| FILED PURSUANT TO RULE 424(b)(2) | ||
| REGISTRATION FILE NO.: 333-206705-05 | ||
PROSPECTUS
$625,865,000 (Approximate)
CD 2016-CD1 Mortgage Trust
(Central Index Key Number 0001679327)
Issuing Entity
Deutsche Mortgage & Asset Receiving Corporation
(Central Index Key Number 0001013454)
Depositor
German American Capital Corporation
(Central Index Key Number 0001541294)
Citigroup Global Markets Realty Corp.
(Central Index Key Number 0001541001)
Sponsors and Mortgage Loan Sellers
CD 2016-CD1 Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2016-CD1
Deutsche Mortgage & Asset Receiving Corporation is offering certain classes of the CD 2016-CD1 Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2016-CD1 consisting of the certificate classes identified in the table below. The certificates being offered by this prospectus (and the Class X-B, Class X-C, Class X-D, Class X-E, Class X-F, Class D, Class E, Class F, Class G, Class V and Class R certificates) represent the ownership interests in the issuing entity, which will be a New York common law trust named CD 2016-CD1 Mortgage Trust. The assets of the issuing entity will primarily consist of a pool of fixed rate commercial mortgage loans, which are generally the sole source of payments on the certificates. Credit enhancement will be provided solely by certain classes of subordinate certificates that will be subordinate to certain classes of senior certificates as described under “Description of the Certificates—Subordination; Allocation of Realized Losses”. Each class of certificates will be entitled to receive monthly distributions of interest and/or principal on the fourth business day following the sixth day of each month (or if the sixth is not a business day, the next business day), commencing in September 2016. The rated final distribution date for the certificates is the distribution date in August 2049.
| Class | Initial Class Certificate Balance or Notional Amount(1) | Approx. Initial Pass-Through Rate | Pass-Through Rate Description | Assumed Final Distribution Date(2) | ||||||
| Class A-1 | $ | 30,826,000 | 1.4430% | Fixed | August 2021 | |||||
| Class A-2 | $ | 40,000,000 | 2.4530% | Fixed | August 2021 | |||||
| Class A-SB | $ | 46,236,000 | 2.6220% | Fixed | July 2026 | |||||
| Class A-3 | $ | 168,000,000 | 2.4590% | Fixed | July 2026 | |||||
| Class A-4 | $ | 207,191,000 | 2.7240% | Fixed | August 2026 | |||||
| Class X-A | $ | 566,092,000 | (3) | 1.5820% | Variable(4) | August 2026 | ||||
| Class A-M | $ | 73,839,000 | 2.9260% | Fixed | August 2026 | |||||
| Class B | $ | 31,644,000 | 3.0770% | WAC Cap(5) | August 2026 | |||||
| Class C | $ | 28,129,000 | 3.6310% | WAC Cap(5) | August 2026 | |||||
(Footnotes on table on pages 3 and 4)
You should carefully consider the risk factors beginning on page 51 of this prospectus.
Neither the certificates nor the mortgage loans are insured or guaranteed by any governmental agency, instrumentality or private issuer or any other person or entity.
The certificates will represent interests in the issuing entity only. They will not represent interests in or obligations of the sponsors, depositor, any of their affiliates or any other entity. | The United States Securities and Exchange Commission and state regulators have not approved or disapproved of the offered certificates or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. Deutsche Mortgage & Asset Receiving Corporation will not list the offered certificates on any securities exchange or on any automated quotation system of any securities association.
The issuing entity will be relying on an exclusion or exemption from the definition of “investment company” under the Investment Company Act of 1940, as amended (the “Investment Company Act”), contained in Section 3(c)(5) of the Investment Company Act or Rule 3a-7 under the Investment Company Act, although there may be additional exclusions or exemptions available to the issuing entity. The issuing entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule under the Dodd-Frank Act (both as defined in this prospectus).
The underwriters, Deutsche Bank Securities Inc., Citigroup Global Markets Inc. and J.P. Morgan Securities LLC will purchase the offered certificates from Deutsche Mortgage & Asset Receiving Corporation and will offer them to the public at negotiated prices, plus, in certain cases, accrued interest, determined at the time of sale. Deutsche Bank Securities Inc. and Citigroup Global Markets Inc. are acting as co-lead managers and joint bookrunners in the following manner: Deutsche Bank Securities Inc. is acting as sole bookrunning manager with respect to approximately 82.7% of each class of offered certificates and Citigroup Global Markets Inc. is acting as sole bookrunning manager with respect to approximately 17.3% of each class of offered certificates. J.P. Morgan Securities LLC is acting as a co-manager.
The underwriters expect to deliver the offered certificates to purchasers in book-entry form only through the facilities of The Depository Trust Company in the United States and Clearstream Banking, société anonyme and Euroclear Bank, as operator of the Euroclear System, in Europe, against payment in New York, New York on or about August 25, 2016. Deutsche Mortgage & Asset Receiving Corporation expects to receive from this offering approximately 111.902061033007% of the aggregate certificate balance of the offered certificates, plus accrued interest from August 1, 2016, before deducting expenses payable by the depositor. |
| Deutsche Bank Securities | Citigroup | |
| Co-Lead Managers and Joint Bookrunners | ||
| J.P. Morgan | ||
| Co-Manager |
August 11, 2016
Summary of Certificates
Class | Initial Class Certificate Balance or Notional Amount(1) | Approx. Initial Credit Support(7) | Pass-Through Rate Description | Assumed | Approx. Initial Pass-Through Rate | Weighted Average | Principal Window(8) | |||||||||
| Offered Certificates | ||||||||||||||||
| Class A-1 | $ | 30,826,000 | 30.000% | Fixed | August 2021 | 1.4430% | 2.94 | 1 – 60 | ||||||||
| Class A-2 | $ | 40,000,000 | 30.000% | Fixed | August 2021 | 2.4530% | 4.96 | 60 – 60 | ||||||||
| Class A-SB | $ | 46,236,000 | 30.000% | Fixed | July 2026 | 2.6220% | 7.44 | 60 – 119 | ||||||||
| Class A-3 | $ | 168,000,000 | 30.000% | Fixed | July 2026 | 2.4590% | 9.32 | 108 – 119 | ||||||||
| Class A-4 | $ | 207,191,000 | 30.000% | Fixed | August 2026 | 2.7240% | 9.93 | 119 – 120 | ||||||||
| Class X-A | $ | 566,092,000 | (3) | N/A | Variable(4) | August 2026 | 1.5820% | N/A | N/A | |||||||
| Class A-M | $ | 73,839,000 | 19.500% | Fixed | August 2026 | 2.9260% | 9.96 | 120 – 120 | ||||||||
| Class B | $ | 31,644,000 | 15.000% | WAC Cap(5) | August 2026 | 3.0770% | 9.96 | 120 – 120 | ||||||||
| Class C | $ | 28,129,000 | 11.000% | WAC Cap(5) | August 2026 | 3.6310% | 9.96 | 120 – 120 | ||||||||
| Non-OfferedCertificates(9) | ||||||||||||||||
| Class X-B | $ | 59,773,000 | (3) | N/A | Variable(4) | August 2026 | 0.8180% | N/A | N/A | |||||||
| Class X-C | $ | 31,645,000 | (3) | N/A | Fixed IO(4) | August 2026 | 1.2500% | N/A | N/A | |||||||
| Class X-D | $ | 15,823,000 | (3) | N/A | Variable(4) | August 2026 | 1.6060% | N/A | N/A | |||||||
| Class X-E | $ | 6,153,000 | (3) | N/A | Variable(4) | August 2026 | 1.6060% | N/A | N/A | |||||||
| Class X-F | $ | 23,733,985 | (3) | N/A | Variable(4) | August 2026 | 1.6060% | N/A | N/A | |||||||
| Class D | $ | 31,645,000 | 6.500% | WAC – 1.2500%(6) | August 2026 | 2.9060% | 9.96 | 120 – 120 | ||||||||
| Class E | $ | 15,823,000 | 4.250% | Fixed | August 2026 | 2.5500% | 9.96 | 120 – 120 | ||||||||
| Class F | $ | 6,153,000 | 3.375% | Fixed | August 2026 | 2.5500% | 9.96 | 120 – 120 | ||||||||
| Class G | $ | 23,733,985 | 0.000% | Fixed | August 2026 | 2.5500% | 9.96 | 120 – 120 | ||||||||
| Class V(10) | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||
| Class R(10) | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |||||||||
| (1) | Approximate, subject to a permitted variance of plus or minus 5%. |
| (2) | The assumed final distribution dates set forth in this prospectus have been determined on the basis of the assumptions described in “Description of the Certificates—Assumed Final Distribution Date; Rated Final Distribution Date”. |
| (3) | The notional amount of the Class X-A certificates will be equal to the aggregate certificate balance of the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4 and Class A-M certificates. The notional amount of the Class X-B certificates will be equal to the aggregate certificate balance of the Class B and Class C certificates. The notional amount of the Class X-C certificates will be equal to the certificate balance of the Class D certificates. The notional amount of the Class X-D certificates will be equal to the certificate balance of the Class E certificates. The notional amount of the Class X-E certificates will be equal to the certificate balance of the Class F certificates. The notional amount of the Class X-F certificates will be equal to the certificate balance of the Class G certificates. The Class X-A, Class X-B, Class X-C, Class X-D, Class X-E and Class X-F certificates will not be entitled to distributions of principal. |
| (4) | The pass-through rate for the Class X-A certificates for any distribution date will equal the excess, if any, of (a) the weighted average of the net mortgage 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), over (b) the weighted average of the pass-through rates of the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4 and Class A-M certificates for that distribution date, weighted on the basis of their respective certificate balances immediately prior to that distribution date. The pass-through rate for the Class X-B certificates for any distribution date will equal the excess, if any, of (a) the weighted average of the net mortgage 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), over (b) the weighted average of the pass-through rates of the Class B and Class C certificates for that distribution date, weighted on the basis of their respective certificate balances immediately prior to that distribution date. The pass-through rate for the Class X-C certificates for any distribution date will equal aper annumrate equal to 1.2500%. The pass-through rate for the Class X-D certificates for any distribution date will equal the excess, if any, of (a) the weighted average of the net mortgage 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), over (b) the pass-through rate of the Class E certificates for that distribution date. The pass-through rate for the Class X-E certificates for any distribution date will equal the excess, if any, of (a) the weighted average of the net mortgage 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), over (b) the pass-through rate of the Class F certificates for that distribution date. The pass-through rate for the Class X-F certificates for any distribution date will equal the excess, if any, of (a) the weighted average of the net mortgage 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), over (b) the pass-through rate of the Class G certificates for that distribution date. See “Description of the Certificates—Distributions—Pass-Through Rates”. |
| (5) | For any distribution date, the pass-through rate for the Class B certificates will equal aper annum rate equal to the lesser of (i) the weighted average of the net mortgage 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) as of their respective due dates in the month preceding the month in which such distribution date occurs and (ii) 3.0770%. For any distribution date, the pass-through rate for the Class C certificates will equal aper annum rate equal to the lesser of (i) the weighted average of the net mortgage 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) as of their respective due dates in the month preceding the month in which such distribution date occurs and (ii) 3.6310%. |
| (6) | For any distribution date, the pass-through rate for the Class D certificates will equal aper annum rate equal to (i) the weighted average of the net mortgage 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) as of their respective due dates in the month preceding the month in which such distribution date occurs, minus (ii) 1.2500%, but in any case, not less than 0.0000%. |
| (7) | The approximate initial credit support percentages set forth for the certificates are approximate and, for the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, are represented in the aggregate. |
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| (8) | The weighted average life and principal window during which distributions of principal would be received as set forth in the foregoing table with respect to each class of certificates having a principal balance are based on the assumptions set forth under “Yield and Maturity Considerations—Weighted Average Life” and on the assumptions that there are no prepayments, modifications or losses in respect of the mortgage loans and that there are no extensions or forbearances of maturity dates or anticipated repayment dates of the mortgage loans. |
| (9) | The classes of certificates set forth below “Non-Offered Certificates” in the table are not offered by this prospectus. |
| (10) | The Class V certificates will not have a certificate balance, notional amount, pass-through rate, assumed final distribution date or rating. The Class V certificates represent undivided interests in excess interest accruing on an anticipated repayment date loan, as further described in this prospectus. The Class V certificates will not be entitled to distributions in respect of principal or interest other than excess interest. The Class R certificates will not have a certificate balance, notional amount, pass-through rate, assumed final distribution date or rating. The Class R certificates represent the residual interests in each Trust REMIC and the Prudential Plaza Loan REMIC, as further described in this prospectus. The Class R certificates will not be entitled to distributions of principal or interest. |
The Class X-B, Class X-C, Class X-D, Class X-E, Class X-F, Class D, Class E, Class F, Class G, Class V and Class R certificates are not offered by this prospectus. Any information in this prospectus concerning certificates other than the offered certificates is presented solely to enhance your understanding of the offered certificates.
4
Table of Contents
| Summary of Certificates | 3 |
| Important Notice Regarding the Offered Certificates | 12 |
| Important Notice About Information Presented in This Prospectus | 12 |
| Summary of Terms | 20 |
| Risk Factors | 51 |
| The Certificates May Not Be a Suitable Investment for You | 51 |
| Combination or “Layering” of Multiple Risks May Significantly Increase Risk of Loss | 51 |
| Risks Related to Market Conditions and Other External Factors | 51 |
| The Volatile Economy, Credit Crisis and Downturn in the Real Estate Market Have Adversely Affected and May Continue To Adversely Affect the Value of CMBS | 51 |
| Other Events May Affect the Value and Liquidity of Your Investment | 51 |
| Risks Relating to the Mortgage Loans | 52 |
| Mortgage Loans Are Non-Recourse and Are Not Insured or Guaranteed | 52 |
| Risks of Commercial and Multifamily Lending Generally | 52 |
| Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases | 54 |
| Office Properties Have Special Risks | 57 |
| Mixed Use Properties Have Special Risks | 58 |
| Retail Properties Have Special Risks | 58 |
| Hospitality Properties Have Special Risks | 60 |
| Risks Relating to Affiliation with a Franchise or Hotel Management Company | 62 |
| Multifamily Properties Have Special Risks | 63 |
| Manufactured Housing Community Properties Have Special Risks | 66 |
| Parking Properties Have Special Risks | 67 |
| Condominium Ownership May Limit Use and Improvements | 67 |
| Operation of a Mortgaged Property Depends on the Property Manager’s Performance | 68 |
| Concentrations Based on Property Type, Geography, Related Borrowers and Other Factors May Disproportionately Increase Losses | 69 |
| Adverse Environmental Conditions at or Near Mortgaged Properties May Result in Losses | 70 |
| Risks Related to Redevelopment, Expansion and Renovation at Mortgaged Properties | 71 |
| Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses | 72 |
| Risks Related to Zoning Non-Compliance and Use Restrictions | 74 |
| Risks Relating to Inspections of Properties | 75 |
| Risks Relating to Costs of Compliance with Applicable Laws and Regulations | 75 |
| Insurance May Not Be Available or Adequate | 75 |
| Terrorism Insurance May Not Be Available for All Mortgaged Properties | 78 |
| Risks Associated with Blanket Insurance Policies or Self-Insurance | 79 |
| Limited Information Causes Uncertainty | 79 |
| Underwritten Net Cash Flow Could Be Based On Incorrect or Failed Assumptions | 80 |
| Frequent and Early Occurrence of Borrower Delinquencies and Defaults May Adversely Affect Your Investment | 81 |
5
| The Mortgage Loans Have Not Been Reviewed or Re-Underwritten by Us | 81 |
| Static Pool Data Would Not Be Indicative of the Performance of this Pool | 82 |
| Appraisals May Not Reflect Current or Future Market Value of Each Property | 82 |
| Seasoned Mortgage Loans Present Additional Risk of Repayment | 84 |
| The Performance of a Mortgage Loan and Its Related Mortgaged Property Depends in Part on Who Controls the Borrower and Mortgaged Property | 84 |
| The Borrower’s Form of Entity May Cause Special Risks | 84 |
| A Bankruptcy Proceeding May Result in Losses and Delays in Realizing on the Mortgage Loans | 86 |
| Litigation Regarding the Mortgaged Properties or Borrowers May Impair Your Distributions | 87 |
| Other Financings or Ability to Incur Other Indebtedness Entails Risk | 88 |
| Tenancies-in-Common May Hinder Recovery | 89 |
| Risks Relating to Enforceability of Cross-Collateralization | 89 |
| Risks Relating to Enforceability of Yield Maintenance Charges, Prepayment Premiums or Defeasance Provisions | 90 |
| Risks Associated with One Action Rules | 90 |
| State Law Limitations on Assignments of Leases and Rents May Entail Risks | 90 |
| Various Other Laws Could Affect the Exercise of Lender’s Rights | 90 |
| Risks of Anticipated Repayment Date Loans | 91 |
| Borrower May Be Unable To Repay Remaining Principal Balance on Maturity Date or Anticipated Repayment Date; Longer Amortization Schedules and Interest- |
| Only Provisions Increase Risk | 91 |
| Risks Related to Ground Leases and Other Leasehold Interests | 93 |
| Increases in Real Estate Taxes May Reduce Available Funds | 94 |
| State and Local Mortgage Recording Taxes May Apply Upon a Foreclosure or Deed in Lieu of Foreclosure and Reduce Net Proceeds | 95 |
| Risks Related to Conflicts of Interest | 95 |
| Interests and Incentives of the Originators, the Sponsors and Their Affiliates May Not Be Aligned With Your Interests | 95 |
| Interests and Incentives of the Underwriter Entities May Not Be Aligned With Your Interests | 96 |
| Potential Conflicts of Interest of the Master Servicer and the Special Servicer | 98 |
| Potential Conflicts of Interest of the Operating Advisor | 99 |
| Potential Conflicts of Interest of the Asset Representations Reviewer | 100 |
| The Controlling Companion Loan for the Vertex Pharmaceuticals HQ Whole Loan Is Expected to Be Contributed to a Securitization That Has Not Yet Closed, and the Provisions of the Related Non-Serviced PSA Expected to Govern Such Whole Loan Have Yet to Be Finalized | 101 |
| Potential Conflicts of Interest of the Directing Certificateholder and the Companion Loan Holders | 101 |
| Potential Conflicts of Interest in the Selection of the Underlying Mortgage Loans | 103 |
| Conflicts of Interest May Occur as a Result of the Rights of the Applicable Directing Certificateholder To Terminate the Special |
6
| Servicer of the Applicable Whole Loan | 104 |
| Other Potential Conflicts of Interest May Affect Your Investment | 104 |
| Other Risks Relating to the Certificates | 105 |
| The Certificates Are Limited Obligations | 105 |
| The Certificates May Have Limited Liquidity and the Market Value of the Certificates May Decline | 105 |
| Legal and Regulatory Provisions Affecting Investors Could Adversely Affect the Liquidity of the Certificates | 106 |
| Nationally Recognized Statistical Rating Organizations May Assign Different Ratings to the Certificates; Ratings of the Certificates Reflect Only the Views of the Applicable Rating Agencies as of the Dates Such Ratings Were Issued; Ratings May Affect ERISA Eligibility; Ratings May Be Downgraded | 108 |
| Your Yield May Be Affected by Defaults, Prepayments and Other Factors | 110 |
| Your Lack of Control Over the Issuing Entity and the Mortgage Loans Can Impact Your Investment | 113 |
| Risks Relating to Modifications of the Mortgage Loans | 117 |
| Sponsors May Not Make Required Repurchases or Substitutions of Defective Mortgage Loans or Pay Any Loss of Value Payment Sufficient to Cover All Losses on a Defective Mortgage Loan | 118 |
| Risks Relating to Interest on Advances and Special Servicing Compensation | 118 |
| Bankruptcy of a Servicer May Adversely Affect Collections on the Mortgage Loans and the Ability to Replace the Servicer | 118 |
| The Sponsors, the Depositor and the Issuing Entity Are |
| Subject to Bankruptcy or Insolvency Laws That May Affect the Issuing Entity’s Ownership of the Mortgage Loans | 119 |
| The Requirement of the Special Servicer to Obtain FIRREA-Compliant Appraisals May Result in an Increased Cost to the Issuing Entity | 120 |
| Tax Matters and Changes in Tax Law May Adversely Impact the Mortgage Loans or Your Investment | 120 |
| Description of the Mortgage Pool | 121 |
| General | 121 |
| Certain Calculations and Definitions | 122 |
| Definitions | 122 |
| Mortgage Pool Characteristics | 129 |
| Overview | 129 |
| Property Types | 130 |
| Mortgage Loan Concentrations | 133 |
| Multi-Property Mortgage Loans and Related Borrower Mortgage Loans | 134 |
| Geographic Concentrations | 134 |
| Mortgaged Properties With Limited Prior Operating History | 135 |
| Tenancies-in-Common | 135 |
| Condominium Interests | 135 |
| Fee & Leasehold Estates; Ground Leases | 136 |
| Environmental Considerations | 137 |
| Redevelopment, Renovation and Expansion | 139 |
| Assessment of Property Value and Condition | 140 |
| Litigation and Other Considerations | 141 |
| Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings | 143 |
| Loan Purpose | 143 |
| Default History, Bankruptcy Issues and Other Proceedings | 143 |
| Tenant Issues | 144 |
| Tenant Concentrations | 144 |
| Lease Expirations and Terminations | 145 |
| Purchase Options and Rights of First Refusal | 150 |
| Affiliated Leases | 150 |
| Insurance Considerations | 151 |
| Use Restrictions | 151 |
7
| Appraised Value | 153 |
| Non-Recourse Carveout Limitations | 154 |
| Real Estate and Other Tax Considerations | 155 |
| Delinquency Information | 157 |
| Certain Terms of the Mortgage Loans | 157 |
| Amortization of Principal | 157 |
| Due Dates; Mortgage Rates; Calculations of Interest | 158 |
| ARD Loan(s) | 158 |
| Single Purpose Entity Covenants | 159 |
| Prepayment Protections and Certain Involuntary Prepayments | 159 |
| “Due-On-Sale” and “Due-On-Encumbrance” Provisions | 162 |
| Defeasance; Collateral Substitution | 163 |
| Partial Releases | 164 |
| Addition of Real Property to the Mortgaged Property | 165 |
| Escrows | 165 |
| Mortgaged Property Accounts | 166 |
| Additional Indebtedness | 166 |
| General | 166 |
| Whole Loans | 167 |
| Mezzanine Indebtedness | 167 |
| Preferred Equity | 169 |
| Other Unsecured Indebtedness | 170 |
| The Whole Loans | 171 |
| General | 171 |
| 10 Hudson Yards Whole Loan | 174 |
| Westfield San Francisco Centre Whole Loan | 185 |
| Prudential Plaza Whole Loan | 194 |
| U-Haul AREC Portfolio Whole Loan | 196 |
| Birch Run Premium Outlets Whole Loan | 198 |
| Gas Company Tower & World Trade Center Parking Garage Whole Loan | 200 |
| Vertex Pharmaceuticals HQ Whole Loan | 211 |
| 401 South State Street Whole Loan | 214 |
| Additional Information | 216 |
| Transaction Parties | 217 |
| The Sponsors and Mortgage Loan Sellers | 217 |
| German American Capital Corporation | 217 |
| Citigroup Global Markets Realty Corp. | 225 |
| The Depositor | 233 |
| The Issuing Entity | 234 |
| The Trustee and Certificate Administrator | 235 |
| The Master Servicer | 237 |
| The Non-Serviced Master Servicer | 239 |
| The Special Servicer | 243 |
| The Operating Advisor and Asset Representations Reviewer | 246 |
| Description of the Certificates | 247 |
| General | 247 |
| Distributions | 249 |
| Method, Timing and Amount | 249 |
| Available Funds | 250 |
| Priority of Distributions | 251 |
| Pass-Through Rates | 253 |
| Interest Distribution Amount | 255 |
| Principal Distribution Amount | 255 |
| Certain Calculations with Respect to Individual Mortgage Loans | 257 |
| Excess Interest | 258 |
| Application Priority of Mortgage Loan Collections or Whole Loan Collections | 258 |
| Allocation of Yield Maintenance Charges and Prepayment Premiums | 260 |
| Assumed Final Distribution Date; Rated Final Distribution Date | 262 |
| Prepayment Interest Shortfalls | 262 |
| Subordination; Allocation of Realized Losses | 264 |
| Reports to Certificateholders; Certain Available Information | 265 |
| Certificate Administrator Reports | 265 |
| Information Available Electronically | 270 |
| Voting Rights | 274 |
| Delivery, Form, Transfer and Denomination | 275 |
| Book-Entry Registration | 275 |
| Definitive Certificates | 278 |
| Certificateholder Communication | 278 |
| Access to Certificateholders’ Names and Addresses | 278 |
| Requests to Communicate | 278 |
| List of Certificateholders | 279 |
| Description of the Mortgage Loan Purchase Agreements | 279 |
| General | 279 |
| Dispute Resolution Provisions | 288 |
| Asset Review Obligations | 289 |
| Pooling and Servicing Agreement | 290 |
| General | 290 |
8
| Assignment of the Mortgage Loans | 290 |
| Servicing Standard | 291 |
| Subservicing | 292 |
| Advances | 293 |
| P&I Advances | 293 |
| Servicing Advances | 294 |
| Nonrecoverable Advances | 295 |
| Recovery of Advances | 295 |
| Accounts | 297 |
| Withdrawals from the Collection Account | 299 |
| Servicing and Other Compensation and Payment of Expenses | 301 |
| General | 301 |
| Master Servicing Compensation | 307 |
| Special Servicing Compensation | 308 |
| Disclosable Special Servicer Fees | 312 |
| Certificate Administrator and Trustee Compensation | 313 |
| Operating Advisor Compensation | 313 |
| Asset Representations Reviewer Compensation | 314 |
| CREFC®Intellectual Property Royalty License Fee | 315 |
| Appraisal Reduction Amounts | 315 |
| Maintenance of Insurance | 321 |
| Modifications, Waivers and Amendments | 324 |
| Mortgage Loans with “Due-on-Sale” and “Due-on-Encumbrance” Provisions | 327 |
| Inspections | 329 |
| Collection of Operating Information | 329 |
| Special Servicing Transfer Event | 330 |
| Asset Status Report | 332 |
| Realization Upon Mortgage Loans | 334 |
| Sale of Defaulted Loans and REO Properties | 336 |
| The Directing Certificateholder | 339 |
| General | 339 |
| Major Decisions | 340 |
| Asset Status Report | 342 |
| Replacement of Special Servicer | 342 |
| Control Termination Event and Consultation Termination Event | 342 |
| Servicing Override | 344 |
| Rights of Holders of Companion Loans | 345 |
| Limitation on Liability of Directing Certificateholder | 345 |
| The Operating Advisor | 346 |
| General | 346 |
| Duties of Operating Advisor While No Control Termination Event Has Occurred and Is Continuing | 346 |
| Duties of Operating Advisor While a Control Termination Event Has Occurred and Is Continuing | 347 |
| Annual Report | 348 |
| Recommendation of the Replacement of the Special Servicer | 349 |
| Eligibility of Operating Advisor | 349 |
| Other Obligations of Operating Advisor | 350 |
| Termination of the Operating Advisor With Cause | 350 |
| Rights Upon Operating Advisor Termination Event | 351 |
| Termination of the Operating Advisor Without Cause | 352 |
| Resignation of the Operating Advisor | 352 |
| Operating Advisor Compensation | 353 |
| The Asset Representations Reviewer | 353 |
| Asset Review | 353 |
| Eligibility of Asset Representations Reviewer | 357 |
| Other Obligations of Asset Representations Reviewer | 358 |
| Delegation of Asset Representations Reviewer’s Duties | 359 |
| Assignment of Asset Representations Reviewer’s Rights and Obligations | 359 |
| Asset Representations Reviewer Termination Events | 359 |
| Rights Upon Asset Representations Reviewer Termination Event | 360 |
| Termination of the Asset Representations Reviewer Without Cause | 360 |
| Resignation of Asset Representations Reviewer | 361 |
| Asset Representations Reviewer Compensation | 361 |
| Replacement of Special Servicer Without Cause | 361 |
| Termination of Servicer and Special Servicer for Cause | 364 |
| Servicer Termination Events | 364 |
9
| Rights Upon Servicer Termination Event | 366 |
| Waiver of Servicer Termination Event | 367 |
| Resignation of the Master Servicer and Special Servicer | 368 |
| Limitation on Liability; Indemnification | 368 |
| Enforcement of Mortgage Loan Seller’s Obligations Under the MLPA | 371 |
| Dispute Resolution Provisions | 371 |
| Certificateholder’s Rights When a Repurchase Request is Initially Delivered By a Certificateholder | 371 |
| Repurchase Request Delivered by a Party to the PSA | 372 |
| Resolution of a Repurchase Request | 372 |
| Mediation and Arbitration Provisions | 375 |
| Servicing of the Non-Serviced Mortgage Loans | 376 |
| Servicing of the 10 Hudson Yards Mortgage Loan | 377 |
| Servicing of the Westfield San Francisco Centre Mortgage Loan | 379 |
| Servicing of the Prudential Plaza Mortgage Loan | 381 |
| Servicing of the Birch Run Premium Outlets Mortgage Loan | 382 |
| Servicing of the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan | 384 |
| Servicing of the Vertex Pharmaceuticals HQ Mortgage Loan | 386 |
| Servicing of the 401 South State Street Mortgage Loan | 389 |
| Rating Agency Confirmations | 391 |
| Evidence as to Compliance | 393 |
| Limitation on Rights of Certificateholders to Institute a Proceeding | 394 |
| Termination; Retirement of Certificates | 394 |
| Amendment | 395 |
| Resignation and Removal of the Trustee and the Certificate Administrator | 398 |
| Governing Law; Waiver of Jury Trial; and Consent to Jurisdiction | 399 |
| Certain Legal Aspects of Mortgage Loans | 400 |
| General | 402 |
| Types of Mortgage Instruments | 402 |
| Leases and Rents | 402 |
| Personalty | 403 |
| Foreclosure | 403 |
| General | 403 |
| Foreclosure Procedures Vary from State to State | 403 |
| Judicial Foreclosure | 403 |
| Equitable and Other Limitations on Enforceability of Certain Provisions | 404 |
| Nonjudicial Foreclosure/Power of Sale | 404 |
| Public Sale | 404 |
| Rights of Redemption | 405 |
| Anti-Deficiency Legislation | 406 |
| Leasehold Considerations | 406 |
| Cooperative Shares | 406 |
| Bankruptcy Laws | 407 |
| Environmental Considerations | 412 |
| General | 412 |
| Superlien Laws | 412 |
| CERCLA | 412 |
| Certain Other Federal and State Laws | 413 |
| Additional Considerations | 414 |
| Due-on-Sale and Due-on-Encumbrance Provisions | 414 |
| Subordinate Financing | 414 |
| Default Interest and Limitations on Prepayments | 414 |
| Applicability of Usury Laws | 415 |
| Americans with Disabilities Act | 415 |
| Servicemembers Civil Relief Act | 415 |
| Anti-Money Laundering, Economic Sanctions and Bribery | 416 |
| Potential Forfeiture of Assets | 416 |
| Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties | 417 |
| Pending Legal Proceedings Involving Transaction Parties | 418 |
| Use of Proceeds | 418 |
| Yield and Maturity Considerations | 419 |
| Yield Considerations | 419 |
| General | 419 |
| Rate and Timing of Principal Payments | 419 |
| Losses and Shortfalls | 420 |
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| Certain Relevant Factors Affecting Loan Payments and Defaults | 421 |
| Delay in Payment of Distributions | 422 |
| Yield on the Certificates with Notional Amounts | 423 |
| Weighted Average Life | 423 |
| Pre-Tax Yield to Maturity Tables | 428 |
| Material Federal Income Tax Considerations | 432 |
| General | 432 |
| Qualification as a REMIC | 433 |
| Status of Offered Certificates | 434 |
| Taxation of Regular Interests | 435 |
| General | 435 |
| Original Issue Discount | 435 |
| Acquisition Premium | 437 |
| Market Discount | 437 |
| Premium | 438 |
| Election To Treat All Interest Under the Constant Yield Method | 438 |
| Treatment of Losses | 439 |
| Yield Maintenance Charges and Prepayment Provisions | 439 |
| Sale or Exchange of Regular Interests | 440 |
| Taxes That May Be Imposed on a REMIC | 440 |
| Prohibited Transactions | 440 |
| Contributions to a REMIC After the Startup Day | 441 |
| Net Income from Foreclosure Property | 441 |
| Bipartisan Budget Act of 2015 | 441 |
| Taxation of Certain Foreign Investors | 442 |
| FATCA | 443 |
| Backup Withholding | 443 |
| Information Reporting | 443 |
| 3.8% Medicare Tax on “Net Investment Income” | 443 |
| Reporting Requirements | 444 |
| Certain State and Local Tax Considerations | 444 |
| Method of Distribution (Underwriter) | 444 |
| Incorporation of Certain Information by Reference | 446 |
| Where You Can Find More Information | 446 |
| Financial Information | 447 |
| Certain ERISA Considerations | 447 |
| General | 447 |
| Plan Asset Regulations | 448 |
| Administrative Exemption | 448 |
| Insurance Company General Accounts | 450 |
| Legal Investment | 451 |
| Legal Matters | 451 |
| Ratings | 452 |
| Index of Defined Terms | 454 |
| ANNEX A-1 | CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES |
| ANNEX A-2 | CERTAIN POOL CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES |
| ANNEX A-3 | DESCRIPTION OF TOP TWENTY MORTGAGE LOANS AND ADDITIONAL MORTGAGE LOAN INFORMATION |
| ANNEX B | FORM OF REPORT TO CERTIFICATEHOLDERS |
| ANNEX C | FORM OF OPERATING ADVISOR ANNUAL REPORT |
| ANNEX D-1 | MORTGAGE LOAN REPRESENTATIONS AND WARRANTIES |
| ANNEX D-2 | EXCEPTIONS TO MORTGAGE LOAN REPRESENTATIONS AND WARRANTIES FOR GERMAN AMERICAN CAPITAL CORPORATION |
| ANNEX D-3 | EXCEPTIONS TO MORTGAGE LOAN REPRESENTATIONS AND WARRANTIES FOR CITIGROUP GLOBAL MARKETS REALTY CORP. |
| ANNEX E | CLASS A-SB PLANNED PRINCIPAL BALANCE SCHEDULE |
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Important Notice Regarding the Offered Certificates
WE HAVE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, WITH RESPECT TO THE CERTIFICATES OFFERED IN THIS PROSPECTUS. HOWEVER, THIS PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION CONTAINED IN OUR REGISTRATION STATEMENT. FOR FURTHER INFORMATION REGARDING THE DOCUMENTS REFERRED TO IN THIS PROSPECTUS, YOU SHOULD REFER TO OUR REGISTRATION STATEMENT AND THE EXHIBITS TO IT. OUR REGISTRATION STATEMENT AND THE EXHIBITS TO IT CAN BE INSPECTED AND COPIED AT PRESCRIBED RATES AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE SEC AT ITS PUBLIC REFERENCE ROOM, 100 F STREET, N.E., WASHINGTON, D.C. 20549. YOU MAY OBTAIN INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM BY CALLING THE SEC AT 1-800-SEC-0330. COPIES OF THESE MATERIALS CAN ALSO BE OBTAINED ELECTRONICALLY THROUGH THE SEC’S INTERNET WEBSITE (HTTP://WWW.SEC.GOV).
THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THESE SECURITIES IN ANY STATE OR OTHER JURISDICTION WHERE SUCH OFFER, SOLICITATION OR SALE IS NOT PERMITTED.
THE UNDERWRITERS DESCRIBED IN THESE MATERIALS MAY FROM TIME TO TIME PERFORM INVESTMENT BANKING SERVICES FOR, OR SOLICIT INVESTMENT BANKING BUSINESS FROM, ANY COMPANY NAMED IN THESE MATERIALS. THE UNDERWRITERS AND/OR THEIR RESPECTIVE EMPLOYEES MAY FROM TIME TO TIME HAVE A LONG OR SHORT POSITION IN ANY CONTRACT OR CERTIFICATE DISCUSSED IN THESE MATERIALS.
THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPERSEDES ANY PREVIOUS SUCH INFORMATION DELIVERED TO ANY PROSPECTIVE INVESTOR.
THE OFFERED CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR, THE SPONSORS, THE MORTGAGE LOAN SELLERS, THE MASTER SERVICER, THE SPECIAL SERVICER, THE TRUSTEE, THE OPERATING ADVISOR, THE ASSET REPRESENTATIONS REVIEWER, THE CERTIFICATE ADMINISTRATOR, THE DIRECTING CERTIFICATEHOLDER, THE UNDERWRITERS OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE OFFERED CERTIFICATES NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR PRIVATE INSURER.
THERE IS CURRENTLY NO SECONDARY MARKET FOR THE OFFERED CERTIFICATES. WE CANNOT ASSURE YOU THAT A SECONDARY MARKET WILL DEVELOP OR, IF A SECONDARY MARKET DOES DEVELOP, THAT IT WILL PROVIDE HOLDERS OF THE OFFERED CERTIFICATES WITH LIQUIDITY OF INVESTMENT OR THAT IT WILL CONTINUE FOR THE TERM OF THE OFFERED CERTIFICATES. THE UNDERWRITERS CURRENTLY INTEND TO MAKE A MARKET IN THE OFFERED CERTIFICATES BUT ARE UNDER NO OBLIGATION TO DO SO. ACCORDINGLY, PURCHASERS MUST BE PREPARED TO BEAR THE RISKS OF THEIR INVESTMENTS FOR AN INDEFINITE PERIOD. SEE “RISK FACTORS—OTHER RISKS RELATING TO THE CERTIFICATES—THE CERTIFICATES MAY HAVE LIMITED LIQUIDITY AND THE MARKET VALUE OF THE CERTIFICATES MAY DECLINE” IN THIS PROSPECTUS.
Important Notice About Information Presented in This Prospectus
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different from that contained in this prospectus. The information contained in this prospectus is accurate only as of the date of this prospectus.
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This prospectus begins with several introductory sections describing the certificates and the issuing entity in abbreviated form:
| · | Summary of Certificates, commencing on page 3 of this prospectus, which sets forth important statistical information relating to the certificates; |
| · | Summary of Terms, commencing on page 20 of this prospectus, which gives a brief introduction of the key features of the certificates and a description of the mortgage loans; and |
| · | Risk Factors, commencing on page 51 of this prospectus, which describes risks that apply to the certificates. |
This prospectus includes cross references to sections in this prospectus where you can find further related discussions.The table of contents in this prospectus identifies the pages where these sections are located.
Certain capitalized terms are defined and used in this prospectus to assist you in understanding the terms of the offered certificates and this offering. The capitalized terms used in this prospectus are defined on the pages indicated under the caption “Index of Defined Terms” commencing on page 454 of this prospectus.
All annexes and schedules attached to this prospectus are a part of this prospectus.
In this prospectus:
| · | the terms “depositor”, “we”, “us” and “our” refer to Deutsche Mortgage & Asset Receiving Corporation. |
| · | references to “lender” or “mortgage lender” with respect to a mortgage loan generally should be construed to mean, from and after the date of initial issuance of the offered certificates, the trustee on behalf of the issuing entity as the holder of record title to the mortgage loans or the master servicer or special servicer, as applicable, with respect to the obligations and rights of the lender as described under “Pooling and Servicing Agreement”. |
This prospectus is not an offer to sell or a solicitation of an offer to buy these securities in any state or other jurisdiction where such offer, solicitation or sale is not permitted.
NOTICE TO RESIDENTS WITHIN EUROPEAN ECONOMIC AREA
This PROSPECTUS has been prepared on the basis that any offer of certificates in any Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) will be made pursuant to an exemption under the Prospectus Directive (as defined below) from the requirement to publish a prospectus for offers of certificates. Accordingly any person making or intending to make an offer in that Relevant Member State of certificates which are the subject of an offering contemplated in this PROSPECTUS as-completed by final terms in relation to the offer of those certificates may only do so in circumstances in which no obligation arises for the DEPOSITOR, THE issuing entity or an underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer.
NONE OF THE DEPOSITOR, the issuing entity or any of the underwriters has authorized, nor does any of them authorize, the making of any offer of certificates in circumstances in which an obligation arises for THE DEPOSITOR, the issuing entity or an underwriter to publish or supplement a prospectus for such offer.
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For the purposes of this provision and the provision immediately below, “Prospectus Directive” means Directive 2003/71/EC AS AMENDED, INCLUDING BY DIRECTIVE 2010/73/EU, and includes any relevant implementing measure in the Relevant Member State.
EUROPEAN ECONOMIC AREA SELLING RESTRICTIONS
IN RELATION TO EACH 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, IT HAS NOT MADE AND WILL NOT MAKE AN OFFER OF THE CERTIFICATES WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED BY THIS PROSPECTUS TO THE PUBLIC IN THAT RELEVANT MEMBER STATE OTHER THAN:
(A) TO ANY LEGAL ENTITY WHICH IS A “QUALIFIED INVESTOR” AS DEFINED IN THE PROSPECTUS DIRECTIVE;
(B) TO FEWER THAN 150 NATURAL OR LEGAL PERSONS (OTHER THAN “QUALIFIED INVESTORS” AS DEFINED IN THE PROSPECTUS DIRECTIVE) SUBJECT TO OBTAINING THE PRIOR CONSENT OF THE RELEVANT UNDERWRITER OR UNDERWRITERS NOMINATED BY THE ISSUING ENTITY FOR ANY SUCH OFFER; OR
(C) IN ANY OTHER CIRCUMSTANCES FALLING WITHIN ARTICLE 3(2) OF THE PROSPECTUS DIRECTIVE;
PROVIDED THAT NO SUCH OFFER OF THE OFFERED CERTIFICATES REFERRED TO IN CLAUSES (A) TO (C) ABOVE SHALL REQUIRE THE DEPOSITOR, THE ISSUING ENTITY OR ANY UNDERWRITER TO PUBLISH A PROSPECTUS PURSUANT TO ARTICLE 3 OF THE PROSPECTUS DIRECTIVE.
FOR THE PURPOSES OF THE PRIOR PARAGRAPH, THE EXPRESSION AN “OFFER OF THE CERTIFICATES WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED BY THIS PROSPECTUS TO THE PUBLIC” IN RELATION TO ANY OFFERED CERTIFICATE 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 TO THE OFFERED CERTIFICATES, AS THE SAME MAY BE VARIED IN THAT RELEVANT MEMBER STATE BY ANY MEASURE IMPLEMENTING THE PROSPECTUS DIRECTIVE IN THAT RELEVANT MEMBER STATE.
NOTICE TO RESIDENTS OF THE UNITED KINGDOM
THE ISSUING ENTITY MAY CONSTITUTE A “COLLECTIVE INVESTMENT SCHEME” AS DEFINED BY SECTION 235 OF THE FSMA THAT IS NOT A “RECOGNIZED COLLECTIVE INVESTMENT SCHEME” FOR THE PURPOSES OF THE FSMA AND THAT HAS NOT BEEN AUTHORIZED, REGULATED OR OTHERWISE RECOGNIZED OR APPROVED. AS AN UNREGULATED SCHEME, THE OFFERED CERTIFICATES CANNOT BE MARKETED IN THE UNITED KINGDOM TO THE GENERAL PUBLIC, EXCEPT IN ACCORDANCE WITH THE FSMA.
THE DISTRIBUTION OF THIS PROSPECTUS (A) IF MADE BY A PERSON WHO IS NOT AN AUTHORIZED PERSON UNDER THE FSMA, IS BEING MADE ONLY TO, OR DIRECTED ONLY AT, PERSONS WHO (I) ARE OUTSIDE THE UNITED KINGDOM, OR (II) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS AND QUALIFY AS INVESTMENT PROFESSIONALS IN ACCORDANCE WITH ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE “FINANCIAL PROMOTION ORDER”), OR (III) ARE PERSONS FALLING WITHIN ARTICLE 49(2)(A) THROUGH (D)(“HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC”.) OF THE FINANCIAL
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PROMOTION ORDER (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS “FPO PERSONS”); AND (B) IF MADE BY A PERSON WHO IS AN AUTHORIZED PERSON UNDER THE FSMA, IS BEING MADE ONLY TO, OR DIRECTED ONLY AT, PERSONS WHO (I) ARE OUTSIDE THE UNITED KINGDOM, OR (II) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS AND QUALIFY AS INVESTMENT PROFESSIONALS IN ACCORDANCE WITH ARTICLE 14(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (PROMOTION OF COLLECTIVE INVESTMENT SCHEMES)(EXEMPTIONS) ORDER 2001 (THE “PROMOTION OF COLLECTIVE INVESTMENT SCHEMES EXEMPTIONS ORDER”), OR (III) ARE PERSONS FALLING WITHIN ARTICLE 22(2)(A) THROUGH (D)(“HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC”.), OR (IV) PERSONS TO WHOM THE ISSUING ENTITY MAY LAWFULLY BE PROMOTED IN ACCORDANCE WITH RULE 4.12 OF THE UK FINANCIAL CONDUCT AUTHORITY’S CONDUCT OF BUSINESS SOURCEBOOK OF THE PROMOTION OF COLLECTIVE INVESTMENT SCHEMES EXEMPTIONS ORDER (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS “PCIS PERSONS” AND, TOGETHER WITH THE FPO PERSONS, THE “RELEVANT PERSONS”).
THIS PROSPECTUS MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS PROSPECTUS RELATES, INCLUDING THE OFFERED CERTIFICATES, IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. ANY PERSONS OTHER THAN RELEVANT PERSONS SHOULD NOT ACT OR RELY ON THIS PROSPECTUS.
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 OFFERED CERTIFICATES AND THAT COMPENSATION WILL NOT BE AVAILABLE UNDER THE UNITED KINGDOM FINANCIAL SERVICES COMPENSATION SCHEME.
UNITED KINGDOM SELLING RESTRICTIONS
EACH UNDERWRITER HAS REPRESENTED AND AGREED THAT:
(A) 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 (“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 ISSUING ENTITY OR THE DEPOSITOR; AND
(B) 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.
PEOPLE’S REPUBLIC OF CHINA
THE OFFERED CERTIFICATES WILL NOT BE OFFERED OR SOLD IN THE PEOPLE’S REPUBLIC OF CHINA (EXCLUDING HONG KONG, MACAU AND TAIWAN, THE “PRC”) AS PART OF THE INITIAL DISTRIBUTION OF THE OFFERED CERTIFICATES BUT MAY BE AVAILABLE FOR PURCHASE BY INVESTORS RESIDENT IN THE PRC FROM OUTSIDE THE PRC.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN THE PRC TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE THE OFFER OR SOLICITATION IN THE PRC.
THE DEPOSITOR DOES NOT REPRESENT THAT THIS PROSPECTUS MAY BE LAWFULLY DISTRIBUTED, OR THAT ANY OFFERED CERTIFICATES MAY BE LAWFULLY OFFERED, IN COMPLIANCE WITH ANY APPLICABLE REGISTRATION OR OTHER REQUIREMENTS IN THE PRC,
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OR PURSUANT TO AN EXEMPTION AVAILABLE THEREUNDER, OR ASSUME ANY RESPONSIBILITY FOR FACILITATING ANY SUCH DISTRIBUTION OR OFFERING. IN PARTICULAR, NO ACTION HAS BEEN TAKEN BY THE DEPOSITOR WHICH WOULD PERMIT AN OFFERING OF ANY OFFERED CERTIFICATES OR THE DISTRIBUTION OF THIS PROSPECTUS IN THE PRC. ACCORDINGLY, THE OFFERED CERTIFICATES ARE NOT BEING OFFERED OR SOLD WITHIN THE PRC BY MEANS OF THIS PROSPECTUS OR ANY OTHER DOCUMENT. NEITHER THIS PROSPECTUS NOR ANY ADVERTISEMENT OR OTHER OFFERING MATERIAL MAY BE DISTRIBUTED OR PUBLISHED IN THE PRC, EXCEPT UNDER CIRCUMSTANCES THAT WILL RESULT IN COMPLIANCE WITH ANY APPLICABLE LAWS AND REGULATIONS.
HONG KONG
THIS PROSPECTUS HAS NOT BEEN DELIVERED FOR REGISTRATION TO THE REGISTRAR OF COMPANIES IN HONG KONG AND THE CONTENTS OF THIS PROSPECTUS HAVE NOT BEEN REVIEWED OR APPROVED BY ANY REGULATORY AUTHORITY IN HONG KONG. THIS PROSPECTUS DOES NOT CONSTITUTE NOR INTEND TO BE AN OFFER OR INVITATION TO THE PUBLIC IN HONG KONG TO ACQUIRE THE OFFERED CERTIFICATES.
Each UNDERWRITER has represented, warranted and agreed that: (1) It has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any OFFERED certificates (except for certificates which are a “structured product” as defined in the securities and futures ordinance (Cap. 571)(the “SFO”) of Hong Kong) Other than (A) to “Professional Investors” as defined in the SFO and any rules OR REGULATIONS made under the SFO; or (B) in other circumstances which do not result in the document being a “Prospectus” as defined in the companies (winding up and miscellaneous provisions) ordinance (CAP. 32)(The “C(WUMP)O”) of Hong Kong or which do not constitute an offer to the public within the meaning of the C(WUMP)O; and (2) it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the OFFERED certificates, which is directed at, or the contents of which are likely to be accessed or read by, the public of 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” as defined in the SFO and any rules made under the SFO.
W A R N I N G
THE CONTENTS OF THIS PROSPECTUS HAVE NOT BEEN REVIEWED OR APPROVED BY ANY REGULATORY AUTHORITY IN HONG KONG. YOU ARE ADVISED TO EXERCISE CAUTION IN RELATION TO THE OFFER. IF YOU ARE IN ANY DOUBT ABOUT ANY OF THE CONTENTS OF THIS PROSPECTUS, YOU SHOULD OBTAIN INDEPENDENT PROFESSIONAL ADVICE.
SINGAPORE
NEITHER THIS PROSPECTUS NOR ANY OTHER DOCUMENT OR MATERIAL IN CONNECTION WITH A NY OFFER OF THE OFFERED CERTIFICATES HAS BEEN REGISTERED AS A PROSPECTUS WITH THE MONETARY AUTHORITY OF SINGAPORE (“MAS”) UNDER THE SECURITIES AND FUTURES ACT (CAP. 289) OF SINGAPORE (THE “SFA”). ACCORDINGLY, MAS ASSUMES NO RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS. THIS PROSPECTUS IS NOT A PROSPECTUS AS DEFINED IN THE SFA AND STATUTORY LIABILITY UNDER THE SFA IN RELATION TO THE CONTENTS OF PROSPECTUSES WOULD NOT APPLY. ANY PROSPECTIVE INVESTOR SHOULD CONSIDER CAREFULLY WHETHER THE INVESTMENT IS SUITABLE FOR IT. THIS PROSPECTUS AND ANY OTHER DOCUMENT OR MATERIAL IN
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CONNECTION WITH THE OFFER OR SALE, OR INVITATION FOR SUBSCRIPTION OR PURCHASE, OF THE OFFERED CERTIFICATES MAY NOT BE CIRCULATED OR DISTRIBUTED, NOR MAY THE OFFERED 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 UNDER THE SFA, (II) TO A RELEVANT PERSON (AS DEFINED IN SECTION 275(2) OF THE SFA), OR ANY PERSON PURSUANT TO SECTION 275(1A) OF THE SFA, 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 OFFERED CERTIFICATES ARE SUBSCRIBED OR PURCHASED UNDER SECTION 275 OF THE SFA BY A RELEVANT PERSON WHICH IS: (A) A CORPORATION (WHICH IS NOT AN ACCREDITED INVESTOR (AS DEFINED IN SECTION 4A OF THE SFA)) 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, SECURITIES (AS DEFINED IN SECTION 239(1) OF THE SFA) OF THAT CORPORATION OR THE BENEFICIARIES’ RIGHTS AND INTEREST (HOWSOEVER DESCRIBED) IN THAT TRUST SHALL NOT BE TRANSFERABLE FOR 6 MONTHS AFTER THAT CORPORATION OR THAT TRUST HAS ACQUIRED THE OFFERED CERTIFICATES UNDER SECTION 275 OF THE SFA EXCEPT: (1) TO AN INSTITUTIONAL INVESTOR UNDER SECTION 274 OF THE SFA OR TO A RELEVANT PERSON (AS DEFINED IN SECTION 275(2) OF THE SFA), OR TO ANY PERSON PURSUANT TO AN OFFER THAT IS MADE ON TERMS THAT SUCH SHARES, DEBENTURES AND UNITS OF SHARES AND DEBENTURES OF THAT CORPORATION OR SUCH RIGHTS OR INTEREST IN THAT TRUST ARE ACQUIRED AT A CONSIDERATION OF NOT LESS THAN 200,000 SINGAPORE DOLLARS (OR ITS EQUIVALENT IN A FOREIGN CURRENCY) FOR EACH TRANSACTION, WHETHER SUCH AMOUNT IS TO BE PAID FOR IN CASH OR BY EXCHANGE OF SECURITIES OR OTHER ASSETS, AND FURTHER FOR CORPORATIONS, IN ACCORDANCE WITH THE CONDITIONS SPECIFIED IN SECTION 275(1A) OF THE SFA; (2) WHERE NO CONSIDERATION IS GIVEN FOR THE TRANSFER; (3) WHERE THE TRANSFER IS BY OPERATION OF LAW; OR (4) AS SPECIFIED IN SECTION 276(7) OF THE SFA.
NOTICE TO RESIDENTS OF THE REPUBLIC OF KOREA
THIS PROSPECTUS IS NOT, AND UNDER NO CIRCUMSTANCES IS TO BE CONSTRUED AS, A PUBLIC OFFERING OF SECURITIES IN KOREA. NEITHER THE ISSUER NOR ANY OF ITS AGENTS MAKE ANY REPRESENTATION WITH RESPECT TO THE ELIGIBILITY OF ANY RECIPIENTS OF THIS PROSPECTUS TO ACQUIRE THE OFFERED CERTIFICATES UNDER THE LAWS OF KOREA, INCLUDING, BUT WITHOUT LIMITATION, THE FOREIGN EXCHANGE TRANSACTION LAW AND REGULATIONS THEREUNDER (THE “FETL”). THE OFFERED CERTIFICATES HAVE NOT BEEN REGISTERED WITH THE FINANCIAL SERVICES COMMISSION OF KOREA FOR PUBLIC OFFERING IN KOREA, AND NONE OF THE OFFERED CERTIFICATES MAY BE OFFERED, SOLD OR DELIVERED, DIRECTLY OR INDIRECTLY, OR OFFERED OR SOLD TO ANY PERSON FOR RE-OFFERING OR RESALE, DIRECTLY OR INDIRECTLY IN KOREA OR TO ANY RESIDENT OF KOREA EXCEPT PURSUANT TO THE FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT AND THE DECREES AND REGULATIONS THEREUNDER (THE “FSCMA”), THE FETL AND ANY OTHER APPLICABLE LAWS, REGULATIONS AND MINISTERIAL GUIDELINES IN KOREA. WITHOUT PREJUDICE TO THE FOREGOING, THE NUMBER OF OFFERED CERTIFICATES OFFERED IN KOREA OR TO A RESIDENT OF KOREA SHALL BE LESS THAN FIFTY AND FOR A PERIOD OF ONE YEAR FROM THE ISSUE DATE OF THE OFFERED CERTIFICATES, NONE OF THE OFFERED CERTIFICATES MAY BE DIVIDED RESULTING IN AN INCREASED NUMBER OF OFFERED CERTIFICATES. FURTHERMORE, THE OFFERED CERTIFICATES MAY NOT BE RESOLD TO KOREAN RESIDENTS UNLESS THE PURCHASER OF THE OFFERED CERTIFICATES COMPLIES WITH ALL APPLICABLE REGULATORY REQUIREMENTS (INCLUDING, BUT NOT LIMITED TO,
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GOVERNMENT REPORTING APPROVAL REQUIREMENTS UNDER THE FETL AND ITS SUBORDINATE DECREES AND REGULATIONS) IN CONNECTION WITH THE PURCHASE OF THE OFFERED CERTIFICATES.
JAPAN
THE OFFERED CERTIFICATES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE FINANCIAL INSTRUMENTS AND EXCHANGE LAW OF JAPAN, AS AMENDED (THE “FIEL”), AND DISCLOSURE UNDER THE FIEL HAS NOT BEEN AND WILL NOT BE MADE WITH RESPECT TO THE OFFERED CERTIFICATES. ACCORDINGLY, EACHUNDERWRITER HAS REPRESENTED AND AGREED THAT IT HAS NOT, DIRECTLY OR INDIRECTLY, OFFERED OR SOLD AND WILL NOT, DIRECTLY OR INDIRECTLY, OFFER OR SELL ANY OFFERED CERTIFICATES IN JAPAN OR TO, OR FOR THE BENEFIT OF, ANY RESIDENT OF JAPAN (WHICH TERM AS USED IN THIS PROSPECTUS MEANS ANY PERSON RESIDENT IN JAPAN, INCLUDING ANY CORPORATION OR OTHER ENTITY ORGANIZED UNDER THE LAWS OF JAPAN) OR TO OTHERS FOR REOFFERING OR RE-SALE, DIRECTLY OR INDIRECTLY, IN JAPAN OR TO, OR FOR THE BENEFIT OF, ANY RESIDENT OF JAPAN EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF, AND OTHERWISE IN COMPLIANCE WITH, THE FIEL AND OTHER RELEVANT LAWS, REGULATIONS AND MINISTERIAL GUIDELINES OF JAPAN. AS PART OF THIS OFFERING OF THE OFFERED CERTIFICATES, THE UNDERWRITERS MAY OFFER THE OFFERED CERTIFICATES IN JAPAN TO UP TO 49 OFFEREES IN ACCORDANCE WITH THE ABOVE PROVISIONS.
NOTICE TO RESIDENTS OF CANADA
THE CERTIFICATES MAY BE SOLD ONLY TO PURCHASERS PURCHASING, OR DEEMED TO BE PURCHASING, AS PRINCIPAL THAT ARE ACCREDITED INVESTORS, AS DEFINED IN NATIONAL INSTRUMENT 45-106 PROSPECTUS EXEMPTIONS OR SUBSECTION 73.3(1) OF THE SECURITIES ACT (ONTARIO), AND ARE PERMITTED CLIENTS, AS DEFINED IN NATIONAL INSTRUMENT 31-103 REGISTRATION REQUIREMENTS, EXEMPTIONS AND ONGOING REGISTRANT OBLIGATIONS. ANY RESALE OF THE OFFERED CERTIFICATES MUST BE MADE IN ACCORDANCE WITH AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE PROSPECTUS REQUIREMENTS OF APPLICABLE SECURITIES LAWS.
SECURITIES LEGISLATION IN CERTAIN PROVINCES OR TERRITORIES OF CANADA MAY PROVIDE A PURCHASER WITH REMEDIES FOR RESCISSION OR DAMAGES IF THIS PROSPECTUS (INCLUDING ANY AMENDMENT THERETO) CONTAINS A MISREPRESENTATION,PROVIDED THAT THE REMEDIES FOR RESCISSION OR DAMAGES ARE EXERCISED BY THE PURCHASER WITHIN THE TIME LIMIT PRESCRIBED BY THE SECURITIES LEGISLATION OF THE PURCHASER’S PROVINCE OR TERRITORY. THE PURCHASER SHOULD REFER TO ANY APPLICABLE PROVISIONS OF THE SECURITIES LEGISLATION OF THE PURCHASER’S PROVINCE OR TERRITORY FOR PARTICULARS OF THESE RIGHTS OR CONSULT WITH A LEGAL ADVISOR.
PURSUANT TO SECTION 3A.3 OF NATIONAL INSTRUMENT 33-105 UNDERWRITING CONFLICTS (“NI 33-105”), THE UNDERWRITERS ARE NOT REQUIRED TO COMPLY WITH THE DISCLOSURE REQUIREMENTS OF NI 33-105 REGARDING UNDERWRITER CONFLICTS OF INTEREST IN CONNECTION WITH THIS OFFERING.
INFORMATION FOR INVESTORS IN ISRAEL
THIS PROSPECTUS HAS NOT BEEN APPROVED BY THE ISRAELI SECURITIES AUTHORITY AND WILL ONLY BE DISTRIBUTED TO ISRAELI RESIDENTS IN A MANNER THAT WILL NOT CONSTITUTE “AN OFFER TO THE PUBLIC” UNDER SECTIONS 15 AND 15A OF THE ISRAEL SECURITIES LAW, 5728-1968 (“THE SECURITIES LAW”) OR SECTION 25 OF THE JOINT
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INVESTMENT TRUSTS LAW, 5754-1994 (“THE JOINT INVESTMENT TRUSTS LAW”), AS APPLICABLE. THE CERTIFICATES ARE BEING OFFERED TO A LIMITED NUMBER OF INVESTORS (35 INVESTORS OR FEWER DURING ANY GIVEN 12 MONTH PERIOD) AND/OR THOSE CATEGORIES OF INVESTORS LISTED IN THE FIRST ADDENDUM (“THE ADDENDUM”) TO THE SECURITIES LAW, (“SOPHISTICATED INVESTORS”) NAMELY JOINT INVESTMENT FUNDS OR MUTUAL TRUST FUNDS, PROVIDENT FUNDS, INSURANCE COMPANIES, BANKING CORPORATIONS (PURCHASING CERTIFICATES FOR THEMSELVES OR FOR CLIENTS WHO ARE SOPHISTICATED INVESTORS), PORTFOLIO MANAGERS (PURCHASING CERTIFICATES FOR, THEMSELVES OR FOR CLIENTS WHO ARE SOPHISTICATED INVESTORS), INVESTMENT ADVISORS OR INVESTMENT MARKETERS (PURCHASING CERTIFICATES FOR THEMSELVES), MEMBERS OF THE TEL-AVIV STOCK EXCHANGE (PURCHASING CERTIFICATES FOR THEMSELVES OR FOR CLIENTS WHO ARE SOPHISTICATED INVESTORS), UNDERWRITERS (PURCHASING CERTIFICATES FOR THEMSELVES), VENTURE CAPITAL FUNDS ENGAGING MAINLY IN THE CAPITAL MARKET, AN ENTITY WHICH IS WHOLLY OWNED BY SOPHISTICATED INVESTORS, CORPORATIONS, OTHER THAN FORMED FOR THE SPECIFIC PURPOSE OF AN ACQUISITION PURSUANT TO AN OFFER, WITH A SHAREHOLDER’S EQUITY IN EXCESS OF NIS 50 MILLION, AND INDIVIDUALS IN RESPECT OF WHOM THE TERMS OF ITEM 9 IN THE SCHEDULE TO THE INVESTMENT ADVICE LAW HOLD TRUE INVESTING FOR THEIR OWN ACCOUNT, EACH AS DEFINED IN THE SAID ADDENDUM, AS AMENDED FROM TIME TO TIME, AND WHO IN EACH CASE HAVE PROVIDED WRITTEN CONFIRMATION THAT THEY QUALIFY AS SOPHISTICATED INVESTORS, AND THAT THEY ARE AWARE OF THE CONSEQUENCES OF SUCH DESIGNATION AND AGREE THERETO; IN ALL CASES UNDER CIRCUMSTANCES THAT WILL FALL WITHIN THE PRIVATE PLACEMENT OR OTHER EXEMPTIONS OF THE JOINT INVESTMENT TRUSTS LAW, THE SECURITIES LAW AND ANY APPLICABLE GUIDELINES, PRONOUNCEMENTS OR RULINGS ISSUED FROM TIME TO TIME BY THE ISRAELI SECURITIES AUTHORITY.
THIS PROSPECTUS MAY NOT BE REPRODUCED OR USED FOR ANY OTHER PURPOSE, NOR BE FURNISHED TO ANY OTHER PERSON OTHER THAN THOSE TO WHOM COPIES HAVE BEEN SENT. ANY OFFEREE WHO PURCHASES CERTIFICATES IS PURCHASING SUCH CERTIFICATES FOR ITS OWN BENEFIT AND ACCOUNT AND NOT WITH THE AIM OR INTENTION OF DISTRIBUTING OR OFFERING SUCH CERTIFICATES TO OTHER PARTIES (OTHER THAN, IN THE CASE OF AN OFFEREE WHICH IS A SOPHISTICATED INVESTOR BY VIRTUE OF IT BEING A BANKING CORPORATION, PORTFOLIO MANAGER OR MEMBER OF THE TEL-AVIV STOCK EXCHANGE, AS DEFINED IN THE ADDENDUM, WHERE SUCH OFFEREE IS PURCHASING CERTIFICATES FOR ANOTHER PARTY WHICH IS A SOPHISTICATED INVESTOR). NOTHING IN THIS PROSPECTUS SHOULD BE CONSIDERED INVESTMENT ADVICE OR INVESTMENT MARKETING DEFINED IN THE REGULATION OF INVESTMENT COUNSELLING, INVESTMENT MARKETING AND PORTFOLIO MANAGEMENT LAW, 5755-1995.
INVESTORS ARE ENCOURAGED TO SEEK COMPETENT INVESTMENT COUNSELLING FROM A LOCALLY LICENSED INVESTMENT COUNSEL PRIOR TO MAKING THE INVESTMENT. AS A PREREQUISITE TO THE RECEIPT OF A COPY OF THIS PROSPECTUS A RECIPIENT MAY BE REQUIRED BY THE UNDERWRITERS TO PROVIDE CONFIRMATION THAT IT IS A SOPHISTICATED INVESTOR PURCHASING THE CERTIFICATES FOR ITS OWN ACCOUNT OR, WHERE APPLICABLE, FOR OTHER SOPHISTICATED INVESTORS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE CERTIFICATES REFERRED TO HEREIN, NOR DOES IT CONSTITUTE AN OFFER TO SELL TO OR SOLICITATION OF AN OFFER TO BUY FROM ANY PERSON OR PERSONS IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO A PERSON OR PERSONS TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
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Summary of Terms
| This summary highlights selected information from this prospectus. It does not contain all of the information you need to consider in making your investment decision. To understand all of the terms of the offering of the offered certificates, read this entire document carefully. |
Relevant Parties
| Depositor | Deutsche Mortgage & Asset Receiving Corporation, a Delaware corporation. The depositor’s principal offices are located at 60 Wall Street, New York, New York 10005, and its telephone number is (212) 250-2500. See “Transaction Parties—The Depositor”. |
| Issuing Entity | CD 2016-CD1 Mortgage Trust, a New York common law trust, to be established on the closing date under the pooling and servicing agreement. For more detailed information, see “Transaction Parties—The Issuing Entity”. |
| Sponsors | The sponsors of this transaction are: |
| · | German American Capital Corporation, a Maryland corporation; and |
| · | Citigroup Global Markets Realty Corp., a New York corporation. |
| The sponsors are sometimes also referred to in this prospectus as the “mortgage loan sellers”. |
| The sponsors originated or acquired and will transfer to the depositor the mortgage loans set forth in the following chart: |
Sellers of the Mortgage Loans
Seller | Number of | Aggregate | Approx. % of | ||||
| German American Capital Corporation(1)(2)(3)(4)(5) | 24 | $581,640,510 | 82.7% | ||||
| Citigroup Global Markets Realty Corp.(6) | 8 | 121,579,476 | 17.3 | ||||
| Total | 32 | $703,219,986 | 100.0% |
| (1) | Nineteen (19) mortgage loans, representing approximately 63.6% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, were originated by Deutsche Bank AG, New York Branch (an affiliate of German American Capital Corporation) and acquired by German American Capital Corporation. | ||
| (2) | Three (3) mortgage loans, representing approximately 4.9% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, were originated by Pillar Funding LLC and acquired by German American Capital Corporation. German American Capital Corporation has re-underwritten such mortgage loans in accordance with the procedures described under “Transaction Parties—The Sponsors and Mortgage Loan Sellers—German American Capital Corporation” in this prospectus. |
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| (3) | The mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus as 10 Hudson Yards, representing approximately 9.2% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, is part of a loan combination that was co-originated by Deutsche Bank AG, New York Branch (an affiliate of German American Capital Corporation) and Goldman Sachs Mortgage Company, and will be sold to the depositor by German American Capital Corporation. |
| (4) | The mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus as Westfield San Francisco Centre, representing approximately 8.5% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, is part of a loan combination that was co-originated by Deutsche Bank AG, New York Branch (an affiliate of German American Capital Corporation) and JPMorgan Chase Bank, National Association, and will be sold to the depositor by German American Capital Corporation. |
| (5) | The mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus as Gas Company Tower & World Trade Center Parking Garage, representing approximately 5.7% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, is part of a loan combination that was co-originated by Deutsche Bank AG, New York Branch (an affiliate of German American Capital Corporation) and Barclays Bank PLC, and will be sold to the depositor by German American Capital Corporation. |
| (6) | The mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus as Vertex Pharmaceuticals HQ, representing approximately 4.3% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, and as to which Citigroup Global Markets Realty Corp. will act as mortgage loan seller, is part of a whole loan that was co-originated by Citigroup Global Markets Realty Corp. and Morgan Stanley Bank, N.A. |
| See “Transaction Parties—The Sponsors and Mortgage Loan Sellers”. |
| Master Servicer | Midland Loan Services, a Division of PNC Bank, National Association, is expected to act as the master servicer and will be responsible for the master servicing and administration of the mortgage loans and the related companion loans pursuant to the pooling and servicing agreement (other than the mortgage loans and companion loans identified in the table titled “Non-Serviced Whole Loans” under “—Whole Loans” below that are each part of a whole loan and serviced under the pooling and servicing agreement indicated in such table). The principal servicing office of the master servicer is located at 10851 Mastin Street, Building 82, Suite 300, Overland Park, Kansas 66210. See “Transaction Parties—The Master Servicer” and “Pooling and Servicing Agreement”. |
| The master servicer of each non-serviced mortgage loan is set forth in the table titled “Non-Serviced Whole Loans” under “—Whole Loans” below. See “Transaction Parties—The Non-Serviced Master Servicer” and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
| Special Servicer | Rialto Capital Advisors, LLC, a Delaware limited liability company, is expected to act as special servicer with respect to the mortgage loans (other than any excluded special servicer loan) and the related serviced companion loans other than with respect to the non-serviced mortgage loans set forth in the table titled “Non-Serviced Whole Loans” under “—Whole Loans” below. The special servicer will be primarily responsible for (i) making decisions and performing certain servicing functions with respect to such mortgage loans and related serviced companion loans as to which a special servicing transfer event (such as a |
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| default or an imminent default) has occurred and (ii) in certain circumstances, reviewing, evaluating, processing and providing or withholding consent as to certain major decisions and special servicer decisions relating to such mortgage loans and related serviced companion loans for which a special servicing transfer event has not occurred, in each case pursuant to the pooling and servicing agreement for this transaction. The principal servicing office of the special servicer is located at 790 NW 107th Avenue, 4th Floor, Miami, Florida 33172. See “Transaction Parties—The Special Servicer” and “Pooling and Servicing Agreement”. |
| If the special servicer obtains knowledge that it is a borrower party with respect to any mortgage loan (other than a non-serviced mortgage loan) or serviced whole loan (such mortgage loan or serviced whole loan referred to in this prospectus as an “excluded special servicer loan”), if any, the special servicer will be required to resign as special servicer of that excluded special servicer loan. See“Pooling and Servicing Agreement—Termination of Servicer and Special Servicer for Cause” in this prospectus. |
| The special servicer was appointed to be the special servicer by RREF III Debt AIV, LP, or its affiliate, which is committed to purchasing the Class X-D, Class X-E, Class X-F, Class E, Class F, Class G and Class V certificates, and, on the closing date, is expected to be the initial directing certificateholder. See “Pooling and Servicing Agreement—The Directing Certificateholder”. |
| The special servicer of each non-serviced mortgage loan is set forth in the table titled “Non-Serviced Whole Loans” under “—Whole Loans” below. See “Description of the Mortgage Pool—The Whole Loans—General”and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
| Non-Serviced Master Servicer | Wells Fargo Bank, National Association, a national banking association, will be the master servicer of certain of the non-serviced mortgage loans and the related companion loans pursuant to the pooling and servicing agreements identified in the table titled “Non-Serviced Whole Loans” under “—Whole Loans” below. The principal west coast commercial mortgage master servicing offices of Wells Fargo Bank, National Association are located at MAC A0227-020, 1901 Harrison Street, Oakland, California 94612. The principal east coast commercial mortgage master servicing offices of Wells Fargo Bank, National Association are located at MAC D1086, 550 South Tryon Street, Charlotte, North Carolina 28202. See “Transaction Parties—Non-Serviced Master Servicer” and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
| Trustee | Wells Fargo Bank, National Association, a national banking association, will act as trustee. The corporate trust office of the trustee is located at 9062 Old Annapolis Road, Columbia, Maryland 21045. Following the transfer of the mortgage loans to the issuing entity, the trustee, on behalf of the issuing entity, will become the mortgagee of record for each mortgage loan (other than any non-serviced mortgage loan) and the related |
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| companion loans. See “Transaction Parties—The Trustee and Certificate Administrator” and “Pooling and Servicing Agreement”. |
| With respect to each non-serviced mortgage loan, the entity set forth in the table titled “Non-Serviced Whole Loans” under “—Whole Loans” below, in its capacity as trustee under the pooling and servicing agreement for the indicated transaction, is the mortgagee of record for that non-serviced mortgage loan and any related companion loan. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
| Certificate Administrator | Wells Fargo Bank, National Association, a national banking association, will act as certificate administrator. The certificate administrator will also be required to act as custodian, 17g-5 information provider, certificate registrar and authenticating agent. The corporate trust offices of Wells Fargo Bank, National Association are located at 9062 Old Annapolis Road, Columbia, Maryland 21045, and for certificate transfer purposes are located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479 0113. See “Transaction Parties—The Trustee and Certificate Administrator”and “Pooling and Servicing Agreement”. |
| The custodian with respect to eachnon-serviced mortgage loan will bethe entity set forth in the table titled “Non-Serviced Whole Loans” under “—Whole Loans” below, the custodian under the pooling and servicing agreement for the indicated transaction. See“Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
| Operating Advisor | Park Bridge Lender Services LLC, a New York limited liability company and an indirect wholly owned subsidiary of Park Bridge Financial LLC, will be the operating advisor. The operating advisor will have certain review and reporting responsibilities with respect to the performance of the special servicer and, in certain circumstances may recommend to the certificateholders that the special servicer be replaced. The operating advisor will generally have no obligations or consultation rights under the pooling and servicing agreement for this transaction with respect to any non-serviced mortgage loan or any related REO property. See “Transaction Parties—The Operating Advisor and Asset Representations Reviewer” and “Pooling and Servicing Agreement—The Operating Advisor”. |
| Asset Representations Reviewer | Park Bridge Lender Services LLC, a New York limited liability company and an indirect wholly owned subsidiary of Park Bridge Financial LLC, will act as the asset representations reviewer. The asset representations reviewer will be required to review certain delinquent mortgage loans after a specified delinquency threshold has been exceeded and the required percentage of certificateholders vote to direct a review of such delinquent mortgage loans. |
| See “Transaction Parties—The Operating Advisor and Asset Representations Reviewer” and “Pooling and Servicing Agreement—The Asset Representations Reviewer”. |
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| Directing Certificateholder | The directing certificateholder will have certain consent and consultation rights in certain circumstances with respect to the mortgage loans (other than the non-serviced mortgage loans and any excluded loan), as further described in this prospectus. The directing certificateholder will generally be the controlling class certificateholder (or its representative) selected by more than a specified percentage of the controlling class certificateholders (by certificate balance, as certified by the certificate registrar from time to time as provided for in the pooling and servicing agreement). See “Pooling and Servicing Agreement—The Directing Certificateholder”. However, in certain circumstances there may be no directing certificateholder even if there is a controlling class, and in other circumstances there will be no controlling class. |
| An “excluded loan” is a mortgage loan or whole loan with respect to which the directing certificateholder or the holder of the majority of the controlling class certificates (by certificate principal balance), is a borrower, a mortgagor, a manager of a mortgaged property, the holder of a mezzanine loan that has accelerated the related mezzanine loan or commenced foreclosure or enforcement proceedings against the equity collateral pledged to secure the related mezzanine loan, or any borrower party affiliate thereof. |
| The controlling class will be the most subordinate class of the Class E, Class F and Class G certificates then-outstanding that has an aggregate certificate balance, as notionally reduced by any cumulative appraisal reduction amounts allocable to such class, at least equal to 25% of the initial certificate balance of that class;provided, however, that during such time as the Class E certificates would be the controlling class, the holders of such certificates will have the right to irrevocably waive their right to appoint a directing certificateholder or to exercise any of the rights of the controlling class certificateholder. No class of certificates, other than as described above, will be eligible to act as the controlling class or appoint a directing certificateholder. |
| RREF III Debt AIV, LP, or its affiliate, is committed to purchasing the Class X-D, Class X-E, Class X-F, Class E, Class F, Class G and Class V certificates, and, on the closing date, is expected to be the initial directing certificateholder with respect to each mortgage loan (other than the non-serviced mortgage loans). |
| Each entity identified in the table titled “Non-Serviced Whole Loans” under “—Whole Loans” below is the initial directing certificateholder under the pooling and servicing agreement for the indicated transaction and will have certain consent and consultation rights with respect to the related non-serviced whole loan, which are substantially similar, but not identical, to those of the directing certificateholder under the pooling and servicing agreement for this securitization, subject to similar appraisal mechanics. See “Description of the Mortgage Pool—The Whole Loans” and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
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| Certain Affiliations | The originators, the sponsors, the underwriters and parties to the pooling and servicing agreement have various roles in this transaction as well as certain relationships with parties to this transaction and certain of their affiliates. These roles and other potential relationships may give rise to conflicts of interest as further described in this prospectus under “Risk Factors—Risks Related to Conflicts of Interest” and “Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties”. |
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Relevant Dates and Periods
| Cut-off Date | With respect to each mortgage loan, the later of the related due date of such mortgage loan in August 2016 and the date of origination of such mortgage loan. |
| Closing Date | On or about August 25, 2016. |
| Distribution Date | The 4th business day following each determination date. The first distribution date will be in September 2016. |
| Determination Date | The 6th day of each month or, if the 6th day is not a business day, then the business day immediately following such 6th day. |
| Record Date | With respect to any distribution date, the last business day of the month preceding the month in which that distribution date occurs. |
| Interest Accrual Period | Interest will accrue on the offered certificates during the calendar month immediately preceding the related distribution date. Interest will be calculated on the offered certificates assuming each month has 30 days and each year has 360 days. |
| Collection Period | For any mortgage loan to be held by the issuing entity and any distribution date, the period commencing on the day immediately following the due date for such mortgage loan in the month preceding the month in which that distribution date occurs and ending on and including the due date for such mortgage loan in the month in which that distribution date occurs. However, in the event that the last day of a collection period (or applicable grace period) is not a business day, any periodic payments received with respect to the mortgage loans relating to that collection period on the business day immediately following that last day will be deemed to have been received during that collection period and not during any other collection period. |
| Assumed Final Distribution Date; Rated Final |
| Distribution Date | The assumed final distribution dates set forth below for each class of offered certificates have been determined on the basis of the assumptions described in “Description of the Certificates—Assumed Final Distribution Date; Rated Final Distribution Date”: |
| Class A-1 | August 2021 | |
| Class A-2 | August 2021 | |
| Class A-SB | July 2026 | |
| Class A-3 | July 2026 | |
| Class A-4 | August 2026 | |
| Class X-A | August 2026 | |
| Class A-M | August 2026 | |
| Class B | August 2026 | |
| Class C | August 2026 |
| The rated final distribution date will be the distribution date in August 2049. |
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Transaction Overview
| On the closing date, each sponsor will sell its respective mortgage loans to the depositor, which will in turn deposit the mortgage loans into the issuing entity, a common law trust created on the closing date. The issuing entity will be formed by a pooling and servicing agreement to be entered into among the depositor, the master servicer, the special servicer, the certificate administrator, the trustee, the operating advisor and the asset representations reviewer.
The transfers of the mortgage loans from the sponsors to the depositor and from the depositor to the issuing entity in exchange for the offered certificates are illustrated below: |
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Offered Certificates
| General | We are offering the following classes of commercial mortgage pass-through certificates as part of CD 2016-CD1 Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2016-CD1: |
| · | Class A-1 |
| · | Class A-2 |
| · | Class A-SB |
| · | Class A-3 |
| · | Class A-4 |
| · | Class X-A |
| · | Class A-M |
| · | Class B |
| · | Class C |
| The certificates of this Series will consist of the above classes and the following classes that are not being offered by this prospectus: Class X-B, Class X-C, Class X-D, Class X-E, Class X-F, Class D, Class E, Class F, Class G, Class V and Class R. | |
| Certificate Balances and Notional Amounts |
|
| Class A-1 | $ | 30,826,000 | |
| Class A-2 | $ | 40,000,000 | |
| Class A-SB(1) | $ | 46,236,000 | |
| Class A-3 | $ | 168,000,000 | |
| Class A-4 | $ | 207,191,000 | |
| Class X-A(2) | $ | 566,092,000 | |
| Class A-M | $ | 73,839,000 | |
| Class B | $ | 31,644,000 | |
| Class C | $ | 28,129,000 | |
| (1) | The Class A-SB certificates have certain priority with respect to reducing the principal balance of those certificates to their planned principal balance, as described in this prospectus. | ||
| (2) | Notional amount. |
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| Pass-Through Rates | |
| A. Offered Certificates | Your certificates will accrue interest at an annual rate called a pass-through rate. The initial approximate pass-through rate is set forth below for each class: |
| Class A-1 | 1.4430%(1) | ||
| Class A-2 | 2.4530%(1) | ||
| Class A-SB | 2.6220%(1) | ||
| Class A-3 | 2.4590%(1) | ||
| Class A-4 | 2.7240%(1) | ||
| Class X-A | 1.5820%(2) | ||
| Class A-M | 2.9260%(1) | ||
| Class B | 3.0770%(3) | ||
| Class C | 3.6310%(3) | ||
| (1) | The pass through rates for the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4 and Class A-M certificates, in each case, will be equal to a fixedper annum rate. |
| (2) | The pass-through rate for the Class X-A certificates for any distribution date will equal the excess, if any, of (a) the weighted average of the net mortgage 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), over (b) the weighted average of the pass-through rates of the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4 and Class A-M certificates for that distribution date, weighted on the basis of their respective certificate balances immediately prior to that distribution date. |
| (3) | For any distribution date, the pass-through rate for the Class B certificates will equal aper annum rate equal to the lesser of (i) the weighted average of the net mortgage 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) as of their respective due dates in the month preceding the month in which such distribution date occurs and (ii) 3.0770%. For any distribution date, the pass-through rate for the Class C certificates will equal aper annum rate equal to the lesser of (i) the weighted average of the net mortgage 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) as of their respective due dates in the month preceding the month in which such distribution date occurs and (ii) 3.6310%. |
| See “Description of the Certificates—Distributions—Pass-Through Rates” in this prospectus. |
| B. Interest Rate Calculation |
| Convention | Interest on the offered certificates at their applicable pass-through rates 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-A, Class X-B, Class X-C, Class X-D, Class X-E and Class X-F 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 (which calculation does not include any companion loan interest rate), the mortgage loan interest rates will not reflect any default interest rate, any loan term modifications agreed to by the applicable special servicer or any modifications resulting from a borrower’s bankruptcy or insolvency. |
| For purposes of calculating the pass-through rates on the offered certificates, the interest rate for each mortgage loan that accrues interest based on the actual number of days in each month and assuming a 360-day year, or an “actual/360 basis”, will be recalculated, if necessary, so that the amount of interest that |
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| would accrue at that recalculated rate in the applicable month, calculated on a 30/360 basis, will equal the amount of interest that is required to be paid on that mortgage loan in that month, subject to certain adjustments as described in “Description of the Certificates—Distributions—Pass-Through Rates” and “—Interest Distribution Amount”. | ||
| 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 each mortgage loan (other than a non-serviced mortgage loan with respect to the special servicing fee only), the serviced companion loans and any related REO loans and, with respect to the special servicing fees, if the related loan interest payments (or other collections in respect of the related mortgage loan or mortgaged property) are insufficient, then from general collections on all mortgage loans. The servicing fee for each distribution date, including the master servicing fee and the portion of the servicing fee payable to any primary servicer or subservicer, is calculated on the stated principal amount of each mortgage loan (including the non-serviced mortgage loans) and the related serviced companion loans at the servicing fee rate equal to aper annum rate ranging from 0.00375% to 0.10250%. |
| 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 for each distribution date is calculated based on the stated principal amount of each mortgage loan (other than any non-serviced mortgage loan) and the related serviced companion loans as to which a special servicing transfer event has occurred (including any REO loans), on a loan-by-loan basis at the special servicing fee rate equal to 0.25%per annum. The special servicer will not be entitled to a special servicing fee with respect to any non-serviced mortgage loan. |
| The workout fee will generally be payable with respect to each specially serviced loan (including any related serviced companion loan) which has become a “corrected loan” (which will occur (i) with respect to a specially serviced loan as to which there has been a payment default, when the borrower has brought the mortgage loan current and thereafter made three consecutive full and timely monthly payments, including pursuant to any workout and (ii) with respect to any other specially serviced loan, when the related default is cured or the other circumstances pursuant to which it became a specially serviced loan cease to exist in the commercially reasonable judgment of the special servicer). The workout fee will be payable out of each collection of interest and principal (including scheduled payments, prepayments, balloon payments, and payments at maturity) received on the related mortgage loan (or serviced whole loan, as applicable) for so long as it remains a corrected mortgage loan, in an amount equal to the lesser of (1) 1.0% of each such collection of interest and principal and (2) $1,000,000 |
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| in the aggregate with respect to any particular workout of a specially serviced loan. | ||
| A liquidation fee will generally be payable with respect to each specially serviced loan (including any related serviced companion loan) and any related REO property, each mortgage loan repurchased by a mortgage loan seller or each defaulted mortgage loan that is a non-serviced mortgage loan sold by the special servicer, as to which the special servicer obtains a full, partial or discounted payoff from the related borrower, loan purchaser or which is repurchased by the related mortgage loan seller outside the applicable cure period and, except as otherwise described in this prospectus, with respect to any specially serviced loan or REO property as to which the special servicer receives any liquidation proceeds. The liquidation fee for each mortgage loan (including any related serviced companion loan) and REO property will be payable from the related payment or proceeds in an amount equal to the lesser of (1) 1.0% of such payment or proceeds and (2) $1,000,000. |
| Workout fees and liquidation fees paid by the issuing entity with respect to each mortgage loan or serviced whole loan will be subject to an aggregate cap per mortgage loan or serviced whole loan of $1,000,000 as described in “Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses—Special Servicing Compensation” in this prospectus. Any workout fees or liquidation fees paid to a predecessor or successor special servicer will not be taken into account in determining the cap. |
| Any primary servicing fees or sub-servicing fees with respect to each mortgage loan (other than the non-serviced mortgage loans) and the related serviced companion loans will be paid by the master servicer or special servicer, respectively, out of the fees described above. |
| The master servicer and special servicer are also entitled to additional fees and amounts, including income on the amounts held in certain accounts and certain permitted investments. See “Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses”. |
| The certificate administrator fee for each distribution date is calculated on the stated principal amount of each mortgage loan and REO loan (excluding any non-serviced mortgage loan) at aper annumrate equal to 0.00850%. The trustee fee is payable by the certificate administrator from the certificate administrator fee. |
| The operating advisor will be entitled to a fee on each distribution date calculated on the stated principal amount of each mortgage loan and REO loan (excluding the non-serviced mortgage loans) at aper annum rate equal to (i) 0.00440% with respect to all mortgage loans (except the non-serviced mortgage loans and the U-Haul AREC Portfolio mortgage loan); and (ii) 0.00850% with respect to the U-Haul AREC Portfolio mortgage loan. The operating advisor will also be entitled under certain circumstances to a consulting fee. |
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| The asset representations reviewer will be entitled to a reasonable hourly fee (to be paid by the applicable mortgage loan seller except as described in “Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses” in this prospectus) upon the completion of the review it conducts with respect to certain delinquent mortgage loans, which will be subject to a cap as described in “Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses—Asset Representations Reviewer Compensation”. |
| Each party to the pooling and servicing agreement will also be entitled to be reimbursed by the issuing entity for costs, expenses and liabilities borne by them in certain circumstances. Fees and expenses payable by the issuing entity to any party to the pooling and servicing agreement are generally payable prior to any distributions to certificateholders. |
| Additionally, with respect to each distribution date, an amount equal to the product of 0.0005%per annum multiplied by the stated principal amount of each mortgage loan and any REO loan will be payable to CRE Finance Council©as a license fee for use of its name and trademarks, including an investor reporting package. This fee will be payable prior to any distributions to certificateholders. |
| Payment of the fees and reimbursement of the costs and expenses described above will generally have priority over the distribution of amounts payable to the certificateholders. See “Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses”and“—Limitation on Liability; Indemnification”. |
| With respect to each non-serviced mortgage loan set forth in the following table, the master servicer under the related pooling and servicing agreement governing the servicing of that loan will be entitled to a primary servicing fee (which includes any sub-servicing fee) at a rate equal to aper annum rate set forth in the following table, and the special servicer under the related pooling and servicing agreement will be entitled to a special servicing fee at a rate equal to theper annum rate set forth below. In addition, each party to the related pooling and servicing agreement governing the servicing of such non-serviced whole loan will be entitled to receive other fees and reimbursements with respect to the related non-serviced mortgage loan in amounts, from sources, and at frequencies, that are similar, but not necessarily identical, to those described above and, in certain cases (for example, with respect to unreimbursed special servicing fees and servicing advances with respect to the related non-serviced whole loan), such amounts will be reimbursable from general collections on the mortgage loans to the extent (i) not recoverable from the related non-serviced whole loan and (ii) allocable to the related non-serviced mortgage loan pursuant to the related intercreditor agreement. See “Description of the Mortgage Pool—The Whole Loans—10 Hudson Yards Whole Loan”, “—Westfield San Francisco Centre Whole Loan”, “—Prudential Plaza Whole Loan”, “—Birch Run Premium Outlets Whole Loan”, “—Gas Company Tower & World Trade Center | ||
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| Parking Garage Whole Loan”, “—Vertex Pharmaceuticals HQ Whole Loan” and “—401 South State Street Whole Loan” and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
| Non-Serviced Whole Loans | |||||
| Non-Serviced Loan | Primary Servicer Fee | Special Servicer Fee | |||
| 10 Hudson Yards(1) | 0.00125% | 0.2500% | |||
| Westfield San Francisco Centre | 0.00125% | 0.2500% | |||
| Prudential Plaza | 0.00250% | 0.2500% | |||
| Birch Run Premium Outlets(2) | 0.00125% | 0.2500% | |||
| Gas Company Tower & World Trade Center Parking Garage | 0.00125% | 0.2500% | |||
| Vertex Pharmaceuticals HQ(3) | 0.00250% | (5) | |||
| 401 South State Street(4) | 0.00250% | (6) | |||
| (1) | The 10 Hudson Yards whole loan is expected to be, as of the closing date for this securitization transaction, serviced and administered pursuant to the trust and servicing agreement governing the Hudson Yards 2016-10HY transaction. |
| (2) | The Birch Run Premium Outlets whole loan is being serviced by the master servicer and special servicer pursuant to the pooling and servicing agreement governing the COMM 2016-DC2 transaction. From and after the date on which the Birch Run Premium Outlets companion loan identified as Note A-3 is securitized, it is anticipated that the Birch Run Premium Outlets whole loan will be serviced under, and by the master servicer designed in the pooling and servicing agreement entered into in connection with such securitization. |
| (3) | The Vertex Pharmaceuticals HQ whole loan is expected to be, as of the closing date for this securitization transaction, serviced and administered pursuant to the pooling and servicing agreement governing the WFCM 2016-BNK1 transaction. |
| (4) | The 401 South State Street whole loan is currently serviced and administered pursuant to the pooling and servicing agreement governing the CGCMT 2016-P4 transaction. |
| (5) | The greater of 0.25%per annum and the rate that would result in a special servicing fee for the related month of (i) $3,500 or (ii) under certain circumstances, $5,000. |
| (6) | The greater of 0.25%per annum and the rate that would result in a special servicing fee of $3,500 per month. |
Distributions
A. Amount and Order of
| Distributions | On each distribution date, funds available for distribution from the mortgage loans, net of (i) specified expenses of the issuing entity, including fees payable to, and costs and expenses reimbursable to, the master servicer, the special servicer, the certificate administrator, the trustee, the operating advisor and the asset representations reviewer, (ii) any yield maintenance charges and prepayment premiums and (iii) any excess interest distributable to the Class V certificates will be distributed in the following amounts and order of priority: |
| First, to the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B, Class X-C, Class X-D, Class X-E and Class X-F certificates, in respect of interest, up to an amount equal to, andpro rata in accordance with, the interest entitlements for those classes; |
| Second, to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, in reduction of the certificate balances of those classes, in the following priority: |
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| First, to principal on the Class A-SB certificates, until the certificate balance of the Class A-SB certificates has been reduced to the planned principal balance for the related distribution date set forth in Annex E to this prospectus; | ||
| Second, to principal on the Class A-1 certificates, until the certificate balance of the Class A-1 certificates has been reduced to zero; |
| Third, to principal on the Class A-2 certificates, until the certificate balance of the Class A-2 certificates has been reduced to zero; |
| Fourth, to principal on the Class A-3 certificates, until the certificate balance of the Class A-3 certificates has been reduced to zero; |
| Fifth, to principal on the Class A-4 certificates, until the certificate balance of the Class A-4 certificates has been reduced to zero; and |
| Sixth, to principal on the Class A-SB certificates, until the certificate balance of the Class A-SB certificates has been reduced to zero. |
| However, if the certificate balances of each class of certificates, other than the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, having an initial principal balance have been reduced to zero, funds available for distributions of principal will be distributed to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates,pro rata, based on their respective certificate balances and without regard to the Class A-SB planned principal balance; |
| Third, to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates,pro rata, based on the aggregate unreimbursed losses, for any previously unreimbursed losses on the mortgage loans allocable to principal that were previously borne by those classes; |
| Fourth, to the Class A-M Certificates, as follows: (a) to interest on the Class A-M certificates in the amount of its interest entitlement; (b) to the extent of funds allocable to principal remaining after distributions in respect of principal to each class with a higher priority (as set forth in prior enumerated clauses set forth above), to principal on the Class A-M certificates until its certificate balance has been reduced to zero; and (c) to reimburse the Class A-M certificates for any previously unreimbursed losses on the mortgage loans that were previously allocated to that class of certificates; |
| Fifth, to the Class B certificates, as follows: (a) to interest on the Class B certificates in the amount of its interest entitlement; (b) to the extent of funds allocable to principal remaining after distributions in respect of principal to each class with a higher priority (as set forth in prior enumerated clauses set forth above), to principal on the Class B certificates until its certificate balance | ||
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| has been reduced to zero; and (c) to reimburse the Class B certificates for any previously unreimbursed losses on the mortgage loans that were previously allocated to that class of certificates; | ||
| Sixth, to the Class C certificates, as follows: (a) to interest on the Class C certificates in the amount of its interest entitlement; (b) to the extent of funds allocable to principal remaining after distributions in respect of principal to each class with a higher priority (as set forth in prior enumerated clauses set forth above), to principal on the Class C certificates until its certificate balance has been reduced to zero; and (c) to reimburse the Class C certificates for any previously unreimbursed losses on the mortgage loans that were previously allocated to that class of certificates; |
| Seventh, to the non-offered certificates (other than the Class X-B, Class X-C, Class X-D, Class X-E, Class X-F, Class V and Class R certificates), in the amounts and order of priority described in “Description of the Certificates—Distributions” in this prospectus; and |
| Eighth, to the Class R certificates, any remaining amounts. |
| For more detailed information regarding distributions on the certificates, see “Description of the Certificates—Distributions—Priority of Distributions”. |
B. Interest and Principal
| Entitlements | A description of the interest entitlement of each class of certificates (other than the Class V and Class R certificates) can be found in “Description of the Certificates—Distributions—Interest Distribution Amount”. 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 balance or notional amount. |
| A description of the amount of principal required to be distributed to each class of certificates entitled to principal on a particular distribution date can be found in “Description of the Certificates—Distributions—Principal Distribution Amount”. |
C. Yield Maintenance Charges,
| Prepayment Premiums | Yield maintenance charges and prepayment premiums with respect to the mortgage loans will be allocated to the certificates as described in “Description of the Certificates—Allocation of Yield Maintenance Charges and Prepayment Premiums”. |
| For an explanation of the calculation of yield maintenance charges, see “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans”. |
D. Subordination, Allocation of
| Losses and Certain Expenses | The following chart describes the manner in which the payment rights of certain classes of certificates will be senior or subordinate, as the case may be, to the payment rights of other | |
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| classes of certificates. The chart shows the entitlement to receive principal and/or interest of certain classes of certificates (other than excess interest that accrues on each mortgage loan that has an anticipated repayment date) on any distribution date in descending order. It also shows the manner in which mortgage loan losses are allocated to certain classes of the certificates in ascending order (beginning with the non-offered certificates, other than the Class V and Class R certificates) to reduce the certificate balance of each such class to zero;providedthat no principal payments or mortgage loan losses will be allocated to the Class X-A, Class X-B, Class X-C, Class X-D, Class X-E, Class X-F, Class R or Class V certificates, although principal payments and mortgage loan losses may reduce the notional amounts of the Class X-A, Class X-B, Class X-C, Class X-D, Class X-E and Class X-F certificates and, therefore, the amount of interest they accrue. | ||
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| (1) | The Class A-SB certificates have certain priority with respect to reducing the principal balance of those certificates to their planned principal balance as described in this prospectus. | |
| (2) | The Class X-A, Class X-B, Class X-C, Class X-D, Class X-E and Class X-F certificates are interest-only certificates and the Class X-B, Class X-C, Class X-D, Class X-E and Class X-F certificates are not offered by this prospectus. | |
| (3) | Other than the Class X-B, Class X-C, Class X-D, Class X-E and Class X-F certificates. |
| Other than the subordination of certain classes of certificates, as described above, no other form of credit enhancement will be available for the benefit of the holders of the offered certificates. |
| The notional amount of the Class X-A certificates will be reduced by the aggregate amount of principal losses or principal payments, if any, allocated to the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4 and Class A-M certificates. The notional amount of the Class X-B certificates will be reduced by the aggregate amount of principal losses or principal payments, if any, allocated to the Class B and Class C certificates. The notional amount of the Class X-C certificates will be reduced by the amount of principal losses or principal payments, if any, allocated to the Class D certificates. The notional amount of the Class X-D certificates will be reduced by | ||
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| the amount of principal losses or principal payments, if any, allocated to the Class E certificates. The notional amount of the Class X-E certificates will be reduced by the amount of principal losses or principal payments, if any, allocated to the Class F certificates. The notional amount of the Class X-F certificates will be reduced by the amount of principal losses or principal payments, if any, allocated to the Class G certificates. |
| To the extent funds are available on a subsequent distribution date for distribution on your offered certificates, you will be reimbursed for any losses allocated to your offered certificates in accordance with the distribution priorities. |
| See “Description of the Certificates—Subordination; Allocation of Realized Losses” for more detailed information regarding the subordination provisions applicable to the certificates and the allocation of losses to the certificates. |
| E.Shortfalls in Available Funds | The following types of shortfalls in available funds will reduce distributions to the classes of certificates with the lowest payment priorities: |
| · | shortfalls resulting from the payment of special servicing fees and other additional compensation that the special servicer is entitled to receive; |
| · | shortfalls resulting from interest on advances made by the master servicer, the special servicer or the trustee (to the extent not covered by late payment charges or default interest paid by the related borrower); | |
| · | shortfalls resulting from the application of appraisal reductions to reduce interest advances; |
| · | shortfalls resulting from extraordinary expenses of the issuing entity including indemnification payments payable to the parties to the pooling and servicing agreement; | |
| · | shortfalls resulting from a modification of a mortgage loan’s interest rate or principal balance; and | |
| · | shortfalls resulting from other unanticipated or default-related expenses of the issuing entity. |
| In addition, prepayment interest shortfalls on the mortgage loans that are not covered by certain compensating interest payments made by the master servicer are required to be allocated among the classes of certificates entitled to interest, on apro ratabasis, to reduce the amount of interest payable on each such class of certificates to the extent described in this prospectus. See “Description of the Certificates—Distributions—Priority of Distributions”. |
| F. Excess Interest | On each distribution date, any excess interest in respect of the increase in the interest rate on any mortgage loan with an anticipated repayment date (which would accrue after the related anticipated repayment date), to the extent actually collected and | |
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| applied as interest during a collection period, will be distributed to the holders of the Class V certificates on the related distribution date. This excess interest will not be available to make distributions to any other class of certificates or to provide credit support for other classes of certificates or offset any interest shortfalls or to pay any other amounts to any other party under the pooling and servicing agreement. | ||
| Advances |
| A.P&I Advances | The master servicer is required to advance a delinquent periodic payment on each mortgage loan (unless the master servicer or the special servicer determines that the advance would be non-recoverable). Neither the master servicer nor the trustee will be required to advance balloon payments due at maturity in excess of the regular periodic payment, interest in excess of a mortgage loan’s regular interest rate, default interest, late payment charges, prepayment premiums or yield maintenance charges. |
| The amount of the interest portion of any advance will be subject to reduction to the extent that an appraisal reduction of the related mortgage loan has occurred (and with respect to any mortgage loan that is part of a whole loan, to the extent such appraisal reduction amount is allocated to the related mortgage loan). There may be other circumstances in which the master servicer will not be required to advance a full month of principal and/or interest. If the master servicer fails to make a required advance, the trustee will be required to make the advance, unless the trustee determines that the advance would be non-recoverable. If an interest advance is made by the master servicer, the master servicer will not advance the portion of interest that constitutes its servicing fee, but will advance the portion of interest that constitutes the regular monthly fees payable to the certificate administrator, the trustee, the operating advisor and the CREFC®license fee. |
| None of the master servicer, the special servicer or the trustee will make, or be permitted to make, any principal or interest advance with respect to any companion loan that is not held by the issuing entity. |
| See “Pooling and Servicing Agreement—Advances”. |
| B.Servicing Advances | The master servicer may be required to make advances with respect to mortgage loans and related companion loans that it is required to service to pay delinquent real estate taxes, assessments and hazard insurance premiums and similar expenses necessary to: |
| · | protect and maintain (and in the case of REO properties, lease and manage) the related mortgaged property; | |
| · | maintain the priority of the lien on the related mortgaged property; and/or | |
| · | enforce the related mortgage loan documents. |
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| The special servicer will have no obligation to make any servicing advances. |
| If the master servicer fails to make a required advance of this type, the trustee will be required to make this advance. None of the master servicer, the special servicer or the trustee is required to advance amounts determined by such party to be non-recoverable. |
| See “Pooling and Servicing Agreement—Advances”. |
| With respect to any non-serviced mortgage loan, the master servicer and/or the special servicer (and the trustee, as applicable) under the related pooling and servicing agreement governing the servicing of that non-serviced whole loan will be required to make similar advances with respect to delinquent real estate taxes, assessments and hazard insurance premiums as described above. |
| C.Interest on Advances | The master servicer, the special servicer and the trustee, as applicable, will be entitled to interest on the above described advances at the “Prime Rate” as published inThe Wall Street Journal, as described in this prospectus. 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 and interest due on a mortgage loan until the related due date has passed and any grace period for late payments applicable to the mortgage loan has expired. See “Pooling and Servicing Agreement—Advances”. |
| With respect to a non-serviced mortgage loan, the applicable makers of advances under the related pooling and servicing agreement governing the servicing of such non-serviced whole loan will similarly be entitled to interest on advances, and any accrued and unpaid interest on servicing advances made in respect of such non-serviced mortgage loan may be reimbursed from general collections on the other mortgage loans included in the issuing entity to the extent not recoverable from such non-serviced mortgage loan and to the extent allocable to the related non-serviced mortgage loan in accordance with the related intercreditor agreement. | ||
| The Mortgage Pool |
| The Mortgage Pool | The issuing entity’s primary assets will be 32 fixed rate commercial mortgage loans, each evidenced by one or more promissory notes secured by first mortgages, deeds of trust, deeds to secure debt or similar security instruments on the fee and/or leasehold estate of the related borrowers in 58 commercial, multifamily or manufactured housing community properties. See “Description of the Mortgage Pool—Additional Indebtedness”. |
| The aggregate principal balance of the mortgage loans as of the cut-off date will be approximately $703,219,986. |
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| Whole Loans |
| Unless otherwise expressly stated in this prospectus, the term “mortgage loan” refers to each of the 32 commercial mortgage loans to be held by the issuing entity. Of the mortgage loans, each of the mortgage loans in the following table is part of a larger whole loan, each of which is comprised of (i) the related mortgage loan, (ii) one or more loans that arepari passuin right of payment to the related mortgage loan (each referred to in this prospectus as a “pari passu companion loan”) and (iii) in the case of three of the mortgage loans in the following table, one or more loans that are subordinate in right of payment to the related mortgage loan and the relatedpari passu companion loans (each referred to in this prospectus as a “subordinate companion loan”). Each of thepari passu companion loans and the subordinate companion loans are referred to in this prospectus as a “companion loan”. The companion loans, together with their related mortgage loans, are each referred to in this prospectus as a “whole loan”. |
Whole Loan Summary
Mortgage Loan | Mortgage Loan Cut-off Date Balance | % of | Pari Passu Companion | Subordinate Companion Loan Cut-off Date Balance | Mortgage Loan LTV Ratio(1) | Mortgage Loan Underwritten NCF DSCR(1) | Mortgage Loan Underwritten NOI Debt Yield(1) | ||||||||
| 10 Hudson Yards(2) | $65,000,000 | 9.2% | $643,100,000 | $191,900,000 | 32.9% | 4.18x | 12.9% | ||||||||
| Westfield San Francisco Centre | $60,000,000 | 8.5% | $373,077,000 | $124,923,000 | 35.5% | 3.68x | 13.1% | ||||||||
| Prudential Plaza | $50,000,000 | 7.1% | $365,000,000 | N/A | 59.3% | 1.34x | 9.0% | ||||||||
| U-Haul AREC Portfolio | $48,500,000 | 6.9% | $46,000,000 | N/A | 67.4% | 1.64x | 10.3% | ||||||||
| Birch Run Premium Outlets | $43,000,000 | 6.1% | $80,000,000 | N/A | 59.4% | 2.90x | 13.2% | ||||||||
| Gas Company Tower & World Trade Center Parking Garage(3) | $40,000,000 | 5.7% | $104,000,000 | $175,000,000 | 23.6% | 5.23x | 19.9% | ||||||||
| Vertex Pharmaceuticals HQ(4) | $30,000,000 | 4.3% | $395,000,000 | N/A | 35.5% | 6.28x | 17.9% | ||||||||
| 401 South State Street(5) | $15,742,454 | 2.2% | $31,964,374 | N/A | 62.4% | 1.59x | 11.5% |
| (1) | Calculated based on the balance of the related whole loan excluding any related subordinate companion loans. With respect to the mortgaged property identified on Annex A-1 to this prospectus as 10 Hudson Yards, the Mortgage Loan LTV Ratio is calculated using a “hypothetical as-is” appraised value for the mortgaged property. See “Description of the Mortgage Pool—Appraised Value” for more information. | |
| (2) | Information presented excludes $300,000,000 of mezzanine debt. |
| (3) | Information presented excludes $131,000,000 of mezzanine debt. |
| (4) | Information presented excludes $195,000,000 of mezzanine debt. |
| (5) | Information presented excludes $7,830,000 of mezzanine debt. |
| The U-Haul AREC Portfolio whole loan will be serviced by the master servicer and the special servicer pursuant to the pooling and servicing agreement for this transaction and is referred to in this prospectus as a “serviced whole loan”, and the related companion loans are referred to in this prospectus as “serviced companion loans”. |
| Each loan identified in the following table will not be serviced under the pooling and servicing agreement for this transaction and instead will be serviced under a separate pooling and servicing agreement identified in the following table relating to a | ||
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| related companion loan and is, together with the related companion loan(s), referred to in this prospectus as a “non-serviced whole loan”. Each related mortgage loan is referred to as a “non-serviced mortgage loan” and each of the related companion loans are referred to in this prospectus as a “non-serviced companion loan”. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
Non-Serviced Whole Loans
Loan Name | Transaction/ Pooling and Servicing Agreement | % of | Master Servicer | Special Servicer | Trustee | Custodian | Directing Certificateholder(1) | Operating Advisor | Asset Representations Reviewer | |||||||||
| 10 Hudson Yards | Hudson Yards 2016-10HY(2) | 9.2% | Wells Fargo Bank, National Association(2) | AEGON USA Realty Advisors, LLC(2) | Wilmington Trust, National Association(2) | Wells Fargo Bank, National Association(2) | N/A | N/A | N/A | |||||||||
| Westfield San Francisco Centre | DBJPM 2016-SFC | 8.5% | Wells Fargo Bank, National Association | Pacific Life Insurance Company | Wilmington Trust, National Association | Deutsche Bank Trust Company Americas | Prima Capital Advisors LLC | N/A | N/A | |||||||||
| Prudential Plaza | COMM 2015-CCRE26 | 7.1% | Wells Fargo Bank, National Association | CWCapital Asset Management LLC | Wilmington Trust, National Association | Wells Fargo Bank, National Association | Seer Capital Partners Master Fund L.P. | Park Bridge Lender Services LLC | N/A | |||||||||
| Birch Run Premium Outlets(3) | COMM 2016-DC2 | 6.1% | Wells Fargo Bank, National Association | CWCapital Asset Management LLC | Wilmington Trust, National Association | Deutsche Bank Trust Company Americas | Seer Capital Partners Master Fund L.P. | Park Bridge Lender Services LLC | Park Bridge Lender Services LLC | |||||||||
| Gas Company Tower & World Trade Center Parking Garage | COMM 2016-GCT | 5.7% | KeyBank National Association | Strategic Asset Services, LLC | Wells Fargo Bank, National Association | Wells Fargo Bank, National Association | H/2 Capital Partners | N/A | N/A | |||||||||
| Vertex Pharmaceuticals HQ | WFCM 2016-BNK1(4) | 4.3% | Wells Fargo Bank, National Association(4) | Rialto Capital Advisors, LLC(4) | Wilmington Trust, National Association(4) | Wells Fargo Bank, National Association(4) | RREF III Debt AIV, LP(4) | Park Bridge Lender Services LLC(4) | Park Bridge Lender Services LLC(4) | |||||||||
| 401 South State Street | CGCMT 2016-P4 | 2.2% | Wells Fargo Bank, National Association | CWCapital Asset Management LLC | Deutsche Bank Trust Company Americas | Deutsche Bank Trust Company Americas | Eightfold Real Estate Capital Fund IV, L.P. | Park Bridge Lender Services LLC | Park Bridge Lender Services LLC |
| (1) | The related transaction documents may provide that the directing certificateholder may either be the entity specified or an affiliate thereof. |
| (2) | The initial controlling note holder of the 10 Hudson Yards whole loan is German American Capital Corporation, as holder of the related controlling companion loan. The related controlling companion loan is expected to be contributed to the Hudson Yards 2016-10HY transaction prior to the closing date for this securitization transaction. Accordingly, the 10 Hudson Yards whole loan is expected to be (and information presented in the foregoing table is based on the assumption that the 10 Hudson Yards whole loan will be) securitized, serviced and administered pursuant to the trust and servicing agreement governing the Hudson Yards 2016-10HY transaction. |
| (3) | The Birch Run Premium Outlets whole loan is being serviced by the master servicer and special servicer pursuant to the pooling and servicing agreement governing the COMM 2016-DC2 transaction. From and after the date on which the Birch Run Premium Outlets companion loan identified as Note A-3 is securitized, it is anticipated that the Birch Run Premium Outlets whole loan will be serviced under, and by the master servicer designed in the pooling and servicing agreement entered into in connection with such securitization. |
| (4) | The initial controlling note holder of the Vertex Pharmaceuticals HQ whole loan is Morgan Stanley Bank, N.A., as holder of the related controlling companion loan. The related controlling companion loan, which is evidenced by Note A-1, is expected to be contributed to the WFCM 2016-BNK1 transaction prior to the closing date for this securitization transaction. Accordingly, the Vertex Pharmaceuticals HQ whole loan is expected to be (and information presented in the foregoing table is based on the assumption that the Vertex Pharmaceuticals HQ whole loan will be) securitized, serviced and administered pursuant to the pooling and servicing agreement governing the WFCM 2016-BNK1 transaction. |
| For further information regarding the whole loans, see “Description of the Mortgage Pool—The Whole Loans”, and for information regarding the servicing of the non-serviced whole loan, see “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”. |
Mortgage Loan Characteristics
| The following tables set forth certain anticipated characteristics of the mortgage loans as of the cut-off date (unless otherwise indicated). Except as specifically provided in this prospectus, various information presented in this prospectus (including | ||
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| loan-to-value ratios, debt service coverage ratios, debt yields and cut-off date balances per net rentable square foot, pad, room or unit, as applicable) with respect to any mortgage loan with one or morepari passu companion loans is calculated including the principal balance and debt service payment of the relatedpari passu companion loan(s), but is calculated excluding any related mezzanine debt or preferred equity. | ||
| The sum of the numerical data in any column may not equal the indicated total due to rounding. Unless otherwise indicated, all figures and percentages presented in this “Summary of Terms” are calculated as described under “Description of the Mortgage Pool—Additional Information” and, unless otherwise indicated, such figures and percentages are approximate and in each case, represent the indicated figure or percentage of the aggregate principal balance of the pool of mortgage loans as of the cut-off date. The principal balance of each mortgage loan as of the cut-off date assumes the timely receipt of principal scheduled to be paid on or before the cut-off date and no defaults, delinquencies or prepayments on, or modifications of, any mortgage loan on or prior to the cut-off date. Whenever percentages and other information in this prospectus are presented on the mortgaged property level rather than the mortgage loan level, the information for mortgage loans secured by more than one mortgaged property is based on allocated loan amounts as stated in Annex A-1. | ||
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| The mortgage loans will have the following approximate characteristics as of the cut-off date: |
Cut-off Date Mortgage Loan Characteristics
All Mortgage Loans | |||
| Initial Pool Balance(1) | $703,219,986 | ||
| Number of mortgage loans | 32 | ||
| Number of mortgaged properties | 58 | ||
| Range of Cut-off Date Balances | $3,775,000 to $65,000,000 | ||
| Average Cut-off Date Balance | $21,975,625 | ||
| Range of Mortgage Rates | 2.7982% to 5.1500% | ||
| Weighted average Mortgage Rate | 4.0420% | ||
| Range of original terms to maturity(2) | 60 months to 120 months | ||
| Weighted average original term to maturity(2) | 117 months | ||
| Range of remaining terms to maturity(2) | 60 months to 120 months | ||
| Weighted average remaining term to maturity(2) | 114 months | ||
| Range of original amortization term(3) | 300 months to 360 months | ||
| Weighted average original amortization term(3) | 353 months | ||
| Range of remaining amortization terms(3) | 300 months to 360 months | ||
| Weighted average remaining amortization term(3) | 353 months | ||
| Range of LTV Ratios as of the Cut-off Date(4)(5) | 23.6% to 74.8% | ||
| Weighted average LTV Ratio as of the Cut-off Date(4)(5) | 56.2% | ||
| Range of LTV Ratios as of the maturity date(2)(4)(5) | 23.6% to 63.4% | ||
| Weighted average LTV Ratio as of the maturity date(2)(4)(5) | 48.8% | ||
| Range of UW NCF DSCR(4)(6) | 1.25x to 6.28x | ||
| Weighted average UW NCF DSCR(4)(6) | 2.48x | ||
| Range of UW NOI Debt Yield(4) | 8.3% to 19.9% | ||
| Weighted average UW NOI Debt Yield(4) | 11.9% | ||
| Percentage of Initial Pool Balance consisting of: | |||
| Interest Only, then Amortizing | 34.9% | ||
| Interest Only | 29.6% | ||
| Amortizing Balloon(3) | 24.3% | ||
| Amortizing Balloon, ARD | 6.9% | ||
| Interest Only, ARD | 4.3% |
| (1) | Subject to a permitted variance of plus or minus 5%. | |
| (2) | With respect to any mortgage loan with an anticipated repayment date, calculated through or as of, as applicable, such anticipated repayment date. |
| (3) | Does not include mortgage loans that pay interest-only until their maturity dates or anticipated repayment dates. |
| (4) | In the case of eight (8) mortgage loans, collectively representing approximately 50.1% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, each of which has one or morepari passu companion loans and, in certain cases, one or more subordinate companion loans that are not included in the issuing entity, the debt service coverage ratios, loan-to-value ratios and debt yield have been calculated including the relatedpari passu companion loans but without regard to the subordinate companion loans. |
| (5) | In the case of the mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus as 10 Hudson Yards, representing approximately 9.2% of the outstanding pool balance as of the related cut-off date, the cut-off date loan to value ratio has been calculated based on the “hypothetical as-is” value for such mortgaged property. The “hypothetical as-is” value refers to the mortgaged property’s value assuming the remaining obligations and costs of approximately $108.6 million are expended as of July 1, 2016. As of August 1, 2016, approximately $91.0 million of such contractual obligations and costs remain, which amount was reserved at loan origination. In the case of the mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus as Hall Office Park 16, representing approximately 6.0% of the outstanding pool balance as of the related cut-off date, the cut-off date loan-to-value ratio has been calculated based on the “as-is with reserves” value for such mortgaged property. The “as-is with reserves” value refers to the mortgaged property’s value that reflects the scheduled tenant improvements, leasing commissions, rent reserves and rent abatements costs that were reserved at | |
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| closing. In the case of the mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus as Hilton Garden Inn San Leandro, representing approximately 2.9% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, the cut-off date loan-to-value ratio has been calculated based on the “as-stabilized” value for such mortgaged property. With respect to the Hilton Garden Inn San Leandro mortgaged property, the “as-stabilized” value refers to the mortgaged property’s value assuming that the remaining renovations related to a property improvement plan have been completed. In the case of the mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus as Huntington Park, representing approximately 0.8% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, the cut-off date loan-to-value ratio has been calculated based on the “as-stabilized” value for such mortgaged property. The “as-stabilized” value refers to the mortgaged property’s value assuming that the remaining renovations are completed and the mortgaged property is operated at a stabilized occupancy. In the case of the mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus as Hampton Inn Eugene, representing approximately 0.8% of the outstanding pool balance as of the related cut-off date, the cut-off date loan-to-value ratio has been calculated based on the “as complete” value for such mortgaged property. |
| (6) | Debt service coverage ratios are calculated using the average of the principal and interest payments for the first twelve payment periods of the mortgage loan following the cut-off date (but without regard to any leap year adjustments),providedthat (i) in the case of a mortgage loan that provides for interest-only payments through maturity or its anticipated repayment date, as applicable, such items are calculated based on the interest payments scheduled to be due on the first due date following the cut-off date and the 11 due dates thereafter for such mortgage loan and (ii) in the case of a mortgage loan that provides for an initial interest-only period that ends prior to maturity or its anticipated repayment date, as applicable and provides for scheduled amortization payments thereafter, such items are calculated based on the monthly payment of principal and interest payable immediately following the expiration of the interest-only period. |
| All of the mortgage loans accrue interest on an actual/360 basis. |
| For further information regarding the Mortgage Loans, see “Description of the Mortgage Pool”. |
| Modified and Refinanced Loans | As of the cut-off date, none of the mortgage loans were modified due to a delinquency. |
| Three (3) of the mortgage loans, identified on Annex A-1 as Prudential Plaza, Embassy Suites Columbus and Oxford Glen Apartments, collectively representing approximately 12.6% of the outstanding pool balance as of the cut-off date, (i) were refinancings in whole or in part of a prior loan secured by, or a mezzanine loan secured by interests in the owner of, the related mortgaged property, which prior loan was in default at the time of refinancing and/or otherwise involved a discounted pay-off, maturity extension, short sale or other restructuring or (ii) provided acquisition financing for the related borrower’s purchase of the related mortgaged property at a foreclosure sale or after becoming an REO property as described below under “Description of the Mortgage Pool—Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings” in this prospectus. |
| Loans Underwritten Based on | ||
| Projections of Future Income | With respect to eight (8) of the mortgaged properties, representing approximately 26.7% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (by allocated loan amount), such mortgaged properties (i) were constructed, in a lease-up period or the subject of a major renovation that was completed within 12 calendar months prior | |
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| to the cut-off date and, therefore, the related mortgaged property has no prior operating history or the mortgage loan seller did not take the operating history into account in the underwriting of the related mortgage loan, (ii) were acquired by the related borrower or an affiliate of the borrower within 12 calendar months prior to the cut-off date and such borrower or affiliate was unable to provide the related mortgage loan seller with historical financial information (or provided limited historical financial information) for such acquired mortgaged property or (iii) are single tenant properties subject to double-net or triple-net leases with the related tenant where the related borrower did not provide the related mortgage loan seller with historical financial information for the related mortgaged property. |
| See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Mortgaged Properties With Limited Prior Operating History”. |
| Certain Variances from | ||
| Underwriting Standards | Certain of the mortgage loans may vary from the underwriting guidelines described under “Transaction Parties—The Sponsors and Mortgage Loan Sellers” with respect to the related third party materials requirements. See “Transaction Parties—The Sponsors and Mortgage Loan Sellers—German American Capital Corporation—Exceptions” and “—Citigroup Global Markets Realty Corp.—Exceptions”. |
Additional Aspects of Certificates
| Denominations | The offered certificates with certificate balances will be issued, maintained and transferred only in minimum denominations of $10,000 and integral multiples of $1 in excess of $10,000. The offered certificates with notional amounts will be issued, maintained and transferred only in minimum denominations of authorized initial notional amounts of not less than $10,000 and in integral multiples of $1 in excess of $10,000. |
| Registration, Clearance and | ||
| Settlement | Each class of offered certificates will initially be registered in the name of Cede & Co., as nominee of The Depository Trust Company, or DTC. |
| You may hold offered certificates through: (1) DTC in the United States; or (2) Clearstream Banking, société anonyme or Euroclear Bank, as operator of the Euroclear System. Transfers within DTC, Clearstream Banking, société 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. |
| We may elect to terminate the book-entry system through DTC (with the consent of the DTC participants), Clearstream Banking, société anonyme or Euroclear Bank, as operator of the Euroclear System, with respect to all or any portion of any class of the offered certificates. | ||
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| “Descriptionof the Certificates—Delivery, Form, Transfer and Denomination—Book-Entry Registration”. | ||
| Information Available to | ||
| Certificateholders | On each distribution date, the certificate administrator will prepare and make available to each certificateholder a statement as to the distributions being made on that date. Additionally, under certain circumstances, certificateholders of record may be entitled to certain other information regarding the issuing entity. See “Description of the Certificates—Reports to Certificateholders; Certain Available Information”. |
| Deal Information/Analytics | Certain information concerning the mortgage loans and the certificates may be available to subscribers through the following services: |
| · | BlackRock Financial Management, Inc., Bloomberg Financial Markets, L.P., Trepp, LLC, Intex Solutions, Inc., Interactive Data Corporation, Markit LLC and Thomson Reuters Corporation |
| · | The certificate administrator’s website initially located at www.ctslink.com |
| · | The master servicer’s website initially located at www.pnc.com/midland |
| Optional Termination | On any distribution date on which the aggregate principal balance of the pool of mortgage loans is less than 1.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, certain entities specified in this prospectus will have the option to purchase all of the remaining mortgage loans (and all property acquired through exercise of remedies in respect of any mortgage loan) at the price specified in this prospectus. |
| The issuing entity may also be terminated in connection with a voluntary exchange of all the then-outstanding certificates (other than the Class V and Class R certificates) for the mortgage loans held by the issuing entity,providedthat (i) the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class B, Class C and Class D certificates are no longer outstanding and (ii) there is only one holder (or multiple holders acting unanimously) of the outstanding certificates (other than the Class V and Class R certificates). | ||
| See “Pooling and Servicing Agreement—Termination; Retirement of Certificates”. |
| Required Repurchases or Substitutions of Mortgage Loans; Loss of Value | ||
| Payment | Under certain circumstances, the related mortgage loan seller may be obligated to (i) repurchase (without payment of any yield maintenance charge or prepayment premium) or substitute for an affected mortgage loan from the issuing entity or (ii) make a cash payment that would be deemed sufficient to compensate |
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| the issuing entity in the event of a document defect or a breach of a representation and warranty made by the related mortgage loan seller with respect to the mortgage loan in the mortgage loan purchase agreement that materially and adversely affects the value of the mortgage loan, the value of the related mortgaged property or the interests of any certificateholders in the mortgage loan or mortgaged property or causes the mortgage loan to be other than a “qualified mortgage” within the meaning of Code Section 860G(a)(3)(but without regard to the rule of Treas. Reg. Section 1.860G-2(f)(2) that causes a defective loan to be treated as a “qualified mortgage”). See “Description of the Mortgage Loan Purchase Agreements”. |
| Sale of Defaulted Loans | Pursuant to the pooling and servicing agreement, the special servicer is required to solicit offers for defaulted serviced mortgage loans (or a defaulted serviced whole loan) and/or related REO properties and accept the first (and, if multiple offers are received, the highest) cash offer from any person that constitutes a fair price for the defaulted serviced mortgage loan (or a defaulted whole loan) or related REO property, determined as described in “Pooling and Servicing Agreement—Realization Upon Mortgage Loans”and “—Sale of Defaulted Loans and REO Properties”, unless the special servicer determines, in accordance with the servicing standard, that rejection of such offer would be in the best interests of the certificateholders and the relatedpari passu companion loan holders (as a collective whole as if such certificateholders and such companion loan holders constituted a single lender). |
| If a non-serviced mortgage loan with a relatedpari passu companion loan becomes a defaulted mortgage loan and the special servicer under the related pooling and servicing agreement for the relatedpari passu companion loan determines to sell suchpari passu companion loan, then that special servicer will be required to sell such non-serviced mortgage loan together with the relatedpari passucompanion loan in a manner similar to that described above. See “Description of the Mortgage Pool—The Whole Loans—10 Hudson Yards Whole Loan”, “—Westfield San Francisco Centre Whole Loan”, “—Prudential Plaza Whole Loan”, “—Birch Run Premium Outlets Whole Loan”, “—Gas Company Tower & World Trade Center Parking Garage Whole Loan”, “—Vertex Pharmaceuticals HQ Whole Loan” and “—401 South State Street Whole Loan”. | ||
| Tax Status | Elections will be made to treat designated portions of the issuing entity (exclusive of (i) interest that is deferred after the anticipated repayment date of each mortgage loan with an anticipated repayment date and the excess interest distribution account and (ii) the Prudential Plaza Loan REMIC residual interest and the related distribution account) as two separate REMICs (the “Lower-Tier REMIC” and the “Upper-Tier REMIC” and each a “Trust REMIC”) for federal income tax purposes. | |
| In addition, a third REMIC (the “Prudential Plaza Loan REMIC”), created pursuant to a REMIC declaration effective as of July 26, 2016 by German American Capital Corporation, holds the |
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| Prudential Plaza mortgage loan, evidenced by the promissory note designated as Note A-2-1, and certain of the Prudential Plaza companion loans, evidenced by the promissory notes designated as Note A-2-2, Note A-3 and Note A-4, and other related assets, and has issued a class of uncertificated regular interests with a principal balance equal to the aggregate outstanding principal balances of such Note A-2-1, Note A-2-2, Note A-3 and Note A-4 and a single uncertificated residual interest, which will be represented by the Class R certificates. The Prudential Plaza mortgage loan represents a percentage interest in the Prudential Plaza Loan REMIC regular interest corresponding to the outstanding principal balance of the Prudential Plaza mortgage loan. |
| In addition, the portions of the issuing entity consisting of the excess interest accrued on the mortgage loan with an anticipated repayment date, beneficial ownership of which is represented by the Class V certificates, and the Prudential Plaza Loan REMIC residual interest, beneficial ownership of which is represented by the Class R certificates, will be treated as a grantor trust for federal income tax purposes (the “Grantor Trust”). |
| Pertinent federal income tax consequences of an investment in the offered certificates include: |
| · | Each class of offered certificates will constitute REMIC “regular interests”. |
| · | The offered certificates will be treated as newly originated debt instruments for federal income tax purposes. |
| · | You will be required to report income on your offered certificates using the accrual method of accounting. |
| · | It is anticipated that the Class X-Acertificates will be issued with original issue discount and that the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class A-M, Class B and Class C certificates will be issued at a premium for federal income tax purposes. |
| See “Material Federal Income Tax Considerations”. |
| Certain ERISA Considerations | Subject to important considerations described under “Certain ERISA Considerations”, the offered certificates are eligible for purchase by persons investing assets of employee benefit plans or individual retirement accounts. |
| Legal Investment | None of the certificates will constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended. | |
| 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 certificates. You should consult your own legal advisors for assistance in determining the suitability of and | ||
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| consequences to you of the purchase, ownership, and sale of the certificates. |
| The issuing entity will not be registered under the Investment Company Act of 1940, as amended. The issuing entity will be relying on an exclusion or exemption from the definition of “investment company” under the Investment Company Act of 1940, as amended contained in Section 3(c)(5) of the Investment Company Act of 1940, as amended, or Rule 3a-7 under the Investment Company Act of 1940, as amended, although there may be additional exclusions or exemptions available to the issuing entity. The issuing entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule under the Dodd-Frank Act (both as defined in this prospectus). |
| See “Legal Investment”. |
| Ratings | The offered certificates will not be issued unless each of the offered classes receives credit rating from one or more of the nationally recognized statistical rating organizations engaged by the depositor to rate the offered certificates. The decision not to engage one or more other rating agencies in the rating of certain classes of certificates to be issued in connection with this transaction, may negatively impact the liquidity, market value and regulatory characteristics of those classes of certificates. Neither the depositor nor any other person or entity will have any duty to notify you if any other nationally recognized statistical rating organization issues, or delivers notice of its intention to issue, unsolicited ratings on one or more classes of certificates after the date of this prospectus. |
| See “Risk Factors—Other Risks Relating to the Certificates—Nationally Recognized Statistical Rating Organizations May Assign Different Ratings to the Certificates; Ratings of the Certificates Reflect Only the Views of the Applicable Rating Agencies as of the Dates Such Ratings Were Issued; Ratings May Affect ERISA Eligibility; Ratings May Be Downgraded” and “Ratings”. | ||
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RISK FACTORS
You should carefully consider the following risks 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.
If any of the following events or circumstances identified as risks actually occur or materialize, your investment could be materially and adversely affected. We note that additional risks and uncertainties not presently known to us may also impair your investment.
This prospectus 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.
The Certificates May Not Be a Suitable Investment for You
The certificates will not be suitable investments for all investors. In particular, you should not purchase any class of certificates unless you understand and are able to bear the risk that the yield to maturity and the aggregate amount and timing of distributions on the certificates will be subject to material variability from period to period and give rise to the potential for significant loss over the life of the certificates. The interaction of the foregoing factors and their effects are impossible to predict and are likely to change from time to time. As a result, an investment in the certificates involves substantial risks and uncertainties and should be considered only by sophisticated institutional investors with substantial investment experience with similar types of securities and who have conducted appropriate due diligence on the mortgage loans, the mortgaged properties and the certificates.
Combination or “Layering” of Multiple Risks May Significantly Increase Risk of Loss
Although the various risks discussed in this prospectus are generally described separately, you should consider the potential effects of the interplay of multiple risk factors. Where more than one significant risk factor is present, the risk of loss to an investor in the certificates may be significantly increased.
Risks Related to Market Conditions and Other External Factors
The Volatile Economy, Credit Crisis and Downturn in the Real Estate Market Have Adversely Affected and May Continue To Adversely Affect the Value of CMBS
In recent years, the real estate and securitization markets, including the market for commercial mortgage-backed securities (“CMBS”), experienced significant dislocations, illiquidity and volatility. We cannot assure you that another dislocation in CMBS will not occur.
Any economic downturn may adversely affect the financial resources of borrowers under commercial mortgage loans and may result in their inability to make payments on, or refinance, their outstanding mortgage debt when due or to sell their mortgaged properties for an aggregate amount sufficient to pay off the outstanding debt when due. As a result, distributions of principal and interest on your certificates, and the value of your certificates, could be adversely affected.
Other Events May Affect the Value and Liquidity of Your Investment
Moreover, other types of events, domestic or international, may affect general economic conditions and financial markets:
| · | Wars, revolts, terrorist attacks, armed conflicts, energy supply or price disruptions, political crises, natural disasters and man-made disasters may have an adverse effect on the mortgaged properties and/or your certificates; and |
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| · | Trading activity associated with indices of CMBS may drive spreads on those indices wider than spreads on CMBS, thereby resulting in a decrease in value of such CMBS, including your certificates, and spreads on those indices may be affected by a variety of factors, and may or may not be affected for reasons involving the commercial and multifamily real estate markets and may be affected for reasons that are unknown and cannot be discerned. |
You should consider that the foregoing factors may adversely affect the performance of the mortgage loans and accordingly the performance of the offered certificates.
Risks Relating to the Mortgage Loans
Mortgage Loans Are Non-Recourse 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 non-recourse loan. If a default occurs, recourse generally may be had only against the specific mortgaged properties and other assets that have been pledged to secure the mortgage loan. Consequently, payment prior to maturity is dependent primarily on the sufficiency of the net operating income of the mortgaged property. Payment at maturity or anticipated repayment date is primarily dependent upon the market value of the mortgaged property or the borrower’s ability to refinance the mortgaged property.
Although the mortgage loans generally are non-recourse in nature, certain mortgage loans contain non-recourse carveouts for liabilities such as a result of fraud by the borrower, certain voluntary insolvency proceedings or other matters. Certain mortgage loans set forth under “Description of the Mortgage Pool—Non-Recourse Carveout Limitations” either do not contain non-recourse carveouts or contain material limitations to non-recourse carveouts. Often these obligations are guaranteed by an affiliate of the related borrower, although liability under any such guaranty may be capped or otherwise limited in amount or scope. Furthermore, the guarantor’s net worth and liquidity may be less (and in some cases, materially less) than amounts due under the related mortgage loan or the guarantor’s sole asset may be its interest in the related borrower. Certain mortgage loans may have the benefit of a general payment guaranty of a portion of the indebtedness under the mortgage loan. In all cases, however, the mortgage loans should be considered to be non-recourse obligations because neither the depositor nor the sponsors make any representation or warranty as to the obligation or ability of any borrower or guarantor to pay any deficiencies between any foreclosure proceeds and the mortgage loan indebtedness. In addition, certain mortgage loans may provide for recourse to a guarantor for a portion of the indebtedness or for any loss or costs that may be incurred by the borrower or the lender with respect to certain borrower obligations under the related mortgage loan documents. In such cases, we cannot assure you any recovery from such guarantor will be made or that such guarantor will have assets sufficient to pay any otherwise recoverable claim under a guaranty.
Risks of Commercial and Multifamily Lending Generally
The mortgage loans will be secured by various income producing commercial and multifamily properties. 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 ability to produce 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:
| · | the age, design and construction quality of the properties; |
| · | perceptions regarding the safety, convenience and attractiveness of the properties; |
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| · | the characteristics and desirability of the area where the property is located; |
| · | the strength and nature of the local economy, including labor costs and quality, tax environment and quality of life for employees; |
| · | the proximity and attractiveness of competing properties; |
| · | the adequacy of the property’s management and maintenance; |
| · | increases in interest rates, real estate taxes and operating expenses at the property and in relation to competing properties; |
| · | an increase in the capital expenditures needed to maintain the properties or make improvements; |
| · | a decline in the businesses operated by tenants or in their financial condition; |
| · | an increase in vacancy rates; and |
| · | a decline in rental rates as leases are renewed or entered into with new tenants. |
Other factors are more general in nature, such as:
| · | national or regional economic conditions, including plant closings, military base closings, industry slowdowns and unemployment rates; |
| · | local real estate conditions, such as an oversupply of competing properties; |
| · | demographic factors; |
| · | consumer confidence; |
| · | consumer tastes and preferences; |
| · | retroactive changes in building codes; |
| · | changes or continued weakness in specific industry segments; |
| · | location of certain mortgaged properties in less densely populated or less affluent areas; and |
| · | the public perception of safety for customers and clients. |
The volatility of net operating income will be influenced by many of the foregoing factors, as well as by:
| · | the length of tenant leases (including that in certain cases, all or substantially all of the tenants, or one or more sole, anchor or other major tenants, at a particular mortgaged property may have leases that expire or permit the tenant(s) to terminate its lease during the term of the loan); |
| · | the quality and creditworthiness of tenants; |
| · | tenant defaults; |
| · | in the case of rental properties, the rate at which new rentals occur; and |
| · | 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. |
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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 relatively higher operating leverage or short term revenue sources, such as short term or month to month leases, and may lead to higher rates of delinquency or defaults.
Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases
General. Any tenant may, from time to time, experience a downturn in its business, which may weaken its financial condition and result in a reduction or failure to make rental payments when due. If tenants’ sales were to decline, percentage rents may decline and, further, tenants may be unable to pay their base rent or other occupancy costs. If a tenant defaults in its obligations to a property owner, that property owner may experience delays in enforcing its rights as lessor and may incur substantial costs and experience significant delays associated with protecting its investment, including costs incurred in renovating and reletting the property.
Additionally, the income from, and market value of, the mortgaged properties leased to various tenants would be adversely affected if:
| · | space in the mortgaged properties could not be leased or re-leased or substantial re-leasing costs were required and/or the cost of performing landlord obligations under existing leases materially increased; |
| · | 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; |
| · | a significant tenant were to become a debtor in a bankruptcy case; |
| · | rental payments could not be collected for any other reason; or |
| · | a borrower fails to perform its obligations under a lease resulting in the related tenant having a right to terminate such lease. |
There may be (and there may exist from time to time) pending or threatened legal proceedings against, or disputes with, certain tenants and/or their parent companies that may have a material adverse effect on the related tenant’s ability to pay rent or remain open for business. We cannot assure you that any such litigation or dispute will not result in a material decline in net operating income at the related mortgaged property.
Certain tenants currently may be in a rent abatement period. We cannot assure you that such tenants will be in a position to pay full rent when the abatement period expires. We cannot assure you that the net operating income contributed by the mortgaged properties will remain at its current or past levels. See “Description of the Mortgage Pool—Tenant Issues”.
A Tenant Concentration May Result in Increased Losses. 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:
| · | the financial effect of the absence of rental income may be severe; |
| · | more time may be required to re-lease the space; and |
| · | substantial capital costs may be incurred to make the space appropriate for replacement tenants. |
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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 mortgage loan. In certain cases where the tenant owns the improvements on the mortgaged property, the related borrower may be required to purchase such improvements in connection with the exercise of its remedies.
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. 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 loan.
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.
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. In addition, the mortgage loans may be adversely affected if a tenant at the mortgaged property is highly specialized, or dependent on a single industry or only a few customers for its revenue. See “—Tenant Bankruptcy Could Result in a Rejection of the Related Lease” below, and “Description of the Mortgage Pool—Tenant Issues—Tenant Concentrations” for information on tenant concentrations in the mortgage pool.
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. See Annex A-1 for tenant lease expiration dates for the five largest tenants at each mortgaged property.
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 certain cases, an affiliated lessee may be a tenant under a master lease with the related borrower, under which the tenant is obligated to make rent payments but does not occupy any space at the mortgaged property. Master leases in these circumstances may be used to bring occupancy to a “stabilized” level with the intent of finding additional tenants to occupy some or all of the master leased space, but may not provide additional economic support for the mortgage loan. If a mortgaged property is leased in whole or substantial part to the borrower or to an affiliate of the borrower, a deterioration in the financial condition of the borrower or its affiliates could significantly affect the borrower’s ability to perform under the mortgage loan as it would directly interrupt the cash flow from the mortgaged property if the borrower’s or its affiliate’s financial condition worsens. We cannot assure you that any space leased by a borrower or an affiliate of the borrower will eventually be occupied by third party tenants.
See “Description of the Mortgage Pool—Tenant Issues—Affiliated Leases” for information on properties leased in whole or in part to borrowers and their affiliates.
Tenant Bankruptcy Could Result in a Rejection of the Related Lease. The bankruptcy or insolvency of a major tenant or a number of smaller tenants, such as in retail properties, may have an adverse
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impact on the mortgaged properties affected and the income produced by such mortgaged properties. Under the federal bankruptcy code, a tenant has the option of assuming or rejecting or, subject to certain conditions, assuming and assigning to a third party, any unexpired lease. If the tenant rejects the lease, the landlord’s claim for breach of the lease would (absent collateral securing the claim) be treated as a general unsecured claim against the tenant and a lessor’s damages for lease rejection are generally subject to certain limitations. We cannot assure you that tenants of the mortgaged properties will continue making payments under their leases or that tenants will not file for bankruptcy protection in the future or, if any tenants do file, that they will continue to make rental payments in a timely manner. See “Certain Legal Aspects of Mortgage Loans—Bankruptcy Laws”. See “Description of the Mortgage Pool—Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings” for information regarding bankruptcy issues with respect to certain mortgage loans.
Leases That Are Not Subordinated to the Lien of the Mortgage or Do Not Contain Attornment Provisions May Have an Adverse Impact at Foreclosure.In certain jurisdictions, if tenant leases are subordinated to the liens created by the mortgage but do not contain attornment provisions that require the tenant to subordinate the lease if the mortgagee agrees to enter into a non-disturbance agreement, the tenants may terminate their leases upon the transfer of the property to a foreclosing lender or purchaser at foreclosure. 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. This is particularly likely if those tenants were paying above-market rents or could not be replaced. If a lease is not subordinate to a mortgage, the issuing entity will not possess the right to dispossess the tenant upon foreclosure of the mortgaged property (unless otherwise agreed to with the tenant). Also, 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. Not all leases were reviewed to ascertain the existence of attornment or subordination provisions.
With respect to certain of the mortgage loans, the related borrower may have given to certain tenants or others an option to purchase, a right of first refusal to purchase and/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 may not be 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. See “Description of the Mortgage Pool—Tenant Issues—Purchase Options and Rights of First Refusal” for information regarding material purchase options and/or rights of first refusal or first offer, if any, with respect to mortgaged properties securing certain mortgage loans.
Early Lease Termination Options May Reduce Cash Flow. Leases often give tenants the right to terminate the related lease, abate or reduce the related rent, and/or exercise certain remedies against the related borrower for various reasons or upon various conditions, including:
| · | if the related borrower allows uses at the mortgaged property in violation of use restrictions in current tenant leases; |
| · | if the related borrower or any of its affiliates owns other properties within a certain radius of the mortgaged property and allows uses at those properties in violation of use restrictions; |
| · | if the related borrower fails to provide a designated number of parking spaces; |
| · | if there is construction at the related mortgaged property or an adjacent property (whether or not such adjacent property is owned or controlled by the borrower or any of its affiliates) that may interfere with visibility of, access to or a tenant’s use of the mortgaged property or otherwise violate the terms of a tenant’s lease; |
| · | upon casualty or condemnation with respect to all or a portion of the mortgaged property that renders such mortgaged property unsuitable for a tenant’s use or if the borrower fails to rebuild |
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| such mortgaged property within a certain time or if the casualty or condemnation occurs within a specified period of the lease expiration date; |
| · | if a tenant’s use is not permitted by zoning or applicable law; |
| · | if the tenant is unable to exercise an expansion right; |
| · | if the landlord defaults on its obligations under the lease; |
| · | if a landlord leases space at the mortgaged property or within a certain radius of the mortgaged property to a competitor; |
| · | if the tenant fails to meet certain sales targets or other business objectives for a specified period of time; |
| · | if significant tenants at the subject property go dark or terminate their leases, or if a specified percentage of the mortgaged property is unoccupied; |
| · | if the landlord violates the tenant’s exclusive use rights for a specified period of time; |
| · | if the related borrower violates covenants under the related lease or if third parties take certain actions that adversely affect such tenants’ business or operations; |
| · | in the case of government sponsored tenants, any time or for lack of appropriations; or |
| · | if the related borrower violates covenants under the related lease or if third parties take certain actions that adversely affect such tenants’ business or operations. |
In certain cases, compliance or satisfaction of landlord covenants may be the responsibility of a third party affiliated with the borrower or, in the event that partial releases of the applicable mortgaged property are permitted, an unaffiliated or affiliated third party.
Any exercise of a termination right by a tenant at a mortgaged property could result in vacant space at the related mortgaged property, renegotiation of the lease with the related tenant or re-letting of the space. Any such vacated space may not be re-let. Furthermore, such foregoing termination and/or abatement rights may arise in the future or materially adversely affect the related borrower’s ability to meet its obligations under the related loan documents. See “Description of the Mortgage Pool—Tenant Issues—Lease Expirations and Terminations” for information on material tenant lease expirations and early termination options.
Mortgaged Properties Leased to Not-for-Profit Tenants Also Have Risks. Certain mortgaged properties may have tenants that are charitable institutions that generally rely on contributions from individuals and government grants or other subsidies to pay rent on office space and other operating expenses. We cannot assure you that the rate, frequency and level of individual contributions or governmental grants and subsidies will continue with respect to any such institution. A reduction in contributions or grants may impact the ability of the related institution to pay rent, and we cannot assure you that the related borrower will be in a position to meet its obligations under the related mortgage loan documents if such tenant fails to pay its rent.
Office Properties Have Special Risks
In addition to the factors discussed in “—Risks of Commercial and Multifamily Lending Generally” and “—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases” above, other factors may adversely affect the financial performance and value of office properties, including:
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| · | 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); |
| · | the adaptability of the building to changes in the technological needs of the tenants; |
| · | an adverse change in population, patterns of telecommuting or sharing of office space, and employment growth (which creates demand for office space); |
| · | 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 healthcare establishment, (b) reimbursements for patient fees from private or government sponsored insurers, (c) its ability to attract doctors and nurses to be on staff, and (d) its ability to afford and acquire the latest medical equipment. Issues related to reimbursement (ranging from nonpayment to delays in payment) from such insurers could adversely impact cash flow at such mortgaged property; and |
| · | office space used as lab and/or research and development may rely on funds for research and development from government and/or private sources of funding, which may become unavailable. |
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.
If one or more major tenants at a particular office property were to close or remain vacant, we cannot assure you that such tenants would be replaced in a timely manner or without incurring material additional costs to the related borrower and resulting in an adverse effect on the financial performance of the property.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Office Properties”.
Mixed Use Properties Have Special Risks
Certain properties are mixed use properties. Such mortgaged properties are subject to the risks relating to the property types described in “—Office Properties Have Special Risks” and/or “—Retail Properties Have Special Risks”. See Annex A-1 for the 5 largest tenants (by net rentable area leased) at the mixed use property.A mixed use property may be subject to additional risks, including the property manager’s inexperience in managing the different property types that comprise such mixed use property.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Mixed Use Properties”.
Retail Properties Have Special Risks
The value of retail properties is significantly affected by the quality of the tenants as well as fundamental aspects of real estate, such as location and market demographics, as further described in “—Risks of Commercial and Multifamily Lending Generally” and “—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases”above. The correlation between success of tenant business and a retail property’s value may be more direct with respect to retail properties than other types of commercial property because a component of the total rent paid by certain retail tenants is often tied to a percentage of gross sales.
Whether a retail property is “anchored”, “shadow anchored” or “unanchored” is also an important consideration. Retail properties that have anchor tenant-owned stores often have reciprocal easement and/or operating agreements (each, an “REA”) between the retail property owner and such anchor tenants containing certain operating and maintenance covenants. Although an anchor tenant is often required to pay a contribution toward common area maintenance and real estate taxes on the improvements and related real property, an anchor tenant that owns its own parcel does not pay rent.
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However, the presence or absence of an “anchor tenant” or a “shadow anchor tenant” in or near a retail property also can be important because anchors play a key role in generating customer traffic and making a retail property desirable for other tenants. Many of the retail properties that will secure one or more mortgage loans will also have shadow anchor tenants. An “anchor tenant” is located on the related mortgaged property, usually proportionately larger in size than most or all other tenants at the mortgaged property and is vital in attracting customers to a retail property. A “shadow anchor tenant” is usually proportionally larger in size than most tenants at 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:
| · | an anchor tenant’s or shadow anchor tenant’s failure to renew its lease or the termination of an anchor tenant’s or shadow anchor tenant’s lease; |
| · | if the anchor tenant or shadow anchor tenant decides to vacate; |
| · | the bankruptcy or economic decline of an anchor tenant, shadow anchor or self-owned anchor; or |
| · | the cessation of the business of an anchor tenant, a shadow anchor tenant or a self-owned anchor or a change in use or in the nature of its retail operations (notwithstanding its continued payment of rent). |
If anchor stores at 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. In addition, it is common for anchor tenants and non-anchor tenants at anchored or shadowed anchored retail centers to have co-tenancy clauses and/or operating covenants in their leases or operating agreements that permit those tenants or anchor stores to cease operating, reduce rent or terminate their leases if the anchor or shadow anchor tenant goes dark or is otherwise no longer in occupancy. Even if non-anchor tenants do not have termination or rent abatement rights, because the anchor or shadow anchor tenant plays a key role in generating customer traffic and making a center desirable for other tenants, the loss of an anchor tenant may have a material adverse impact on the non-anchor tenant’s ability to operate, which may in turn adversely impact the borrower’s ability to meet its obligations under the related loan documents. 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. If an anchor tenant goes dark, generally the borrower’s only remedy is to terminate that lease after the anchor tenant has been dark for a specified amount of time.
We cannot assure you that if anchor tenants or shadow anchor tenants at a particular mortgaged property were to close or otherwise become vacant or remain vacant, such anchor tenants or shadow anchor tenants, as applicable, would be replaced in a timely manner or, if part of the collateral for the related mortgage loan, without incurring material additional costs to the related borrower and resulting in adverse economic effects.
In addition, certain of the tenants of the retail properties may have operating covenants in their leases or operating agreements which permit those tenants to cease operating, reduce rent or terminate their leases if one or more particular tenants are vacant or not open for business or a specified percentage of the related mortgaged property is vacant or if the subject store is not meeting the minimum sales requirement under its lease.
In addition, the limited adaptability of certain shopping malls that have proven unprofitable may result in high (and possibly extremely high) loss severities on mortgage loans secured by those shopping malls. For example, it is possible that a significant amount of advances made by the applicable servicer(s) of a mortgage loan secured by a shopping mall property, combined with low liquidation proceeds in respect of
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that property, may result in a loss severity exceeding 100% of the outstanding principal balance of that mortgage loan.
Certain tenant estoppels will have been obtained in connection with the origination of the mortgage loans that may identify disputes between the related borrower and the applicable tenant, or alleged defaults or potential defaults by the applicable property owner under the lease or REA. Such disputes, defaults or potential defaults could lead to a termination or attempted termination of the applicable lease or REA by the tenant or to litigation against the related borrower. We cannot assure you that these tenant disputes will not have a material adverse effect on the ability of the related borrowers to repay their portion of the mortgage loan. In addition, we cannot assure you that the tenant estoppels obtained identify all potential disputes that may arise with the subject tenants or that potential disputes do not exist with tenants who did not provide estoppels prior to origination. We cannot assure you that the failure to have obtained related estoppel information will not have a material adverse effect on the related mortgage loans.
Rental payments from tenants of retail properties typically comprise the largest portion of the net operating income of those mortgaged properties. We cannot assure you that the rate of occupancy at the stores will remain at the levels described in this prospectus or that the net operating income contributed by the mortgaged properties will remain at the level specified in this prospectus or past levels.
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. Another issue for retail properties is that additional competing retail properties may be built in the areas where a retail mortgaged property is located and consumers may choose to shop at the newer retail property. These and other issues may cause affected retail stores to close, which may include anchor stores or shadow anchors for a mortgaged property.
Certain retail properties have specialty use tenants. See “—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses” below.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Retail Properties”.
Hospitality Properties Have Special Risks
In addition to the factors discussed in “—Risks of Commercial and Multifamily Lending Generally” above, various other factors may adversely affect the financial performance and value of hospitality properties, including:
| · | 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); |
| · | continuing expenditures for modernizing, refurbishing and maintaining existing facilities prior to the expiration of their anticipated useful lives; |
| · | ability to convert to alternative uses which may not be readily made; |
| · | a deterioration in the financial strength or managerial capabilities of the owner or operator of a hospitality property; |
| · | changes in travel patterns caused by general adverse economic conditions, fear of terrorist attacks, adverse weather conditions and changes in access, energy prices, strikes, travel costs, |
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| relocation of highways, the construction of additional highways, concerns about travel safety or other factors; and |
| · | relative illiquidity of hospitality investments which limits the ability of the borrowers and property managers to respond to changes in economic or other conditions. |
Because 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.
Moreover, the hospitality and lodging industry is generally seasonal in nature and different seasons affect different hospitality properties 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. We cannot assure you that cash flow will be sufficient to offset any shortfalls that occur at the mortgaged property during slower periods or that the related mortgage loans provide for seasonality reserves, or if seasonality reserves are provided for, that such reserves will be funded or will be sufficient or available to fund such shortfalls.
In addition, some of the hospitality properties are limited-service, select service or extended stay hotels. Hospitality properties that are limited-service, select service or extended stay hotels may subject a lender to more risk than full-service hospitality properties as they generally require less capital for construction than full-service hospitality properties. In addition, as limited-service, select service or extended stay hotels generally offer fewer amenities than full-service hospitality properties, they are less distinguishable from each other. As a result, it is easier for limited-service, select service or extended stay hotels to experience increased or unforeseen competition.
In addition to hotel operations, some hospitality properties also operate entertainment complexes that include restaurants, lounges, nightclubs and/or banquet and meeting spaces and may derive a significant portion of the related property’s revenue from such operations. Consumer demand for entertainment resorts is particularly sensitive to downturns in the economy and the corresponding impact on discretionary spending on leisure activities. Changes in discretionary consumer spending or consumer preferences could be driven by factors such as perceived or actual general economic conditions, high energy, fuel and food costs, the increased cost of travel, the weakened job market, perceived or actual disposable consumer income and wealth, fears of recession and changes in consumer confidence in the economy, or fears of war and future acts of terrorism. These factors could reduce consumer demand for the leisure activities that the property offers, thus imposing practical limits on pricing and harming operations. Restaurants and nightclubs are particularly vulnerable to changes in consumer preferences. In addition, a nightclub’s, restaurant’s or bar’s revenue is extremely dependent on its popularity and perception. These characteristics are subject to change rapidly and we cannot assure you that any of a hospitality property’s nightclubs, restaurants or bars will maintain their current level of popularity or perception in the market. Any such change could have a material adverse effect on the net cash flow of the property.
Some of the hospitality properties have liquor licenses associated with the mortgaged property. The liquor licenses for these mortgaged properties are generally held by affiliates of the related borrowers, unaffiliated managers or operating lessees. The laws and regulations relating to liquor licenses generally prohibit the transfer of such licenses to any person, or condition such transfer on the prior approval of the governmental authority that issued the license. In the event of a foreclosure of a hospitality property that holds a liquor license, the special servicer on behalf of the issuing entity 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. We cannot assure you that a new license could be obtained promptly or at all. The lack of a liquor license in a hospitality property could have an adverse impact on the revenue from the related mortgaged property or on the hospitality property’s occupancy rate.
In addition, hospitality properties may be structured with a master lease (or operating lease) in order to minimize potential liabilities of the borrower. Under the master lease structure, an operating lessee
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(typically affiliated with the borrower) is also an obligor under the related mortgage loan and the operating lessee borrower pays rent to the fee owner borrower.
In addition, there may be risks associated with hospitality properties that have not entered into or become a party to any franchise agreement, license agreement or other “flag”. Hospitality properties often enter into these types of agreements in order to align the hospitality property with a certain public perception or to benefit from a centralized reservation system. We cannot assure you that hospitality properties that lack such benefits will be able to operate successfully on an independent basis.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Hospitality Properties”.
Risks Relating to Affiliation with a Franchise or Hotel Management Company
The performance of a hospitality property affiliated with a franchise or hotel management company depends in part on:
| · | the continued existence and financial strength of the franchisor or hotel management company; |
| · | the public perception of the franchise or hotel chain service mark; and |
| · | the duration of the franchise licensing or management agreements. |
The continuation of a franchise agreement, license agreement or hotel 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, such as property improvement plans, could result in the loss or cancellation of their rights under the franchise, license or management agreement. We cannot assure you that a replacement franchise could be obtained in the event of termination. In addition, replacement franchises, licenses and/or hospitality property managers may require significantly higher fees as well as the investment of capital to bring the hospitality property into compliance with the requirements of the replacement franchisor, licensor and/or hospitality property manager. 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 agreements, license agreements and property management agreements may be restricted. In the event of a foreclosure, the lender may not have the right to use the franchise license without the franchisor’s consent or the manager might be able to terminate the management agreement. Conversely, in the case of certain mortgage loans, the lender may be unable to remove a franchisor/licensor or a hotel management company that it desires to replace following a foreclosure and, further, may be limited as regards the pool of potential transferees for a foreclosure, licensor or real estate owned property.
In some cases where a hospitality property is subject to a license or franchise agreement, the licensor or franchisor has required or may in the future require the completion of various repairs and/or renovations pursuant to a property improvement plan issued by the licensor or franchisor. See “Description of the Mortgage Pool—Redevelopment, Renovation and Expansion”.Failure to complete those repairs and/or renovations in accordance with the plan could result in the hospitality property losing its license or franchise. Annex A-1 and the related footnotes set forth the amount of reserves, if any, established under the related mortgage loans in connection with any of those repairs and/or renovations. We cannot assure you that any amounts reserved will be sufficient to complete the repairs and/or renovations required with respect to any affected hospitality property. In addition, in some cases, those reserves will be maintained by the franchisor or property manager. Furthermore, the lender may not require a reserve for repairs and/or renovations in all instances.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Hospitality Properties”.
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Self Storage Properties Have Special Risks
In addition to the factors discussed in “—Risks of Commercial and Multifamily Lending Generally” above, other factors may adversely affect the financial performance and value of self-storage properties, including:
| · | decreased demand; |
| · | lack of proximity to apartment complexes or commercial users; |
| · | apartment tenants moving to single family homes; |
| · | decline in services rendered, including security; |
| · | dependence on business activity ancillary to renting units; |
| · | security concerns; |
| · | age of improvements; or |
| · | competition or other factors. |
Self-storage properties are considered vulnerable to competition, because both acquisition costs and break-even occupancy are relatively low. The conversion of self-storage facilities to alternative uses would generally require substantial capital expenditures. Thus, if the operation of any of the self-storage properties becomes unprofitable, the liquidation value of that self-storage mortgaged property may be substantially less, relative to the amount owing on the mortgage loan, than if the self-storage mortgaged property were readily adaptable to other uses.
Tenants at self-storage properties tend to require and receive privacy, anonymity and efficient access, each of which may heighten environmental and other risks related to such property as the borrower may be unaware of the contents in any self-storage unit. No environmental assessment of a self-storage mortgaged property included an inspection of the contents of the self-storage units at that mortgaged property, and there is no assurance that all of the units included in the self-storage mortgaged properties are free from hazardous substances or other pollutants or contaminants or will remain so in the future.
Certain mortgage loans secured by self-storage properties may be affiliated with a franchise company through a franchise agreement. The performance of a self-storage property affiliated with a franchise company may be affected by the continued existence and financial strength of the franchisor, the public perception of a service mark, and the duration of the franchise agreement. 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. In addition, certain self-storage properties may derive a material portion of revenue from business activities ancillary to self-storage such as truck rentals, parking fees and similar activities which require special use permits or other discretionary zoning approvals.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Self Storage Properties”.
Multifamily Properties Have Special Risks
In addition to the factors discussed in “—Risks of Commercial and Multifamily Lending Generally” above, other factors may adversely affect the financial performance and value of multifamily properties, including:
| · | the quality of property management; |
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| · | the ability of management to provide adequate maintenance and insurance; |
| · | the types of services or amenities that the property provides; |
| · | the property’s reputation; |
| · | the level of mortgage interest rates, which may encourage tenants to purchase rather than lease housing; |
| · | the generally short terms of residential leases and the need for continued reletting; |
| · | rent concessions and month-to-month leases, which may impact cash flow at the property; |
| · | the tenant mix, such as the tenant population being predominantly students or being heavily dependent on workers from a particular business or industry or personnel from or workers related to a local military base; |
| · | in the case of student housing facilities or properties 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; |
| · | certain multifamily properties may be considered to be “flexible apartment properties”. Such properties have a significant percentage of units leased to tenants under short-term leases (less than one year in term), which creates a higher turnover rate than for other types of multifamily properties; |
| · | restrictions on the age of tenants who may reside at the property; |
| · | 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; |
| · | adverse local, regional 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; |
| · | state and local regulations, which may affect the building owner’s ability to increase rent to market rent for an equivalent apartment; and |
| · | the existence of government assistance/rent subsidy programs, and whether or not they continue and provide the same level of assistance or subsidies. |
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
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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 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:
| · | rent limitations that would adversely affect the ability of borrowers to increase rents to maintain the condition of their mortgaged properties and satisfy operating expense; and |
| · | tenant income restrictions that may reduce the number of eligible tenants in those mortgaged properties and result in a reduction in occupancy rates. |
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.
Certain of the multifamily properties may be residential cooperative buildings where the land under the building is owned or leased by a non-profit residential cooperative corporation. The cooperative owns all the units in the building and all common areas. Its tenants own stock, shares or membership certificates in the corporation. This ownership entitles the tenant-stockholders to proprietary leases or occupancy agreements which confer exclusive rights to occupy specific units. Generally, the tenant-stockholders make monthly maintenance payments which represent their share of the cooperative corporation’s mortgage loan payments, real property taxes, reserve contributions and capital expenditures, maintenance and other expenses, less any income the corporation may receive. These payments are in addition to any payments of principal and interest the tenant-stockholder may be required to make on any loans secured by its shares in the cooperative.
A number of factors may adversely affect the value and successful operation of a residential cooperative property. Some of these factors include:
| · | the primary dependence of a borrower upon maintenance payments and any rental income from units or commercial areas to meet debt service obligations; |
| · | the initial concentration of shares relating to occupied rental units of the sponsor, owner or investor after conversion from rental housing, which may result in an inability to meet debt service obligations on the residential cooperative corporation’s mortgage loan if the sponsor, owner or investor is unable to make the required maintenance payments; |
| · | the failure of a borrower to qualify for favorable tax treatment as a “cooperative housing corporation” each year, which may reduce the cash flow available to make payments on the related mortgage loan; and |
| · | that, upon foreclosure, in the event a cooperative property becomes a rental property, certain units could be subject to rent control, stabilization and tenants’ rights laws, at below market rents, which may affect rental income levels and the marketability and sale proceeds of the rental property as a whole. |
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See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Multifamily Properties”.
Manufactured Housing Community Properties Have Special Risks
In addition to the factors discussed in “—Risks of Commercial and Multifamily Lending Generally” and “—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases” above, other factors may adversely affect the financial performance and value of manufactured housing community properties, including:
| · | the number of competing residential developments in the local market, such as other manufactured housing community properties, apartment buildings and site built single family homes; |
| · | the physical attributes of the community, including its age and appearance; |
| · | the location of the manufactured housing property; |
| · | the presence and/or continued presence of sufficient manufactured homes at the manufactured housing property (manufactured homes are not generally part of the collateral for a mortgage loan secured by a manufactured housing property; rather, the pads upon which manufactured homes are located are leased to the owners of such manufactured homes; manufactured homes may be moved from a manufactured housing property); |
| · | the type of services or amenities it provides; |
| · | any age restrictions; |
| · | the property’s reputation; and |
| · | state and local regulations, including rent control and rent stabilization. |
The manufactured housing community properties have few improvements (which are highly specialized) and are “single purpose” properties that could not be readily converted to general residential, retail or office use. Thus, if the operation of any of the manufactured housing community 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 manufactured housing community property may be substantially less, relative to the amount owing on the related mortgage loan, than would be the case if the manufactured housing community property were readily adaptable to other uses.
Some manufactured housing community properties are either recreational vehicle resorts or have a significant portion of the properties that are intended for short-term recreational vehicle hook-ups, and tenancy of these communities may vary significantly by season. This seasonality may cause periodic fluctuations in revenues, tenancy levels, rental rates and operating expenses for these properties.
Certain of the manufactured housing community mortgaged properties may not be connected in their entirety to public water and/or sewer systems. In such cases, the borrower could incur a substantial expense if it were required to connect the property to such systems in the future. In addition, the use of well water enhances the likelihood that the property could be adversely affected by a recognized environmental condition that impacts soil and groundwater.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types—Manufactured Housing Community Properties”.
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Parking Properties Have Special Risks
Certain of the mortgaged properties are comprised in whole or in part of, or contain, a parking lot or parking garage. The primary source of income for parking lots and garages is the rental fees charged for parking spaces (or in the case of a parking lot or parking garage leased in whole or part to a parking garage or parking lot operator, rents from such operating lease). Factors affecting the success of a parking lot or garage include:
| · | the number of rentable parking spaces and rates charged; |
| · | the location of the lot or garage and, in particular, its proximity to places where large numbers of people work, shop or live; |
| · | the amount of alternative parking spaces in the area; |
| · | the availability of mass transit; and |
| · | the perceptions of the safety, convenience and services of the lot or garage. |
Aspects of building site design and adaptability affect the value of a parking garage facility. Site characteristics that are valuable to a parking garage facility include location, clear ceiling heights, column spacing, zoning restrictions, number of spaces and overall functionality and accessibility.
In addition, because of the unique construction requirements of many parking garages and because a parking lot is often vacant paved land without any structure, a vacant parking garage facility or parking lot may not be easily converted to other uses. See “—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses”.
With respect to parking properties leased to a parking garage, parking lot operator or single tenant user, such leases generally provide the parking operator the right to terminate such leases upon various contingencies, which may include if there are specified reductions in gross receipts, or specified income targets are not met, if certain subleases of such parking properties are terminated or reduced, or upon a specified amount of capital expenditures to such properties being required in order to comply with applicable law, or other adverse events. There can be no assurance that the operating lessee of a parking property will not terminate its lease upon such an event.
Condominium Ownership May Limit Use and Improvements
The management and operation of a condominium is generally controlled by a condominium board representing the owners of the individual condominium units, subject to the terms of the related condominium rules or by-laws. Generally, the consent of a majority of the board members is required for any actions of the condominium board and a unit owner’s ability to control decisions of the board are generally related to the number of units owned by such owner as a percentage of the total number of units in the condominium. In certain cases, the related borrower does not have a majority of votes on the condominium board, which result in the related borrower not having control of the related condominium or owners association.
The board of managers or directors of the related condominium generally has discretion to make decisions affecting the condominium, and we cannot assure you that the related borrower under a mortgage loan secured by one or more interests in that condominium will have any control over decisions made by the related board of managers or directors. Even if a borrower or its designated board members, either through control of the appointment and voting of sufficient members of the related condominium board or by virtue of other provisions in the related condominium documents, has consent rights over actions by the related condominium associations or owners, we cannot assure you that the related condominium board will not take actions that would materially adversely affect the related borrower’s unit. Thus, decisions made by that board of managers or directors, including regarding assessments to be paid by the unit owners, insurance to be maintained on the condominium and many other decisions affecting
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the maintenance of that condominium, may have a significant adverse impact on the related mortgage loans in the issuing entity that are secured by mortgaged properties consisting of such condominium interests. We cannot assure you that the related board of managers or directors will always act in the best interests of the related borrower under the related mortgage loans.
The condominium board is generally responsible for administration of the affairs of the condominium, including providing for maintenance and repair of common areas, adopting rules and regulations regarding common areas, and obtaining insurance and repairing and restoring the common areas of the property after a casualty. Notwithstanding the insurance and casualty provisions of the related mortgage loan documents, the condominium board may have the right to control the use of casualty proceeds.
In addition, the condominium board generally has the right to assess individual unit owners for their share of expenses related to the operation and maintenance of the common elements. In the event that an owner of another unit fails to pay its allocated assessments, the related borrower may be required to pay such assessments in order to properly maintain and operate the common elements of the property. Although the condominium board generally may obtain a lien against any unit owner for common expenses that are not paid, such lien generally is extinguished if a lender takes possession pursuant to a foreclosure. Each unit owner is responsible for maintenance of its respective unit and retains essential operational control over its unit.
In addition, due to the nature of condominiums, a default on the part of the borrower with respect to such mortgaged properties will not allow the special servicer the same flexibility in realizing on the collateral as-is generally available with respect to commercial properties that are not condominium units. The rights of other unit or property 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 condominium, due to the possible existence of multiple loss payees on any insurance policy covering such property, there could be a delay in the allocation of related insurance proceeds, if any. Consequently, servicing and realizing upon the collateral described above could subject the certificateholders to a greater delay, expense and risk than with respect to a mortgage loan secured by a commercial property that is not a condominium unit.
Certain condominium declarations and/or local laws provide for the withdrawal of a property from a condominium structure under certain circumstances. For example, the New York Condominium Act provides for a withdrawal of the property from a condominium structure by vote of 80% of unit owners. If the condominium is terminated, the building will be subject to an action for partition by any unit owner or lienor as if owned in common. This could cause an early and unanticipated prepayment of the mortgage loan. We cannot assure you that the proceeds from partition would be sufficient to satisfy borrower’s obligations under the mortgage loan. See also “—Risks Related to Zoning Non-Compliance and Use Restrictions” for certain risks relating to use restrictions imposed pursuant to condominium declarations or other condominium especially in a situation where the mortgaged property does not represent the entire condominium building.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Condominium Interests”.
Operation of a Mortgaged Property Depends on the Property Manager’s Performance
The successful operation of a real estate project depends upon the property manager’s performance and viability. The property manager is responsible for:
| · | responding to changes in the local market; |
| · | planning and implementing the rental structure; |
| · | operating the property and providing building services; |
| · | managing operating expenses; and |
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| · | assuring that maintenance and capital improvements are carried out in a timely fashion. |
Properties deriving revenues primarily from short term sources, such as hotel guests or short term or month to month leases, are generally more management intensive than properties leased to creditworthy tenants under long term leases.
Certain of the mortgaged properties will be managed by affiliates of the related borrower. If a mortgage loan is in default or undergoing special servicing, such relationship could disrupt the management of the related mortgaged property, which may adversely affect cash flow. However, the related mortgage loans will generally permit, in the case of mortgaged properties managed by borrower affiliates, the lender to remove the related property manager upon the occurrence of an event of default under the related mortgage loan beyond applicable cure periods (or, in some cases, in the event of a foreclosure following such default), and in some cases a decline in cash flow below a specified level or the failure to satisfy some other specified performance trigger.
Concentrations Based on Property Type, Geography, Related Borrowers and Other Factors May Disproportionately Increase Losses
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. As mortgage loans pay down or properties are released, the remaining certificateholders may pose a higher risk with respect to the diversity of property types and property characteristics and with respect to the number of borrowers.
See the table entitled “Distribution of Remaining Term to Maturity or ARD” in Annex A-2 for a stratification of the remaining terms to maturity of the mortgage loans. Because principal on the certificates is payable in sequential order of payment priority, and a class receives principal only after the preceding class(es), if any, have been paid in full, classes that have a lower sequential priority are more likely to face these types of risk of concentration than classes with a higher sequential priority.
Several of the mortgage loans have cut-off date balances that are substantially higher than the average cut-off date balance. In general, concentrations in mortgage loans with larger-than-average balances can result in losses that are more severe, relative to the size of the mortgage loan pool, than would be the case if the aggregate balance of the mortgage loan pool were more evenly distributed.
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. Mortgaged property types representing 5.0% or more of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (based on allocated loan amount) are office, retail, mixed use, hospitality, self-storage and multifamily. See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Property Types” for information on the types of mortgaged properties securing the mortgage loans in the mortgage pool.
Repayments by borrowers and the market value of the related mortgaged properties could be affected by economic conditions generally or specific to particular geographic areas or regions of the United States, and concentrations of mortgaged properties in particular geographic areas may increase the risk that conditions in the real estate market where the mortgaged property is located, or other adverse economic or other developments or natural disasters (e.g., earthquakes, floods, forest fires, tornadoes or hurricanes or changes in governmental rules or fiscal policies) affecting a particular region of the country, could increase the frequency and severity of losses on mortgage loans secured by those mortgaged properties.
Mortgaged properties securing 5.0% or more of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (based on allocated loan amount) are located in California, New York, Georgia, Texas, Illinois, Michigan and Oregon. See “Description of the Mortgage Pool—Mortgage Pool Characteristics—Geographic Concentrations”.
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Some of the mortgaged properties are located in areas that, based on low population density, poor economic demographics (such as higher than average unemployment rates, lower than average annual household income and/or overall loss of jobs) and/or negative trends in such regards, would be considered secondary or tertiary markets.
A concentration of mortgage loans with the same borrower or related borrowers also can pose increased risks:
| · | 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; |
| · | a 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 secured by that borrower’s mortgaged properties (subject to the master servicer’s and the trustee’s obligation to make advances for monthly payments) for an indefinite period; and |
| · | mortgaged properties owned by the same borrower or related borrowers are likely to have common management, common general partners and/or common 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. See “—A Bankruptcy Proceeding May Result in Losses and Delays in Realizing on the Mortgage Loans” below. |
See “Description of the Mortgage Pool—Mortgage Pool Characteristics” for information on the composition of the mortgage pool by property type and geographic distribution and loan concentration.
Adverse Environmental Conditions at or Near Mortgaged Properties May Result in Losses
The issuing entity 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.
Each of the mortgaged properties was either (i) subject to environmental site assessments prior to the time of origination of the related mortgage loan including Phase I environmental site assessments or updates of previously performed Phase I environmental site assessments, or (ii) subject to a secured creditor environmental insurance policy or other environmental insurance policy. See “Description of the Mortgage Pool—Environmental Considerations”.
We cannot assure you that the environmental assessments revealed all existing or potential environmental risks or that all adverse environmental conditions have been or will be completely abated or remediated or that any reserves, insurance or operations and maintenance plans will be sufficient to remediate the environmental conditions. Moreover, we cannot assure you that:
| · | future laws, ordinances or regulations will not impose any material environmental liability; or |
| · | the current environmental condition of the mortgaged properties will not be adversely affected by tenants or by the condition of land or operations in the vicinity of the mortgaged properties (such as underground storage tanks). |
We cannot assure you that with respect to any mortgaged property, any remediation plan or any projected remedial costs or time is accurate or sufficient to complete the remediation objectives, or that no additional contamination requiring environmental investigation or remediation will be discovered on any mortgaged property. Likewise, all environmental policies naming the lender as named insured cover certain risks or events specifically identified in the policy, but the coverage is limited by its terms, conditions, limitations and exclusions, and does not purport to cover all environmental conditions whatsoever affecting the applicable mortgaged property, and we cannot assure you that any
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environmental conditions currently known, suspected, or unknown and discovered in the future will be covered by the terms of the policy.
Before the trustee, the special servicer or the master servicer, as applicable, acquires title to a mortgaged property on behalf of the issuing entity or assumes operation of the property, it will be required to obtain an environmental assessment of such mortgaged property, or rely on a recent environmental assessment. This requirement is intended to mitigate the risk that the issuing entity will become liable under any environmental law. There is accordingly some risk that the mortgaged property will decline in value while this assessment is being obtained or remedial action is being taken. Moreover, we cannot assure you that this requirement will effectively insulate the issuing entity from potential liability under environmental laws. Any such potential liability could reduce or delay distributions to certificateholders.
See “Description of the Mortgage Pool—Environmental Considerations” for additional information on environmental conditions at mortgaged properties securing certain mortgage loans in the issuing entity. See also representation and warranty number 40 in Annex D-1, and the identified exceptions to that representation and warranty in Annex D-2 and Annex D-3.
See “Transaction Parties—The Sponsors and Mortgage Loan Sellers—German American Capital Corporation” and “—Citigroup Global Markets Realty Corp.”, “Pooling and Servicing Agreement—Realization Upon Mortgage Loans” and “Certain Legal Aspects of Mortgage Loans”.
See “Certain Legal Aspects of Mortgage Loans—Environmental Considerations”.
Risks Related to Redevelopment, Expansion and Renovation at Mortgaged Properties
Certain of the mortgaged properties are currently undergoing or, in the future, are expected to undergo redevelopment, expansion or renovation. To the extent applicable, we cannot assure you that any escrow or reserve collected, if any, will be sufficient to complete the current renovation or be otherwise sufficient to satisfy any tenant improvement expenses at a mortgaged property. Failure to complete those planned improvements may have a material adverse effect on the cash flow at the mortgaged property and the related borrower’s ability to meet its payment obligations under the mortgage loan documents.
Certain of the hospitality properties securing the mortgage loans are currently undergoing or are scheduled to undergo renovations or property improvement plans (“PIPs”). In some circumstances, these renovations or PIPs may necessitate taking a portion of the available guest rooms temporarily offline, temporarily decreasing the number of available rooms and the revenue generating capacity of the related hospitality property. In other cases, these renovations may involve renovations of common spaces or external features of the related hospitality property, which may cause disruptions or otherwise decrease the attractiveness of the related hospitality property to potential guests. These PIPs may be required under the related franchise or management agreement and a failure to timely complete them may result in a termination or expiration of a franchise or management agreement and may be an event of default under the related mortgage loan.
Certain of the properties securing the mortgage loans are currently undergoing or may be scheduled to undergo renovations or property expansions. Such renovations or expansions may be required under tenant leases and a failure to timely complete such renovations or expansions may result in a termination of such lease and may have a material adverse effect on the cash flow at the mortgaged property and the related borrower’s ability to meet its payment obligations under the mortgage loan documents.
We cannot assure you that current or planned redevelopment, expansion or renovation will be completed at all, that such redevelopment, expansion or renovation will be completed in the time frame contemplated, or that, when and if such redevelopment, expansion or renovation is completed, such redevelopment, expansion or renovation will improve the operations at, or increase the value of, the related mortgaged property. Failure of any of the foregoing to occur could have a material negative impact on the related mortgaged property, which could affect the ability of the related borrower to repay the related mortgage loan.
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In the event the related borrower fails to pay the costs for work completed or material delivered in connection with such ongoing redevelopment, expansion or renovation, the portion of the mortgaged property on which there are renovations may be subject to mechanic’s or materialmen’s liens that may be senior to the lien of the related mortgage loan.
The existence of construction or renovation at a mortgaged property may take rental units or rooms or leasable space “off-line” or otherwise make space unavailable for rental, impair access or traffic at or near the mortgaged property, or, in general, make that mortgaged property less attractive to tenants or their customers, and accordingly could have a negative effect on net operating income. In addition, any such construction or renovation at a mortgaged property may temporarily interfere with the use and operation of any portion of such mortgaged property. See “Description of the Mortgage Pool—Redevelopment, Renovation and Expansion” for information regarding mortgaged properties which are currently undergoing or, in the future, are expected to undergo redevelopment, expansion or renovation. See also Annex A-3 for additional information on redevelopment, renovation and expansion at the mortgaged properties securing the 10 largest mortgage loans.
Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses
Certain mortgaged properties securing the mortgage loans may have specialty use tenants and may not be readily convertible (or convertible at all) to alternative uses if those properties were to become unprofitable for any reason.
For example, retail, mixed-use or office properties may have theater tenants. 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, 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. In addition, because of unique construction requirements of theaters, any vacant theater space would not easily be converted to other uses.
Retail, mixed-use or office properties may also have health clubs as tenants. Several factors may adversely affect the value and successful operation of a health club, including:
| · | the physical attributes of the health club (e.g., its age, appearance and layout); |
| · | the reputation, safety, convenience and attractiveness of the property to users; |
| · | management’s ability to control membership growth and attrition; |
| · | competition in the tenant’s marketplace from other health clubs and alternatives to health clubs; and |
| · | adverse changes in economic and social conditions and demographic changes (e.g., population decreases or changes in average age or income), which may result in decreased demand. |
In addition, there may be significant costs associated with changing consumer preferences (e.g., multipurpose clubs from single-purpose clubs or varieties of equipment, classes, services and amenities). In addition, health clubs may not be readily convertible to alternative uses if those properties were to become unprofitable for any reason. The liquidation value of any such health club consequently may be less than would be the case if the property were readily adaptable to changing consumer preferences for other uses.
Certain retail, mixed use or office properties may be partially comprised of a parking garage. Parking garages and parking lots present risks not associated with other properties. The primary source of income for parking lots and garages is the rental fees charged for parking spaces.
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Factors affecting the success of a parking lot or garage include:
| · | the number of rentable parking spaces and rates charged; |
| · | the location of the lot or garage and, in particular, its proximity to places where large numbers of people work, shop or live; |
| · | the amount of alternative parking spaces in the area; |
| · | the availability of mass transit; and |
| · | the perceptions of the safety, convenience and services of the lot or garage. |
Aspects of building site design and adaptability affect the value of a parking garage facility. Site characteristics that are valuable to a parking garage facility include location, clear ceiling heights, column spacing, zoning restrictions, number of spaces and overall functionality and accessibility.
In addition, because of the unique construction requirements of many parking garages and because a parking lot is often vacant paved land without any structure, a vacant parking garage facility or parking lot may not be easily converted to other uses.
Mortgaged properties may have other specialty use tenants, such as medical and dental offices, lab space, gas stations, data centers, urgent care facilities, schools, daycare centers, churches and/or restaurants, as part of the mortgaged property.
In the case of specialty use tenants such as restaurants and theaters, aspects of building site design and adaptability affect the value of such properties and other retailers at the mortgaged property. Decreasing patronage at such properties could adversely affect revenue of the property, which may, in turn, cause the tenants to experience financial difficulties, resulting in downgrades in their credit, lease defaults, ratings and, in certain cases, bankruptcy filings. See “—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases—Tenant Bankruptcy Could Result in a Rejection of the Related Lease” above. Additionally, receipts at such properties are also affected not only by objective factors but by subjective factors. For instance, restaurant receipts are affected by such varied influences as the current personal income levels in the community, an individual consumer’s preference for type of food, style of dining and restaurant atmosphere, the perceived popularity of the restaurant, food safety concerns related to personal health with the handling of food items at the restaurant or by food suppliers and the actions and/or behaviors of staff and management and level of service to the customers. In addition, because of unique construction requirements of such properties, any vacant space would not easily be converted to other uses.
Mortgaged properties with specialty use tenants may not be readily convertible (or convertible at all) to alternative uses if those properties were to become unprofitable, or the leased spaces were to become vacant, for any reason due to their unique construction requirements. 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.
For example, with respect to the mortgaged property identified on Annex A-1 to this prospectus as 10 Hudson Yards, which secures a mortgage loan representing approximately 9.2% of the outstanding pool balance as of the related cut-off date, a portion of the Mortgaged Property consists of a food court. A food court in an office building is not readily convertible to office or other use. In addition, the food court space is leased by the related borrower to a subsidiary of the related borrower that is also an affiliate of the related sponsor. The subsidiary tenant subleases the space demised under food court space to the food court tenant. Part of the collateral for the related whole loan is a pledge of the equity in the subsidiary tenant and its general partner. Under the REMIC provisions of the Code, a REMIC may not be able to hold directly property such as an equity interest in the subsidiary tenant and its general partner, which may adversely affect the liquidation value of the food court lease.
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In addition, 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 subject to a condominium regime or subject to a ground lease, 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. See “—Condominium Ownership May Limit Use and Improvements”above.
Some of the mortgaged properties may be part of tax-reduction programs that apply only if the mortgaged properties are used for certain purposes. Such properties may be restricted from being converted to alternative uses because of such restrictions.
Some of the mortgaged properties have government tenants or other tenants which may have space that was “built to suit” that particular tenant’s uses and needs. For example, a government tenant may require enhanced security features that required additional construction or renovation costs and for which the related tenant may pay above market rent. However, such enhanced features may not be necessary for a new tenant (and such new tenant may not be willing to pay the higher rent associated with such features). While a government office building or government leased space may be usable as a regular office building or tenant space, the rents that may be collected in the event the government tenant does not renew its lease may be significantly lower than the rent currently collected.
Additionally, zoning, historical preservation or other restrictions also may prevent alternative uses. See “—Risks Related to Zoning Non-Compliance and Use Restrictions” below.
Risks Related to Zoning Non-Compliance and Use Restrictions
Certain of the mortgaged properties may not comply with current zoning laws, including density, use, parking, height, landscaping, open space 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 or for which non-conformity with current zoning laws is otherwise permitted, 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.
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 some cases, the related borrower has obtained law and ordinance insurance to cover additional costs that result from rebuilding the mortgaged property in accordance with current zoning requirements. However, if as a result of the applicable zoning laws the rebuilt improvements are smaller or less attractive to tenants than the original improvements, the resulting loss in income will generally not be covered by law and ordinance insurance. Zoning protection insurance will generally reimburse the lender for the difference between (i) the mortgage loan balance on the date of damage loss to the mortgaged property from an insured peril and (ii) the total insurance proceeds at the time of the damage to the mortgaged property if such mortgaged property cannot be rebuilt to its former use due to new zoning ordinances.
In addition, certain of the mortgaged properties may be subject to certain use restrictions and/or operational requirements imposed pursuant to development agreements, ground leases, restrictive covenants, reciprocal easement agreements or operating agreements or historical landmark designations
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or, in the case of those mortgaged properties that are condominiums, condominium 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. In addition, any alteration, reconstruction, demolition, or new construction affecting a mortgaged property designated a historical landmark may require prior approval. Any such approval process, even if successful, could delay any redevelopment or alteration of a related property. The liquidation value of such property, to the extent 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 such property was readily adaptable to other uses or redevelopment. See “Description of the Mortgage Pool—Use Restrictions” for examples of mortgaged properties that are subject to restrictions relating to the use of the mortgaged properties.
Additionally, some of the mortgaged properties may have current or past tenants that handle or have handled hazardous materials and, in some cases, related contamination at some of the mortgaged properties was previously investigated and, as warranted, remediated with regulatory closure, the conditions of which in some cases may include restrictions against any future redevelopment for residential use or other land use restrictions. See “Description of the Mortgage Pool—Environmental Considerations” for additional information on environmental conditions at mortgaged properties securing certain mortgage loans in the issuing entity. See also representation and warranty number 40 in Annex D-1, and the identified exceptions to that representation and warranty in Annex D-2 and Annex D-3.
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 issuance of the offered certificates.
Risks Relating to 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 Mortgage Loans—Americans with Disabilities Act”. 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.
Insurance May Not Be Available or Adequate
Although the mortgaged properties are required to be insured, or self-insured by a sole or major tenant of a related building or group of buildings, against certain risks, there is a possibility of casualty loss with respect to the mortgaged properties for which insurance proceeds may not be adequate or which may result from risks not covered by insurance.
Certain Risks Are Not Covered under Standard Insurance Policies. In general (other than where the mortgage loan documents permit the borrower to rely on a tenant (including a ground tenant) or other third party (such as a condominium association, if applicable) to obtain the insurance coverage, on self-
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insurance provided by a tenant or on a tenant’s agreement to rebuild or continue paying rent), the master servicer and special servicer will be required to cause the borrower on each mortgage loan to maintain such insurance coverage in respect of the related mortgaged property as is required under the related mortgage loan documents. See “Description of the Mortgage Pool—Insurance Considerations”. In general, the standard form of fire and extended coverage policy covers physical damage to or destruction of the improvements of a property by fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and civil commotion, subject to the conditions and exclusions specified in each policy (windstorm is a common exclusion for properties located in certain locations). Most policies typically do not cover any physical damage resulting from, among other things:
| · | war; |
| · | revolution; |
| · | terrorism; |
| · | nuclear, biological or chemical materials; |
| · | governmental actions; |
| · | floods and other water related causes; |
| · | earth movement, including earthquakes, landslides and mudflows; |
| · | wet or dry rot; |
| · | vermin; and |
| · | domestic animals. |
Unless the related mortgage loan documents specifically require the borrower to insure against physical damage arising from such causes, then, the resulting losses may be borne by you as a holder of certificates.
Standard Insurance May Be Inadequate Even for Types of Losses That Are Insured Against. Even if a type of loss is covered by the insurance policies required to be in place at the mortgaged properties, the mortgaged properties may suffer losses for which the insurance coverage is inadequate. For example:
| · | in a case where terrorism coverage is included under a policy, if the terrorist attack is, for example, nuclear, biological or chemical in nature, the policy may include an exclusion that precludes coverage for such terrorist attack; |
| · | in certain cases, particularly where land values are high, the insurable value (at the time of origination of the mortgage loan) of the mortgaged property may be significantly lower than the principal balance of the mortgage loan; |
| · | with respect to mortgaged properties located in flood prone areas where flood insurance is required, the related mortgaged property may only have federal flood insurance (which only covers up to $500,000), not private flood insurance, and the related mortgaged property may suffer losses that exceed the amounts covered by the federal flood insurance; |
| · | the mortgage loan documents may limit the requirement to obtain related insurance to where the premium amounts are “commercially reasonable” or a similar limitation; and |
| · | if reconstruction or major repairs are required, changes in laws may materially affect the borrower’s ability to effect any reconstruction or major repairs and/or may materially increase the |
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| costs of the reconstruction or repairs and insurance may not cover or sufficiently compensate the insured. |
There Is No Assurance That Required Insurance Will Be Maintained. There is no assurance that borrowers have maintained or will maintain the insurance required under the mortgage loan documents or that such insurance will be adequate.
Even if the mortgage loan documents specify that the related borrower must maintain standard extended coverage casualty insurance or other insurance that covers acts of terrorism, the borrower may fail to maintain such insurance and the master servicer or the special servicer may not enforce such default or cause the borrower to obtain such insurance if the special servicer has determined, in accordance with the servicing standard and subject to the discussion under “Pooling and Servicing Agreement—The Directing Certificateholder” and “—The Operating Advisor”, that either (a) such insurance is not available at commercially reasonable rates and the subject hazards are not commonly insured against by prudent owners of similar real properties located in or near the geographic region in which the mortgaged property is located (but only by reference to such insurance that has been obtained by such owners at current market rates), or (b) such insurance is not available at any rate. Additionally, if the related borrower fails to maintain such terrorism insurance coverage, neither the applicable master servicer nor the special servicer will be required to maintain such terrorism insurance coverage if the special servicer determines, in accordance with the servicing standard, that such terrorism insurance coverage is not available for the reasons set forth in the preceding sentence. 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 this 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 certificates.
In addition, certain types of mortgaged properties, such as manufactured housing and recreational vehicle communities, have few or no insurable buildings or improvements and thus do not have casualty insurance or low limits of casualty insurance in comparison with the related mortgage loan balances.
In addition, hazard insurance policies will typically contain co-insurance clauses that in effect require an insured at all times to carry insurance of a specified percentage, generally 80% to 90%, of the full replacement value of the improvements on the related mortgaged property in order to recover the full amount of any partial loss. As a result, even if insurance coverage is maintained, if the insured’s coverage falls below this specified percentage, those clauses generally provide that the insurer’s liability in the event of partial loss does not exceed the lesser of (1) the replacement cost of the improvements less physical depreciation and (2) that proportion of the loss as the amount of insurance carried bears to the specified percentage of the full replacement cost of those improvements.
Furthermore, with respect to certain mortgage loans, the insurable value of the related mortgaged property as of the origination date of the related mortgage loan was lower than the principal balance of the related mortgage loan. In the event of a casualty when a borrower is not required to rebuild or cannot rebuild, we cannot assure you that the insurance required with respect to the related mortgaged property will be sufficient to pay the related mortgage loan in full and there is no “gap” insurance required under such mortgage loan to cover any difference. In those circumstances, a casualty that occurs near the maturity date may result in an extension of the maturity date of the mortgage loan if the master servicer, in accordance with the servicing standard, determines that such extension was in the best interest of certificateholders.
The mortgage loans do not all require flood insurance on the related mortgaged properties unless they are in a flood zone and flood insurance is available and, in certain instances, even where the related mortgaged property was in a flood zone and flood insurance was available, flood insurance was not required.
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We cannot assure you that the borrowers will in the future be able to comply with requirements to maintain adequate insurance with respect to the mortgaged properties, and any uninsured loss could have a material adverse impact on the amount available to make payments on the related mortgage loan, and consequently, the offered certificates. As with all real estate, if reconstruction (for example, following fire or other casualty) or any major repair or improvement is required to the damaged property, changes in laws and governmental regulations may be applicable and may materially affect the cost to, or ability of, the borrowers to effect such reconstruction, major repair or improvement. As a result, the amount realized with respect to the mortgaged properties, and the amount available to make payments on the related mortgage loan, and consequently, the offered certificates, could be reduced. In addition, we cannot assure you that the amount of insurance required or provided would be sufficient to cover damages caused by any casualty, or that such insurance will be available in the future at commercially reasonable rates.
Terrorism Insurance May Not Be Available for All Mortgaged Properties
The occurrence or the possibility of terrorist attacks could (1) lead to damage to one or more of the mortgaged properties if any terrorist attacks occur or (2) 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.
After the September 11, 2001 terrorist attacks in New York City and the Washington, D.C. area, all forms of insurance were impacted, particularly from a cost and availability perspective, including comprehensive general liability and business interruption or rent loss insurance policies required by typical mortgage loans. To give time for private markets to develop a pricing mechanism for terrorism risk and to build capacity to absorb future losses that may occur due to terrorism, the Terrorism Risk Insurance Act of 2002 was enacted on November 26, 2002, establishing the Terrorism Insurance Program. The Terrorism Insurance Program was extended through December 31, 2014 by the Terrorism Risk Insurance Program Reauthorization Act of 2007 and was subsequently reauthorized on January 12, 2015 for a period of six years through December 31, 2020 pursuant to the Terrorism Risk Insurance Program Reauthorization Act of 2015 (“TRIPRA”).
The Terrorism Insurance Program requires insurance carriers 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 void to the extent that it excluded losses that would otherwise be insured losses. Any state approval of those types of exclusions in force on November 26, 2002 is also void.
Under the Terrorism Insurance Program, the federal government shares in the risk of losses occurring within the United States resulting from acts committed in an effort to influence or coerce United States civilians or the United States government. The federal share of compensation for insured losses of an insurer equals 85% (subject to annual 1% decreases beginning in 2016 until such percentage equals 80%) of the portion of such insured losses that exceed a deductible equal to 20% of the value of the insurer’s direct earned premiums over the calendar year immediately preceding that program year. Federal compensation in any program year is capped at $100 billion (with insurers being liable for any amount that exceeds such cap), and no compensation is payable with respect to a terrorist act unless the aggregate industry losses relating to such act exceed $100 million (subject to annual $20 million increases beginning in 2016 until such threshold equals $200 million). The Terrorism Insurance Program does not cover nuclear, biological, chemical or radiological attacks. Unless a borrower obtains separate coverage for events that do not meet the thresholds or other requirements above, such events will not be covered.
If the Terrorism Insurance Program is not reenacted after its expiration in 2020, premiums for terrorism insurance coverage will likely increase and the terms of such insurance policies may be materially amended to increase stated exclusions or to otherwise effectively decrease the scope of coverage available (perhaps to the point where it is effectively not available). In addition, to the extent that any insurance policies contain “sunset clauses” (i.e., clauses that void terrorism coverage if the federal insurance backstop program is not renewed), then such policies may cease to provide terrorism
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insurance upon the expiration of the Terrorism Insurance Program. We cannot assure you that the Terrorism Insurance Program or any successor program will create any long term changes in the availability and cost of such insurance. Moreover, future legislation, including regulations expected to be adopted by the Treasury Department pursuant to TRIPRA, may have a material effect on the availability of federal assistance in the terrorism insurance market. To the extent that uninsured or underinsured casualty losses occur with respect to the related mortgaged properties, losses on the mortgage loans may result. In addition, the failure to maintain such terrorism insurance may constitute a default under the related mortgage loan.
Some of the mortgage loans do not require the related borrower to maintain terrorism insurance. In addition, most of the mortgage loans contain limitations on the related borrower’s obligation to obtain terrorism insurance, such as (i) waiving the requirement that such borrower maintain terrorism insurance if such insurance is not available at commercially reasonable rates, (ii) providing that the related borrower is not required to spend in excess of a specified dollar amount (or in some cases, a specified multiple of what is spent on other insurance) in order to obtain such terrorism insurance, (iii) requiring coverage only for as long as the TRIPRA is in effect, or (iv) requiring coverage only for losses arising from domestic acts of terrorism or from terrorist acts certified by the federal government as “acts of terrorism” under the TRIPRA. See “Annex A-3—Description of Top Twenty Mortgage Loans and Additional Mortgage Loan Information” for a summary of the terrorism insurance requirements under each of the ten largest mortgage loans.
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.
Other mortgaged properties securing mortgage loans may also be insured under a blanket policy or self-insured or insured by a sole tenant. See “—Risks Associated with Blanket Insurance Policies or Self-Insurance” below.
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 or Self-Insurance
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. In addition, with respect to some of the mortgaged properties, a sole or significant tenant is allowed to provide self-insurance against risks.
Additionally, if the mortgage loans that allow coverage under blanket insurance policies are part of a group of mortgage loans with related borrowers, then all of the related mortgaged properties may be covered under the same blanket policy, which may also cover other properties owned by affiliates of such borrowers.
Certain mortgaged properties may also be insured or self-insured by a sole or significant tenant, as further described under “Description of the Mortgage Pool—Insurance Considerations”.
Limited Information Causes Uncertainty
Historical Information. Some of the mortgage loans that we intend to include in the issuing entity are secured in whole or in part by mortgaged properties for which limited or no historical operating information is available. As a result, you may find it difficult to analyze the historical performance of those mortgaged properties.
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A mortgaged property may lack prior operating history or historical financial information because it is newly constructed or renovated, it is a recent acquisition by the related borrower or it is a single-tenant property that is subject to a triple net lease. In addition, a tenant’s lease may contain confidentiality provisions that restrict the sponsors’ access to or disclosure of such tenant’s financial information. The underwritten net cash flows and underwritten net operating income for such mortgaged properties are derived principally from current rent rolls or tenant leases and historical expenses, adjusted to account for, among other things, inflation, significant occupancy increases and/or a market rate management fee. In some cases, underwritten net cash flows and underwritten net operating income for mortgaged properties are based all or in part on leases (or letters of intent) that are not yet in place (and may still be under negotiation) or on tenants that may have signed a lease (or letter of intent), or lease amendment expanding the leased space, but are not yet in occupancy and/or paying rent), which present certain risks described in “—Underwritten Net Cash Flow Could Be Based On Incorrect or Failed Assumptions” below.
See Annex A-1 for certain historical financial information relating to the mortgaged properties, including net operating income for the most recent reporting period and prior three calendar years, to the extent available.
Ongoing Information. The primary source of ongoing information regarding the offered certificates, including information regarding the status of the related mortgage loans and any credit support for the offered certificates, will be the periodic reports delivered to you. See “Description of the Certificates—Reports to Certificateholders; Certain Available Information”. We cannot assure you that any additional ongoing information regarding the offered certificates will be available through any other source. The limited nature of the available information in respect of the offered certificates may adversely affect their liquidity, even if a secondary market for the offered certificates does develop.
We are not aware of any source through which pricing information regarding the offered certificates will be generally available on an ongoing basis or on any particular date.
Underwritten Net Cash Flow Could Be Based On Incorrect or Failed Assumptions
As described under “Description of the Mortgage Pool—Additional Information”, underwritten net cash flow generally includes cash flow (including any cash flow from master leases) adjusted based on a number of assumptions used by the sponsors. We make no representation that the underwritten net cash flow set forth in this prospectus as of the cut-off date or any other date represents actual future net cash flows. For example, with respect to certain mortgage loans included in the issuing entity, the occupancy of the related mortgaged property reflects tenants that (i) may not have yet actually executed leases (or letters of intent), (ii) have signed leases but have not yet taken occupancy and/or are not paying full contractual rent, (iii) are seeking or may in the future seek to sublet all or a portion of their respective spaces, (iv) are “dark” tenants but paying rent, or (v) are affiliates of the related borrower and are leasing space pursuant to a master lease or a space lease. Similarly, with respect to certain mortgage loans included in the issuing entity, the underwritten net cash flow may be based on certain tenants that have not yet executed leases or that have signed leases but are not yet in place and/or are not yet paying rent, or have a signed lease or lease amendment expanding the leased space, but are not yet in occupancy in all or a portion of their space and/or paying rent, or may assume that future contractual rent steps (during some or all of the remaining term of a lease) have occurred. In many cases, co-tenancy provisions were assumed to be satisfied and vacant space was assumed to be occupied and space that was due to expire was assumed to have been re-let, in each case at market rates that may have exceeded current rent. You should review these and other similar assumptions and make your own determination of the appropriate assumptions to be used in determining underwritten net cash flow.
In addition, underwritten or adjusted cash flows, by their nature, are speculative and are based upon certain assumptions and projections. The failure of these assumptions or projections in whole or in part could cause the underwritten net operating income (calculated as described in “Description of the Mortgage Pool—Additional Information”) to vary substantially from the actual net operating income of a mortgaged property.
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In the event of the inaccuracy of any assumptions or projections used in connection with the calculation of underwritten net cash flow, the actual net cash flow could be significantly different (and, in some cases, may be materially less) than the underwritten net cash flow presented in this prospectus, and this would change other numerical information presented in this prospectus based on or derived from the underwritten net cash flow, such as the debt service coverage ratios or debt yield presented in this prospectus. We cannot assure you that any such assumptions or projections made with respect to any mortgaged property will, in fact, be consistent with that mortgaged property’s actual performance.
Frequent and Early Occurrence of Borrower Delinquencies and Defaults May Adversely Affect Your Investment
If you calculate the anticipated yield of your offered certificates based on a rate of default or amount of losses lower than that actually experienced on the mortgage loans and those additional losses result in a reduction of the total distributions on, or the certificate balance of, your offered certificates, your actual yield to maturity will be lower than expected and could be negative under certain extreme scenarios. The timing of any loss on a liquidated mortgage loan that results in a reduction of the total distributions on or the certificate balance of your offered certificates will also affect the actual yield to maturity of your offered certificates, even if the rate of defaults and severity of losses are consistent with your expectations. In general, the earlier a loss is borne by you, the greater the effect on your yield to maturity.
Delinquencies on the mortgage loans, if the delinquent amounts are not advanced, may result in shortfalls in distributions of interest and/or principal to the holders of the offered certificates for the current month. Furthermore, no interest will accrue on this shortfall during the period of time that the payment is delinquent. Additionally, in instances where the principal portion of any balloon payment scheduled with respect to a mortgage loan is collected by the master servicer following the end of the related collection period, no portion of the principal received on such payment will be passed through for distribution to the certificateholders until the subsequent distribution date, which may result in shortfalls in distributions of interest to the holders of the offered certificates in the following month. Furthermore, in such instances no provision is made for the master servicer or any other party to cover any such interest shortfalls that may occur as a result. In addition, if interest and/or principal advances and/or servicing advances are made with respect to a mortgage loan after a default and the related mortgage loan is thereafter worked out under terms that do not provide for the repayment of those advances in full at the time of the workout, then any reimbursements of those advances prior to the actual collection of the amount for which the advance was made may also result in shortfalls in distributions of principal to the holders of the offered certificates with certificate balances for the current month. Even if losses on the mortgage loans are not allocated to a particular class of offered certificates with certificate balances, the losses may affect the weighted average life and yield to maturity of that class of offered certificates. In the case of any material monetary or material non-monetary default, the special servicer may accelerate the maturity of the related mortgage loan, which could result in an acceleration of principal distributions to the certificateholders. The special servicer may also extend or modify a mortgage loan, which could result in a substantial delay in principal distributions to the certificateholders. In addition, losses on the mortgage loans, even if not allocated to a class of offered certificates with certificate balances, may result in a higher percentage ownership interest evidenced by those offered certificates in the remaining mortgage loans than would otherwise have resulted absent the loss. The consequent effect on the weighted average life and yield to maturity of the offered certificates will depend upon the characteristics of those remaining mortgage loans in the trust fund.
The Mortgage Loans Have Not Been Reviewed or Re-Underwritten by Us
Although the sponsors have conducted a review of the mortgage loans to be sold to us for this securitization transaction, we, as the depositor for this securitization transaction, have neither originated the mortgage loans nor conducted a review or re-underwriting of the mortgage loans. Instead, we have relied on the representations and warranties made by the applicable sponsors and the remedies for breach of a representation and warranty as described under “Description of the Mortgage Loan Purchase Agreements” and the sponsor’s description of its underwriting criteria described under “Transaction Parties—The Sponsors and Mortgage Loan Sellers—German American Capital Corporation—DB Originator’s Underwriting Guidelines and Processes” and “—Citigroup Global Markets Realty Corp.—
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CGMRC’s Underwriting Guidelines and Processes”. A description of the review conducted by each sponsor for this securitization transaction is set forth under “Transaction Parties—The Sponsors and Mortgage Loan Sellers—German American Capital Corporation—Review of GACC Mortgage Loans”, “—Citigroup Global Markets Realty Corp.—Review of CGMRC Mortgage Loans”. The representations and warranties made by the sponsors may not cover all of the matters that one would review in underwriting a mortgage loan and you should not view them as a substitute for re-underwriting the mortgage loans. Furthermore, these representations and warranties in some respects represent an allocation of risk rather than a confirmed description of the mortgage loans. If we had re-underwritten the mortgage loans, it is possible that the re-underwriting process may have revealed problems with a mortgage loan not covered by a representation or warranty or may have revealed inaccuracies in the representations and warranties. See “—Other Risks Relating to the Certificates—Sponsors May Not Make Required Repurchases or Substitutions of Defective Mortgage Loans or Pay Any Loss of Value Payment Sufficient to Cover All Losses on a Defective Mortgage Loan” below, and “Description of the Mortgage Loan Purchase Agreements”.
As a result of the foregoing, you are advised and encouraged to make your own investment decision based on a careful review of the information set forth in this prospectus and your own view of the mortgage pool.
Static Pool Data Would Not Be Indicative of the Performance of this Pool
As a result of the distinct nature of each pool of commercial mortgage loans, and the separate mortgage loans within the pool, this prospectus does not include disclosure concerning the delinquency and loss experience of static pools of periodic originations by any sponsor of assets of the type to be securitized (known as “static pool data”). 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.
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 commercial mortgage loan. Each income-producing real property represents a separate and distinct business venture and, as a result, each of the mortgage loans 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.
Therefore, you should evaluate this offering on the basis of the information set forth in this prospectus with respect to the mortgage loans, and not on the basis of the performance of other pools of securitized commercial mortgage loans.
Appraisals May Not Reflect Current or Future Market Value of Each Property
Appraisals were obtained with respect to each of the mortgaged properties at or about the time of origination of the applicable mortgage loan (or whole loan, if applicable) or at or around the time of the acquisition of the mortgage loan (or whole loan, if applicable) by the related sponsor. See Annex A-1 for the dates of the latest appraisals for the mortgaged properties. We have not obtained new appraisals of the mortgaged properties or assigned new valuations to the mortgage loans in connection with the offering of the offered certificates. The market values of the mortgaged properties could have declined since the origination of the related mortgage loans.
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
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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 is not intended to be a representation as to the past, present or future market values of the mortgaged properties. For example, in some cases, a borrower or its affiliate may have acquired the related mortgaged property for a price or otherwise for consideration in an amount that is less than the related appraised value specified on Annex A-1, including at a foreclosure sale or through acceptance of a deed-in-lieu of foreclosure. Historical operating results of the mortgaged properties used in these appraisals, as adjusted by various assumptions, estimates and subjective judgments on the part of the appraiser, may not be comparable to future operating results. In addition, certain appraisals may be based on extraordinary assumptions, including without limitation, that certain tenants are in-place and paying rent when such tenants have not yet taken occupancy or that certain renovations or property improvement plans have been completed. Additionally, certain appraisals with respect to mortgage loans secured by multiple mortgaged properties may have been conducted on a portfolio basis rather than on an individual property basis, and the sum of the values of the individual properties may be different from (and in some cases may be less than) the appraised value of the aggregate of such properties on a portfolio basis. In addition, other factors may impair the mortgaged properties’ value without affecting their current net operating income, including:
| · | changes in governmental regulations, zoning or tax laws; |
| · | potential environmental or other legal liabilities; |
| · | the availability of refinancing; and |
| · | changes in interest rate levels. |
In certain cases, appraisals may reflect the “as-is” value as well as an “as complete”, “as-is with reserves”, “hypothetical as-is” or “as-stabilized” value. The appraised value reflected in this prospectus with respect to each mortgaged property reflects the “as-is” value, except as described under “Description of the Mortgage Pool—Certain Calculations and Definitions” and “—Appraised Value”, where, to the extent another value is used, such value and the satisfaction of the related conditions or assumptions are described, which may contain certain assumptions, such as future construction completion, projected re-tenanting or increased tenant occupancies. See “Description of the Mortgage Pool”.
Additionally, with respect to the appraisals setting forth assumptions, particularly those setting forth extraordinary assumptions, as to the “as complete”, “as-is with reserves”, “hypothetical as-is” or “as-stabilized” values, we cannot assure you that those assumptions are or will be accurate or that the “as complete”, “as-is with reserves”, “hypothetical as-is” or “as-stabilized” value will be the value of the related mortgaged property at the indicated stabilization or other relevant date or at maturity or anticipated repayment date. Any engineering report, site inspection or appraisal represents only the analysis of the individual consultant, engineer or inspector preparing such report at the time of such report, and may not reveal all necessary or desirable repairs, maintenance and capital improvement items. For additional information regarding the appraisals obtained by the sponsors or, in the case of any mortgage loan acquired by the related sponsor, appraisal(s) obtained by the related originator and relied upon by such sponsor, see “Transaction Parties—The Sponsors and Mortgage Loan Sellers—German American Capital Corporation” and “—Citigroup Global Markets Realty Corp.”. We cannot assure you that the information set forth in this prospectus regarding the appraised values or loan-to-value ratios accurately reflects past, present or future market values of the mortgaged properties or the amount that would be realized upon a sale of the related mortgaged property.
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Seasoned Mortgage Loans Present Additional Risk of Repayment
One (1) of the mortgage loans, representing approximately 7.1% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, is a seasoned mortgage loan that was originated 12 months prior to the cut-off date. There are a number of risks associated with seasoned mortgage loans that are not present, or are present to a lesser degree, with more recently originated mortgage loans. For example:
| · | property values and surrounding areas have likely changed since origination; |
| · | origination standards at the time the mortgage loans were originated may have been different than current origination standards; |
| · | the business circumstances and financial condition of the related borrowers and tenants may have changed since the mortgage loans were originated; |
| · | the environmental circumstances at the mortgaged properties may have changed since the mortgage loans were originated; |
| · | the physical condition of the mortgaged properties or improvements may have changed since origination; and |
| · | the circumstances of the mortgaged properties, the borrower and the tenants may have changed in other respects since. |
In addition, any seasoned mortgage loan may not satisfy all of the related sponsor’s underwriting standards. See“Transaction Parties—The Sponsors and Mortgage Loan Sellers”.
The Performance of a Mortgage Loan and Its Related Mortgaged Property Depends in Part on Who Controls the Borrower and Mortgaged Property
The operation and performance of a mortgage loan will depend in part on the identity of the persons or entities who control the borrower and the mortgaged property. The performance of a mortgage loan may be adversely affected if control of a borrower changes, which may occur, for example, by means of transfers of direct or indirect ownership interests in the borrower, or if the mortgage loan is assigned to and assumed by another person or entity along with a transfer of the property to that person or entity.
Many of 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, although some have current or permit future mezzanine or subordinate debt. We cannot assure you the ownership of any of the borrowers would not change during the term of the related mortgage loan and result in a material adverse effect on your certificates. See “Description of the Mortgage Pool—Additional Indebtedness”and“—Certain Terms of the Mortgage Loans—“Due-On-Sale” and “Due-On-Encumbrance” Provisions”.
The Borrower’s Form of Entity May Cause Special Risks
The borrowers are legal entities rather than individuals. Mortgage loans made to legal entities may entail greater risks of loss than those associated with 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 entities generally, but not in all cases, do not have personal assets and creditworthiness at stake. 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 mortgaged 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 related mortgaged property and
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mortgage loan. Such borrower may also have previously owned property other than the related mortgaged property or may be a so-called “recycled” single-purpose entity that previously had other business activities and liabilities. However, we cannot assure you that such borrowers have in the past complied, and will comply, with such requirements, and in some cases unsecured debt exists and/or is allowed in the future. 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 standard rating agency criteria as “single purpose entities”.
Although a borrower may currently be a single purpose entity, in certain cases the borrowers were not originally formed as single purpose entities, but at origination of the related mortgage loan 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” and thus may have liabilities arising from events prior to becoming a single purpose entity.
The organizational documents of a borrower or the direct or indirect managing partner or member of a borrower may also contain requirements that there be one or two independent directors, managers or trustees (depending on the entity form of such borrower) whose vote is required before the borrower files a voluntary bankruptcy or insolvency petition or otherwise institutes insolvency proceedings. Generally, but not always, the independent directors, managers or trustees may only be replaced with certain other independent successors. Although the requirement of having independent directors, managers or trustees is designed to mitigate the risk of a voluntary bankruptcy filing by a solvent borrower, a borrower could file for bankruptcy without obtaining the consent of its independent director(s)(and we cannot assure you that such bankruptcy would be dismissed as an unauthorized filing), and in any case the independent directors, managers or trustees may determine that a bankruptcy filing is an appropriate course of action to be taken by such borrower. Although the independent directors, managers or trustees generally owe no fiduciary duties to entities other than the borrower itself, such determination might take into account the interests and financial condition of such borrower’s parent entities and such parent entities’ other subsidiaries in addition to those of the borrower. Consequently, the financial distress of an affiliate of a borrower might increase the likelihood of a bankruptcy filing by a borrower.
The bankruptcy of a borrower, or a general partner or managing member of a borrower, may impair the ability of the lender to enforce its rights and remedies under the related mortgage. Certain of the mortgage loans have been made to single purpose limited partnerships that have a general partner or general partners that are not themselves single purpose entities. Such loans are subject to additional bankruptcy risk. The organizational documents of the general partner in such cases do not limit it to acting as the general partner of the partnership. Accordingly there is a greater risk that the general partner may become insolvent for reasons unrelated to the mortgaged property. The bankruptcy of a general partner may dissolve the partnership under applicable state law. In addition, even if the partnership itself is not insolvent, actions by the partnership and/or a bankrupt general partner that are outside the ordinary course of their business, such as refinancing the related mortgage loan, may require prior approval of the bankruptcy court in the general partner’s bankruptcy case. The proceedings required to resolve these issues may be costly and time-consuming.
Any borrower, even an entity structured as a single purpose entity, as an owner of real estate, will be subject to certain potential liabilities and risks as an owner of real estate. 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.
Certain borrowers’ organizational documents or the terms of certain mortgage loans permit an affiliated property manager to maintain a custodial account on behalf of such borrower and certain affiliates of such borrower into which funds available to such borrower under the terms of the related mortgage loans and funds of such affiliates are held, but which funds are and will continue to be separately accounted for as to each item of income and expense for each related mortgaged property and each related borrower. A custodial account structure for affiliated entities, while common among certain REITs, institutions or independent owners of multiple properties, presents a risk for consolidation
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of the assets of such affiliates as commingling of funds is a factor a court may consider in considering a request by other creditors for substantive consolidation. Substantive consolidation is an equitable remedy that could result in an otherwise solvent company becoming subject to the bankruptcy proceedings of an insolvent affiliate, making its assets available to repay the debts of affiliated companies. A court has the discretion to order substantive consolidation in whole or in part and may include non-debtor affiliates of the bankrupt entity in the proceedings. In particular, consolidation may be ordered when corporate funds are commingled and used for a principal’s personal purposes, inadequate records of transfers are made and corporate entities are deemed an alter ego of a principal. Strict adherence to maintaining separate books and records, avoiding commingling of assets and otherwise maintaining corporate policies designed to preserve the separateness of corporate assets and liabilities make it less likely that a court would order substantive consolidation, but we cannot assure you that the related borrowers, property managers or affiliates will comply with these requirements as set forth in the related mortgage loans.
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 Mortgage Loans—Bankruptcy Laws”.
In addition, borrowers may own a mortgaged property as a Delaware statutory trust or as tenants-in-common. Delaware statutory trusts may be restricted in their ability to actively operate a property, and in the case of a mortgaged property that is owned by a Delaware statutory trust or by tenants-in-common, there is a risk that obtaining the consent of the holders of the beneficial interests in the Delaware statutory trust or the consent of the tenants-in-common will be time consuming and cause delays with respect to the taking of certain actions by or on behalf of the borrower, including with respect to the related mortgaged property. See “—Tenancies-in-Common May Hinder Recovery” below.
A Bankruptcy Proceeding May Result in Losses and Delays in Realizing on the Mortgage Loans
Numerous statutory provisions, including the federal bankruptcy code and state laws affording relief to debtors, may interfere with and delay the ability of a secured mortgage lender to obtain payment of a loan, to realize upon collateral and/or to enforce a deficiency judgment. For example, under the federal bankruptcy code, virtually all actions (including foreclosure actions and deficiency judgment proceedings) are automatically stayed upon the filing of a bankruptcy petition, and, often, no interest or principal payments are made during the course of the bankruptcy proceeding. Also, under federal bankruptcy law, the filing of a petition in bankruptcy by or on behalf of a junior lien holder may stay the senior lender from taking action to foreclose out such junior lien. Certain of the mortgage loans have sponsors that have previously filed bankruptcy and 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. As a result, the issuing entity’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. See “—Other Financings or Ability to Incur Other Indebtedness Entails Risk” below, “Description of the Mortgage Pool—Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings” and “Certain Legal Aspects of Mortgage Loans—Bankruptcy Laws”.
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 Mortgage Loans—Foreclosure”.
See also “—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases—Tenant Bankruptcy Could Result in a Rejection of the Related Lease” above.
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Litigation Regarding the Mortgaged Properties or Borrowers May Impair Your Distributions
There may be (and there may exist from time to time) pending or threatened legal proceedings against, or disputes with, the borrowers, the borrower sponsors and the managers of the mortgaged properties and their respective affiliates arising out of their ordinary business. We have not undertaken a search for all legal proceedings that relate to the borrowers, borrower sponsors or managers for the mortgaged properties and their respective affiliates. Potential investors are advised and encouraged to perform their own searches related to such matters to the extent relevant to their investment decision. Any such litigation or dispute may materially impair distributions to certificateholders if borrowers must use property income to pay judgments, legal fees or litigation costs. We cannot assure you that any litigation or dispute or any settlement of any litigation or dispute will not have a material adverse effect on your investment.
Additionally, a borrower or a principal of a borrower or affiliate may have been a party to a bankruptcy, foreclosure, litigation or other proceeding, particularly against a lender, or has been convicted of a crime in the past. In addition, certain of the borrower sponsors, property managers, affiliates of any of the foregoing and/or entities controlled thereby have been a party to bankruptcy proceedings, mortgage loan defaults and restructures, discounted payoffs, foreclosure proceedings or deed-in-lieu of foreclosure transactions, or other material proceedings (including criminal proceedings) in the past, whether or not related to the mortgaged property securing a mortgage loan in this securitization transaction. In some cases, mortgaged properties securing certain of the mortgage loans previously secured other loans that had been in default, restructured or the subject of a discounted payoff, foreclosure or deed-in-lieu of foreclosure.
Certain of the borrower sponsors may have a history of litigation or other proceedings against their lender, in some cases involving various parties to a securitization transaction. We cannot assure you that the borrower sponsors that have engaged in litigation or other proceedings in the past will not commence action against the issuing entity in the future upon any attempt by the special servicer to enforce the mortgage loan documents. Any such actions by the borrower or borrower sponsor may result in significant expense and potential loss to the issuing entity and a shortfall in funds available to make payments on the offered certificates. In addition, certain principals or borrower sponsors may have in the past been convicted of, or pled guilty to, a felony. We cannot assure you that the borrower or principal will not be more likely than other borrowers or principals to avail itself or cause a borrower to avail itself of its legal rights, under the federal bankruptcy code or otherwise, in the event of an action or threatened action by the lender or its servicer to enforce the related mortgage loan documents, or otherwise conduct its operations in a manner that is in the best interests of the lender and/or the mortgaged property. We cannot assure you that any such proceedings or actions will not have a material adverse effect upon distributions on your certificates. Further, borrowers, principals of borrowers, property managers and affiliates of such parties may, in the future, be involved in bankruptcy proceedings, foreclosure proceedings or other material proceedings (including criminal proceedings), whether or not related to the mortgage loans. We cannot assure you that any such proceedings will not negatively impact a borrower’s or borrower sponsor’s ability to meet its obligations under the related mortgage loan and, as a result could have a material adverse effect upon your certificates.
In some cases, this analysis is limited to equity owners that have at least a 20% or greater interest in the borrower, in some cases due to the difficulty of confirming each owner with a small equity interest in the related borrower, which means that past issues may not be discovered as to such owners. See “Description of the Mortgage Pool—Litigation and Other Considerations”and “—Loan Purpose, Default History, Bankruptcy Issues and Other Proceedings” for additional information on certain mortgage loans in the issuing entity. See also representation and warranty number 31 in Annex D-1, and the identified exceptions to that representation and warranty in Annex D-2 and Annex D-3. However, we cannot assure you that there are no undisclosed bankruptcy proceedings, foreclosure proceedings, deed-in-lieu-of-foreclosure transaction and/or mortgage loan workout matters that involved one or more mortgage loans or mortgaged properties, and/or a guarantor, borrower sponsor or other party to a mortgage loan.
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
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adversely affect the borrower’s ability to fulfill its obligations under the related mortgage loan. See “Description of the Mortgage Pool—Litigation and Other Considerations” for information regarding litigation matters with respect to certain mortgage loans.
Other Financings or Ability to Incur Other Indebtedness Entails Risk
When a borrower (or its constituent members) also has one or more other outstanding loans (even if they arepari passu, subordinated, mezzanine, preferred equity or unsecured loans or another type of equity pledge), the issuing entity is subjected to additional risk such as:
| · | the borrower (or its constituent members) may have difficulty servicing and repaying multiple financings; |
| · | the existence of other financings will generally also make it more difficult for the borrower to obtain refinancing of the related mortgage loan (or whole loan, if applicable) or sell the related mortgaged property and may thereby jeopardize repayment of the mortgage loan (or whole loan, if applicable); |
| · | the need to service additional financings may reduce the cash flow available to the borrower to operate and maintain the mortgaged property and the value of the mortgaged property may decline as a result; |
| · | if a borrower (or its constituent members) defaults on its mortgage loan and/or any other financing, actions taken by other lenders such as a suit for collection, foreclosure or an involuntary petition for bankruptcy against the borrower could impair the security available to the issuing entity, including the mortgaged property, or stay the issuing entity’s ability to foreclose during the course of the bankruptcy case; |
| · | the bankruptcy of another lender also may operate to stay foreclosure by the issuing entity; and |
| · | the issuing entity may also be subject to the costs and administrative burdens of involvement in foreclosure or bankruptcy proceedings or related litigation. |
Although the companion loans related to the whole loans are not assets of the issuing entity, each related borrower is still obligated to make interest and principal payments on such companion loans. As a result, the issuing entity is subject to additional risks, including:
| · | 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 |
| · | the risk that it may be more difficult for the borrower to refinance these loans or to sell the related mortgaged property for purposes of making any balloon payment on the entire balance of such loans and the related additional debt at maturity or anticipated repayment date. |
With respect to mezzanine financing (if any), while a mezzanine lender has no security interest in the related mortgaged properties, a default under a mezzanine loan could cause a change in control of the related borrower. With respect to mortgage loans that permit mezzanine financing, the relative rights of the mortgagee and the related mezzanine lender will generally be set forth in an intercreditor agreement, which agreements typically provide that the rights of the mezzanine lender (including the right to payment) against the borrower and mortgaged property are subordinate to the rights of the mortgage lender and that the mezzanine lender may not take any enforcement action against the mortgage borrower and mortgaged property.
In addition, the mortgage loan documents related to certain mortgage loans may have or permit future “preferred equity” structures, where one or more special limited partners or members receive a preferred return in exchange for an infusion of capital or other type of equity pledge that may require payments of a
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specified return or of excess cash flow. Such arrangements can present risks that resemble mezzanine debt, including dilution of the borrower’s equity in the mortgaged property, stress on the cash flow in the form of a preferred return or excess cash payments, and/or potential changes in the management of the related mortgaged property in the event the preferred return is not satisfied.
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.
In addition, borrowers under most of the mortgage loans are generally permitted to incur trade payables and equipment financing, which may not be limited or may be significant, in order to operate the related mortgaged properties. Also, with respect to certain mortgage loans the related borrower either has incurred or is permitted to incur unsecured debt from an affiliate of either the borrower or the sponsor of the borrower. See “Description of the Mortgage Pool—Additional Indebtedness—Other Unsecured Indebtedness”.
For additional information, see “Description of the Mortgage Pool—Additional Indebtedness” and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
Tenancies-in-Common May Hinder Recovery
Certain of the mortgage loans included in the issuing entity have borrowers that own the related mortgaged properties as tenants-in-common. 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 under the mortgage loans will be single purpose entities. Each tenant-in-common borrower has waived its right to partition, reducing the risk of partition. However, we cannot assure you that, if challenged, this waiver would be enforceable. In addition, in some cases, the related mortgage loan documents may provide for full recourse (or in an amount equal to itspro rata share of the debt) to the related tenant-in-common borrower or the guarantor if a tenant-in-common files for partition.
Risks Relating to Enforceability of Cross-Collateralization
Cross-collateralization arrangements may be terminated in certain circumstances under the terms of the related mortgage loan documents. Cross-collateralization arrangements whereby multiple borrowers grant their respective mortgaged properties as security for one or more mortgage loans could be challenged as fraudulent conveyances by the creditors or the bankruptcy estate of any of the related borrowers.
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 subordinate all or part of the mortgage loan to other debt of that borrower, recover prior payments made on that mortgage loan, or take other actions such as invalidating the mortgage loan or the mortgages securing the cross-collateralization. See “Certain Legal Aspects of Mortgage Loans—Bankruptcy Laws”.
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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.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics” for a description of any mortgage loans that are cross-collateralized and cross-defaulted with each other or that are secured by multiple properties owned by multiple borrowers.
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.
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.
Risks Associated with One Action Rules
Several states (such as 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 will be required to obtain advice of counsel prior to enforcing any of the issuing entity’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 Mortgage Loans—Foreclosure”.
State Law Limitations on Assignments of Leases and Rents May Entail Risks
Generally mortgage loans included in an issuing entity secured by mortgaged properties that are subject to leases typically will be secured by an assignment of leases and rents pursuant to which the related borrower (or with respect to any indemnity deed of trust structure, the related property owner) assigns to the lender its right, title and interest as landlord under the leases of the related mortgaged properties, and the income derived from those leases, as further security for the related mortgage loan, while retaining a license to collect rents for so long as there is no default. If the borrower defaults, the license terminates and the lender is entitled to collect rents. Some state laws may require that the lender take possession of the related property and obtain a judicial appointment of a receiver before becoming entitled to collect the rents. In addition, if bankruptcy or similar proceedings are commenced by or in respect of the borrower, the lender’s ability to collect the rents may be adversely affected. See “Certain Legal Aspects of Mortgage Loans—Leases and Rents” and “—Bankruptcy Laws”.
Various Other Laws Could Affect the Exercise of Lender’s Rights
The laws of the jurisdictions in which the mortgaged properties are located (which laws may vary substantially) govern many of the legal aspects of the mortgage loans. These laws may affect the ability
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to foreclose on, and, in turn the ability to realize value from, the mortgaged properties securing the mortgage loans. For example, state law determines:
| · | what proceedings are required for foreclosure; |
| · | whether the borrower and any foreclosed junior lienors may redeem the property and the conditions under which these rights of redemption may be exercised; |
| · | whether and to what extent recourse to the borrower is permitted; and |
| · | what rights junior mortgagees have and whether the amount of fees and interest that lenders may charge is limited. |
In addition, the laws of some jurisdictions may render certain provisions of the mortgage loans unenforceable or subject to limitations which may affect lender’s rights under the mortgage loans. Delays in liquidations of defaulted mortgage loans and shortfalls in amounts realized upon liquidation as a result of the application of these laws may create delays and shortfalls in payments to certificateholders. See “Certain Legal Aspects of Mortgage Loans”.
Risks of Anticipated Repayment Date Loans
Certain of the mortgage loans provide that, if after a certain date (referred to as the anticipated repayment date) the related borrower has not prepaid the mortgage loan in full, any principal outstanding after that anticipated repayment date will accrue interest at an increased interest rate rather than the stated mortgage loan rate. Generally, from and after the anticipated repayment date, cash flow in excess of that required for debt service (and in some cases, mezzanine debt service), the funding of reserves and certain approved operating expenses with respect to the related mortgaged property will be applied toward the payment of principal (without payment of a yield maintenance charge) of the related mortgage loan (or in some cases, prior to an event of default under the related mortgage loan, may be appliedpro ratato payment of principal of the related mortgage loan and a related mezzanine loan) until its principal balance has been reduced to zero. Although these provisions may create an incentive for the borrower to repay the mortgage loan in full on its anticipated repayment date, a substantial payment would be required and the borrower has no obligation to do so. With respect to the mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus as U-Haul AREC Portfolio, representing approximately 6.9% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, while interest at the initial mortgage rate continues to accrue and be payable on a current basis on the related mortgage loan after its anticipated repayment date, the payment of excess interest will be deferred and will be required to be paid only after the outstanding principal balance of the related mortgage loan has been paid in full, at which time the excess interest that has been deferred, will be payable. With respect to the mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus as Vertex Pharmaceuticals HQ, representing approximately 4.3% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, the payment of excess interest on such mortgage loan (and on the related mezzanine loan) (i.e., interest at the excess of the higher post-anticipated repayment date revised rate over the initial interest rate) will be payable on a current basis, and prior to the application of excess cash flow to principal. In each case, excess interest, to the extent actually collected, will be paid to the holders of the Class V certificates, which are not offered by this prospectus. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—ARD Loan(s)”.
Borrower May Be Unable To Repay Remaining Principal Balance on Maturity Date or Anticipated Repayment Date; Longer Amortization Schedules and Interest-Only Provisions Increase Risk
Mortgage loans with substantial remaining principal balances at their stated maturity date or anticipated repayment date, as applicable, involve greater risk than fully-amortizing mortgage loans. This is because the borrower may be unable to repay the mortgage 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 balloon payment due at maturity.
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All of the mortgage loans have amortization schedules that are significantly longer than their respective terms to maturity or anticipated repayment date, as applicable, and many of the mortgage loans require only payments of interest for part or all of their respective terms. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—Due Dates; Mortgage Rates; Calculations of Interest”. A longer amortization schedule or an interest-only provision in a mortgage loan will result in a higher amount of principal outstanding under the mortgage loan at any particular time, including at the maturity date or anticipated repayment date of the mortgage loan, than would have otherwise been the case had a shorter amortization schedule been used or had the mortgage loan had a shorter interest-only period or not included an interest-only provision at all. That higher principal amount outstanding could both (i) make it more difficult for the related borrower to make the required balloon payment at maturity or repay the outstanding principal amount at the anticipated repayment date and (ii) lead to increased losses for the issuing entity either during the loan term or at maturity or anticipated repayment date if the mortgage loan becomes a defaulted mortgage loan.
A borrower’s ability to repay a mortgage loan on its stated maturity date or anticipated repayment date, as applicable, 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:
| · | the availability of, and competition for, credit for commercial, multifamily or manufactured housing community real estate projects, which fluctuate over time; |
| · | the prevailing interest rates; |
| · | the net operating income generated by the mortgaged property; |
| · | the fair market value of the related mortgaged property; |
| · | the borrower’s equity in the related mortgaged property; |
| · | significant tenant rollover at the related mortgaged properties (see “—Retail Properties Have Special Risks” and “—Office Properties Have Special Risks” above); |
| · | the borrower’s financial condition; |
| · | the operating history and occupancy level of the mortgaged property; |
| · | reductions in applicable government assistance/rent subsidy programs; |
| · | the tax laws; and |
| · | prevailing general and regional economic conditions. |
In addition, the promulgation of additional laws and regulations, including the final regulations to implement the credit risk retention requirements under Section 15G of the Securities Exchange Act of 1934, as added by Section 941 of the Dodd-Frank Act, compliance with which is required with respect to the CMBS issued on or after December 24, 2016, may cause commercial real estate lenders to tighten their lending standards and reduce the availability of leverage and/or refinancings for commercial real estate. This, in turn, may adversely affect borrowers’ ability to refinance mortgage loans or sell the related mortgaged property on or before the related maturity date or anticipated repayment date, as applicable.
With respect to any mortgage loan that is part of a whole loan, the risks relating to balloon payment obligations are enhanced by the existence and amount of the related companion loans.
None of the sponsors, any party to the pooling and servicing agreement or any other person will be under any obligation to refinance any mortgage loan. However, in order to maximize recoveries on defaulted mortgage loans, the pooling and servicing agreement permits the special servicer (and each
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pooling and servicing agreement governing the servicing of a non-serviced whole loan may permit the related special servicer) to extend and modify mortgage loans in a manner consistent with the servicing standard, subject to the limitations described under “Pooling and Servicing Agreement—Realization Upon Mortgage Loans” and “—Modifications, Waivers and Amendments”.
Neither the master servicer nor the special servicer will have the ability to extend or modify a non-serviced mortgage loan because such mortgage loan is being serviced by a master servicer or special servicer pursuant to the pooling and servicing agreement governing the servicing of the applicable non-serviced whole loan. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
We cannot assure you that any extension or modification will increase the present value of recoveries in a given case. Whether or not losses are ultimately sustained, any delay in collection of a balloon payment that would otherwise be distributable on your certificates, whether such delay is due to borrower default or to modification of the related mortgage loan, will likely extend the weighted average life of your certificates.
In any event, we cannot assure you that each borrower under a balloon loan will have the ability to repay the principal balance of such mortgage loan on the related maturity date or anticipated repayment date, as applicable.
See “Description of the Mortgage Pool—Mortgage Pool Characteristics”.
Risks Related to Ground Leases and Other Leasehold Interests
With respect to certain mortgaged properties, 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 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 other fee owner’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 in the leasehold interest. 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 pursuant to the federal bankruptcy code to treat such lease as terminated by rejection or remain in possession of its leased premises for the rent otherwise payable under the lease for the remaining term of the ground lease (including renewals) and to offset against such rent any damages incurred due to the landlord’s failure to perform its obligations under the lease. 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 lease specifically grants the lender such right. If both the lessor and the lessee/borrower are involved in bankruptcy proceedings, the issuing entity may be unable to enforce the lessee/borrower’s pre-petition agreement 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 mortgage loans 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.
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A leasehold lender could lose its security unless (i) the leasehold lender holds a fee mortgage, (ii) the ground lease requires the lessor to enter into a new lease with the leasehold lender upon termination or rejection of the ground lease, or (iii) the bankruptcy court, as a court of equity, allows the leasehold lender to assume the ground lessee’s obligations under the ground lease and succeed to the ground lessee’s position. Although not directly covered by the 1994 Amendments to the federal bankruptcy code, such a result would be consistent with the purpose of the 1994 Amendments to the federal bankruptcy code granting the holders of leasehold mortgages permitted under the terms of the lease the right to succeed to the position of a leasehold mortgagor. Although consistent with the federal bankruptcy code, such position may not be adopted by the applicable bankruptcy court.
Further, in a 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 under the federal bankruptcy code 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 the federal bankruptcy code, 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 the federal 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 the federal 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 the federal bankruptcy code, the lessee will 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 recoup 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 with respect to a mortgage loan included in the issuing entity may not. See representation and warranty number 34 in Annex D-1, and the identified exceptions to that representation and warranty in Annex D-2 and Annex D-3.
Except as noted in this prospectus, each of the ground leases has a term that extends at least 20 years beyond the maturity date of the mortgage loan (taking into account all freely exercisable extension options) and contains customary mortgagee protection provisions, including notice and cure rights and the right to enter into a new lease with the applicable ground lessor in the event a ground lease is rejected or terminated.
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 or first offer 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.
See “Certain Legal Aspects of Mortgage Loans—Bankruptcy Laws”.
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 “payment in lieu of taxes” program 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. Prior to expiration of such program, the tax benefit to the mortgaged property may decrease throughout the term of the expiration date until the expiration of such program. An increase in real estate taxes may impact the ability of the borrower to pay debt service on the mortgage loan.
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See “Description of the Mortgage Pool—Real Estate and Other Tax Considerations” for descriptions of real estate tax matters relating to certain mortgaged properties.
State and Local Mortgage Recording Taxes May Apply Upon a Foreclosure or Deed in Lieu of Foreclosure and Reduce Net Proceeds
Many jurisdictions impose recording taxes on mortgages which, if not paid at the time of the recording of the mortgage, may impair the ability of the lender to foreclose the mortgage. Such taxes, interest, and penalties could be significant in amount and would, if imposed, reduce the net proceeds realized by the issuing entity in liquidating the real property securing the related mortgage loan.
Risks Related to Conflicts of Interest
Interests and Incentives of the Originators, the Sponsors and Their Affiliates May Not Be Aligned With Your Interests
The originators, the sponsors and their affiliates (including certain of the underwriters) expect to derive ancillary benefits from this offering and their respective incentives may not be aligned with those of purchasers of the offered certificates. The sponsors originated or purchased the mortgage loans in order to securitize the mortgage loans by means of a transaction such as the offering of the offered certificates. The sponsors will sell the mortgage loans to the depositor (an affiliate of German American Capital Corporation, one of the sponsors and originators, and of Deutsche Bank Securities Inc., one of the underwriters) on the closing date in exchange for cash, derived from the sale of the offered certificates to investors and/or in exchange for offered certificates. A completed offering would reduce the originators’ exposure to the mortgage loans. The originators made the mortgage loans with a view toward securitizing them and distributing the exposure by means of a transaction such as this offering of offered certificates. In addition, certain mortgaged properties may have tenants that are affiliated with the related originator. See “Description of the Mortgage Pool—Tenant Issues—Affiliated Leases”. This offering of offered certificates will effectively transfer the originators’ exposure to the mortgage loans to purchasers of the offered certificates.
The originators, the sponsors and their affiliates expect to receive various benefits, including compensation, commissions, payments, rebates, remuneration and business opportunities, in connection with or as a result of this offering of offered certificates and their interests in the mortgage loans. The sponsors and their affiliates will effectively receive compensation, and may record a profit, in an amount based on, among other things, the amount of proceeds (net of transaction expenses) received from the sale of the offered certificates to investors relative to their investment in the mortgage loans. The benefits to the originators, the sponsors and their affiliates arising from the decision to securitize the mortgage loans may be greater than they would have been had other assets been selected.
Furthermore, the sponsors and/or their affiliates may benefit from a completed offering of the offered certificates because the offering would establish a market precedent and a valuation data point for securities similar to the offered certificates, thus enhancing the ability of the sponsors and their affiliates to conduct similar offerings in the future and permitting them to adjust the fair value of the mortgage loans or other similar assets or securities held on their balance sheet, including increasing the carrying value or avoiding decreasing the carrying value of some or all of such similar positions.
In some cases, the originators or their affiliates are the holders of the mezzanine loans and/or companion loans related to their mortgage loans. The originators and/or their respective affiliates may retain existing mezzanine loans and/or companion loans or originate future permitted mezzanine indebtedness with respect to the mortgage loans. These transactions may cause the originators and their affiliates or their clients or counterparties who purchase the mezzanine loans and/or companion loans, as applicable, to have economic interests and incentives that do not align with, and that may be directly contrary to, those of an investor in the offered certificates. In addition, these transactions or actions taken to maintain, adjust or unwind any positions in the future, may, individually or in the aggregate, have a material effect on the market for the offered certificates (if any), including adversely affecting the value of the offered certificates, particularly in illiquid markets. The originators, the sponsors and their affiliates will
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have no obligation to take, refrain from taking or cease taking any action with respect to such companion loans or any existing or future mezzanine loans, based on the potential effect on an investor in the offered certificates, and may receive substantial returns from these transactions. In addition, the originators, the sponsors or any of their respective affiliates may benefit from certain relationships, including financial dealings, with any borrower, any non-recourse carveout guarantor or any of their respective affiliates, aside from the origination of mortgage loans or contribution of mortgage loans into this securitization. Conflicts may also arise because the sponsors and their respective affiliates intend to continue to actively acquire, develop, operate, finance and dispose of real estate-related assets in the ordinary course of their businesses. During the course of their business activities, the sponsors and their respective affiliates may acquire, sell or lease properties, or finance loans secured by properties, which may include the properties securing the mortgage loans or properties that are in the same markets as the mortgaged properties. Such other properties, similar to other third-party owned real estate, may compete with the mortgaged properties for existing and potential tenants. The sponsors may also, from time to time, be among the tenants at the mortgaged properties, and they should be expected to make occupancy-related decisions based on their self-interest and not that of the issuing entity. We cannot assure you that the activities of these parties with respect to such other properties will not adversely impact the performance of the mortgaged properties.
In addition, certain of the mortgage loans included in the issuing entity may have been refinancings of debt previously held by a sponsor, an originator or one of their respective affiliates, or a sponsor, an originator or one of their respective affiliates may have or have had equity investments in the borrowers or mortgaged properties under certain of the mortgage loans included in the issuing entity. Each of the sponsors, the originators and their respective affiliates have made and/or may make loans to, or equity investments in, affiliates of the borrowers under the related mortgage loans. In the circumstances described above, the interests of the sponsors, the originators and their respective affiliates may differ from, and compete with, the interests of the issuing entity.
Further, various originators, sponsors and their respective affiliates are acting in multiple capacities in or with respect to this transaction, which may include, without limitation, acting as one or more transaction parties or a subcontractor or vendor of such party, participating in or contracting for interim servicing and/or custodial services with certain transaction parties, providing warehouse financing to, or receiving warehouse financing from, certain other originators or sponsors prior to transfer of the related mortgage loans to the issuing entity, and/or conducting due diligence on behalf of an investor with respect to the mortgage loans prior to their transfer to the issuing entity.
For a description of certain of the foregoing relationships and arrangements that exist among the parties to this securitization, see “Certain Affiliations, Relationships And Related Transactions Involving Transaction Parties” and “Transaction Parties”.
These roles and other potential relationships may give rise to conflicts of interest as described in
“—Interests and Incentives of the Underwriter Entities May Not Be Aligned With Your Interests”,
“—Potential Conflicts of Interest in the Selection of the Underlying Mortgage Loans” and “—Other Potential Conflicts of Interest May Affect Your Investment” below. Each of the foregoing relationships and related interests should be considered carefully by you before you invest in any offered certificates.
Interests and Incentives of the Underwriter Entities May Not Be Aligned With Your Interests
The activities and interests of the underwriters and their respective affiliates (collectively, the “Underwriter Entities”) will not align with, and may in fact be directly contrary to, those of the certificateholders. The Underwriter Entities are each part of separate global investment banking, securities and investment management firms that provide a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals. As such, they actively make markets in and trade financial instruments for their own account and for the accounts of customers. These financial instruments include debt and equity securities, currencies, commodities, bank loans, indices, baskets and other products. The Underwriter Entities’ activities include, among other things, executing large block trades and taking long and short positions directly and indirectly, through derivative instruments or otherwise. The securities and
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instruments in which the Underwriter Entities take positions, or expect to take positions, include loans similar to the mortgage loans, securities and instruments similar to the offered certificates and other securities and instruments. Market making is an activity where the Underwriter Entities buy and sell on behalf of customers, or for their own account, to satisfy the expected demand of customers. By its nature, market making involves facilitating transactions among market participants that have differing views of securities and instruments. Any short positions taken by the Underwriter Entities and/or their clients through marketing or otherwise will increase in value if the related securities or other instruments decrease in value, while positions taken by the Underwriter Entities and/or their clients in credit derivative or other derivative transactions with other parties, pursuant to which the Underwriter Entities and/or their clients sell or buy credit protection with respect to one or more classes of the offered certificates, may increase in value if the offered certificates default, are expected to default, or decrease in value.
The Underwriter Entities and their clients acting through them may execute such transactions, modify or terminate such derivative positions and otherwise act with respect to such transactions, and may exercise or enforce, or refrain from exercising or enforcing, any or all of their rights and powers in connection therewith, without regard to whether any such action might have an adverse effect on the offered certificates or the certificateholders. Additionally, none of the Underwriter Entities will have any obligation to disclose any of these securities or derivatives transactions to you in your capacity as a certificateholder. As a result, you should expect that the Underwriter Entities will take positions that are inconsistent with, or adverse to, the investment objectives of investors in the offered certificates.
As a result of the Underwriter Entities’ various financial market activities, including acting as a research provider, investment advisor, market maker or principal investor, you should expect that personnel in various businesses throughout the Underwriter Entities will have and express research or investment views and make recommendations that are inconsistent with, or adverse to, the objectives of investors in the offered certificates.
If an Underwriter Entity becomes a holder of any of the certificates, through market-making activity or otherwise, any actions that it takes in its capacity as a certificateholder, including voting, providing consents or otherwise will not necessarily be aligned with the interests of other holders of the same class or other classes of the certificates. To the extent an Underwriter Entity makes a market in the certificates (which it is under no obligation to do), it would expect to receive income from the spreads between its bid and offer prices for the certificates. The price at which an Underwriter Entity may be willing to purchase certificates, if it makes a market, will depend on market conditions and other relevant factors and may be significantly lower than the issue price for the certificates and significantly lower than the price at which it may be willing to sell certificates.
In addition, none of the Underwriter Entities will have any obligation to monitor the performance of the certificates or the actions of the parties to the pooling and servicing agreement and will have no authority to advise any party to the pooling and servicing agreement or to direct their actions.
Furthermore, each Underwriter Entity expects that a completed offering will enhance its ability to assist clients and counterparties in the transaction or in related transactions (including assisting clients in additional purchases and sales of the certificates and hedging transactions). The Underwriter Entities expect to derive fees and other revenues from these transactions. In addition, participating in a successful offering and providing related services to clients may enhance the Underwriter Entities’ relationships with various parties, facilitate additional business development, and enable them to obtain additional business and generate additional revenue.
The Underwriter Entities are playing several roles in this transaction. Deutsche Bank Securities Inc., one of the underwriters, is an affiliate of the depositor, and German American Capital Corporation, a sponsor and originator. Citigroup Global Markets Inc., one of the underwriters, is an affiliate of Citigroup Global Markets Realty Corp., a sponsor and originator.
See “Transaction Parties—The Sponsors and Mortgage Loan Sellers”. Each of the foregoing relationships should be considered carefully by you before you invest in any certificates.
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Potential Conflicts of Interest of the Master Servicer and the Special Servicer
The pooling and servicing agreement provides that the mortgage loans serviced thereunder are required to be administered in accordance with the servicing standard without regard to ownership of any certificate by the master servicer, the special servicer or any of their respective affiliates. See “Pooling and Servicing Agreement—Servicing Standard”. Each pooling and servicing agreement governing the servicing of a non-serviced whole loan provides that such non-serviced whole loan is required to be administered in accordance with a servicing standard that is generally similar to the servicing standard set forth in the pooling and servicing agreement. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
Notwithstanding the foregoing, the master servicer, a sub-servicer, the special servicer or any of their respective affiliates and, as it relates to servicing and administration of a non-serviced mortgage loan, each applicable master servicer, sub-servicer, special servicer or any of their respective affiliates under the pooling and servicing agreement governing the servicing of a non-serviced whole loan, may have interests when dealing with the mortgage loans that are in conflict with those of holders of the certificates, especially if the master servicer, a sub-servicer, the special servicer or any of their respective affiliates holds certificates or securities relating to any of the applicable companion loans, or has financial interests in or financial dealings with a borrower or a borrower sponsor.
In order to minimize the effect of certain of these conflicts of interest as they relate to the special servicer, if the special servicer obtains knowledge that it has become a borrower party with respect to a mortgage loan (other than a non-serviced mortgage loan) or serviced whole loan, the special servicer will be required to resign as special servicer with respect to that mortgage loan or serviced whole loan (referred to in this prospectus as an “excluded special servicer loan”) and a separate special servicer that is not a borrower party (referred to in this prospectus as an “excluded special servicer”) will be appointed as special servicer for such excluded special servicer loan as described under “Pooling and Servicing Agreement—Replacement of Special Servicer Without Cause” in this prospectus. Any excluded special servicer will be required to perform all of the obligations of the special servicer with respect to such excluded special servicer loan and will be entitled to all special servicing compensation with respect to such excluded special servicer loan earned during such time as the related mortgage loan is an excluded special servicer loan (providedthat that special servicer will remain entitled to all other special servicing compensation with respect all mortgage loans and serviced whole loans that are not excluded special servicer loans). While the special servicer will have the same access to information related to the excluded special servicer loan as it does with respect to the other mortgage loans, the special servicer will covenant in the pooling and servicing agreement that it will not directly or indirectly provide any information related to the excluded special servicer loan to the related borrower party or any employees or personnel of such borrower party involved in the management of any investment in the related borrower party or the related mortgaged property and will maintain sufficient internal controls and appropriate policies and procedures in place in order to comply with those obligations. Notwithstanding those restrictions, there can be no assurance that the related borrower party will not obtain sensitive information related to the strategy of any contemplated workout or liquidation related to an excluded special servicer loan.
Each of these relationships may create a conflict of interest. For instance, if the special servicer or its affiliate holds a subordinate class of certificates, the special servicer might seek to reduce the potential for losses allocable to those certificates from the mortgage loans by deferring acceleration in hope of maximizing future proceeds. However, that action could result in less proceeds to the issuing entity than would be realized if earlier action had been taken. In addition, no servicer is required to act in a manner more favorable to the offered certificates or any particular class of certificates than to the Series 2016-CD1 non-offered certificates, any serviced companion loan holder or the holder of any serviced companion loan securities.
Each of the master servicer and the special servicer services and is expected to continue to service, in the ordinary course of its business, existing and new mortgage loans for third parties, including portfolios of mortgage loans similar to the mortgage loans. The real properties securing these other mortgage loans may be in the same markets as, and compete with, certain of the mortgaged properties
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securing the mortgage loans. Consequently, personnel of the master servicer or the special servicer, as applicable, may perform services, on behalf of the issuing entity, 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. In addition, the mortgage loan sellers will determine who will service mortgage loans that the mortgage loan sellers originate in the future, and that determination may be influenced by the mortgage loan seller’s opinion of servicing decisions made by the master servicer or special servicer under the pooling and servicing agreement including, among other things, the manner in which the master servicer or special servicer enforces breaches of representations and warranties against the related mortgage loan seller. This may pose inherent conflicts for the master servicer or the special servicer.
The special servicer may enter into one or more arrangements with the directing certificateholder, a controlling class certificateholder, a serviced companion loan holder or other certificateholders (or an affiliate or a third party representative of one or more of the preceding parties) to provide for a discount and/or revenue sharing with respect to certain of the special servicer compensation in consideration of, among other things, the special servicer’s appointment (or continuance) as special servicer under the pooling and servicing agreement and/or the related intercreditor agreement and limitations on the right of such person to replace the special servicer. See “—Other Potential Conflicts of Interest May Affect Your Investment” below. It is expected that RREF III Debt AIV, LP or another affiliate of the special servicer will be the initial directing certificateholder. Rialto Capital Advisors, LLC, the expected special servicer for this transaction, is an affiliate of (a) the entity or entities that is committed to purchasing the Class X-D, Class X-E, Class X-F, Class E, Class F, Class G and Class V certificates and (b) RREF III Debt AIV, LP or its affiliate, which is expected to be appointed as the initial directing certificateholder with respect to each mortgage loan (other than any non-serviced mortgage loan or any excluded special servicer loan). Rialto Capital Advisors, LLC is expected to act as the special servicer and it or an affiliate assisted RREF III Debt AIV, LP and/or one or more of its affiliates with its due diligence of the mortgage loans prior to the closing date. In addition, Rialto Capital Advisors, LLC is an affiliate of the entity that is expected to be the initial controlling class certificateholder and the initial directing certificateholder under the pooling and servicing agreement governing the WFCM 2016-BNK1 transaction, which is expected to govern the servicing and administration of the Vertex Pharmaceuticals HQ whole loan.
Although the master servicer and the special servicer will be required to service and administer the mortgage loan pool in accordance with the servicing standard and, accordingly, without regard to their rights to receive compensation under the pooling and servicing agreement and without regard to any potential obligation to repurchase or substitute a mortgage loan if the master servicer or special servicer is a mortgage loan seller, the possibility of receiving additional servicing compensation in the nature of assumption and modification fees, the continuation of receiving fees to service or specially service a mortgage loan, or the desire to avoid a repurchase demand resulting from a breach of a representation and warranty or material document default may under certain circumstances provide the master servicer or the special servicer, as the case may be, with an economic disincentive to comply with this standard.
Each of the foregoing relationships should be considered carefully by you before you invest in any certificates.
Potential Conflicts of Interest of the Operating Advisor
Park Bridge Lender Services LLC, an indirect wholly owned subsidiary of Park Bridge Financial LLC, has been appointed as the initial operating advisor with respect to all of the mortgage loans other than the non-serviced mortgage loans. See “Transaction Parties—The Operating Advisor and Asset Representations Reviewer”. In the normal course of conducting its business, the initial operating advisor and its affiliates have rendered services to, performed surveillance of, provided valuation services to, and negotiated with, numerous parties engaged in activities related to structured finance and commercial mortgage securitization. These parties may have included the depositor, the sponsors, the mortgage loan sellers, the originators, the certificate administrator, the trustee, the master servicer, the special servicer or the directing certificateholder or affiliates of any of those parties. Each of these relationships, to the extent they exist, may continue in the future and may involve a conflict of interest with respect to the initial operating advisor’s duties as operating advisor. We cannot assure you that the existence of these
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relationships and other relationships in the future will not impact the manner in which the initial operating advisor performs its duties under the pooling and servicing agreement.
In addition, the operating advisor and its affiliates may have interests that are in conflict with those of certificateholders, especially if the operating advisor or any of its affiliates holds certificates or has financial interests in or other financial dealings with any of the parties to this transaction, a borrower or a parent of a borrower.
Additionally, Park Bridge Lender Services LLC or its affiliates, in the ordinary course of their business, may in the future (a) perform for third parties contract underwriting services and advisory services as well as service or specially service mortgage loans and (b) acquire mortgage loans for their own account, including, in each such case, mortgage loans similar to the mortgage loans that will be included in the issuing entity. The real properties securing these other mortgage 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 issuing entity. Consequently, personnel of Park Bridge Lender Services LLC may perform services, on behalf of the issuing entity, with respect to the mortgage loans included in the issuing entity at the same time as they are performing services with respect to, or while Park Bridge Lender Services LLC or its affiliates are holding, other mortgage loans secured by properties that compete with the mortgaged properties securing the mortgage loans included in the issuing entity. This may pose inherent conflicts for Park Bridge Lender Services LLC.
Potential Conflicts of Interest of the Asset Representations Reviewer
Park Bridge Lender Services LLC has been appointed as the initial asset representations reviewer with respect to all of the mortgage loans. See “Transaction Parties—The Operating Advisor and Asset Representations Reviewer”. In the normal course of conducting its business, the initial asset representations reviewer and its affiliates have rendered services to, performed surveillance of, provided valuation services to, and negotiated with, numerous parties engaged in activities related to structured finance and commercial mortgage securitization. These parties may have included the depositor, the sponsors, the mortgage loan sellers, the originators, the certificate administrator, the trustee, the master servicer, the special servicer or the directing certificateholder or affiliates of any of those parties. Each of these relationships, to the extent they exist, may continue in the future and may involve a conflict of interest with respect to the initial asset representations reviewer’s duties as asset representations reviewer. We cannot assure you that the existence of these relationships and other relationships in the future will not impact the manner in which the initial asset representations reviewer performs its duties under the pooling and servicing agreement.
In addition, the asset representations reviewer and its affiliates may have interests that are in conflict with those of certificateholders, especially if the asset representations reviewer or any of its affiliates holds certificates or has financial interests in or other financial dealings with any of the parties to this transaction, a borrower or a parent of a borrower.
Additionally, Park Bridge Lender Services LLC or its affiliates, in the ordinary course of their business, may in the future (a) perform for third parties contract underwriting services and advisory services as well as service or specially service mortgage loans and (b) acquire mortgage loans for their own account, including, in each such case, mortgage loans similar to the mortgage loans that will be included in the issuing entity. The real properties securing these other mortgage 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 issuing entity. Consequently, personnel of Park Bridge Lender Services LLC may perform services, on behalf of the issuing entity, with respect to the mortgage loans included in the issuing entity at the same time as they are performing services with respect to, or while Park Bridge Lender Services LLC or its affiliates are holding, other mortgage loans secured by properties that compete with the mortgaged properties securing the mortgage loans included in the issuing entity. This may pose inherent conflicts for Park Bridge Lender Services LLC.
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The Controlling Companion Loan for the Vertex Pharmaceuticals HQ Whole Loan Is Expected to Be Contributed to a Securitization That Has Not Yet Closed, and the Provisions of the Related Non-Serviced PSA Expected to Govern Such Whole Loan Have Yet to Be Finalized
It is expected that the Vertex Pharmaceuticals HQ whole loan will be serviced and administered pursuant to the pooling and servicing agreement for the securitization transaction to which the Vertex Pharmaceuticals HQ controlling companion loan is to be contributed, which is expected to be the WFCM 2016-BNK1 transaction. However, the WFCM 2016-BNK1 transaction has not closed, and the provisions of the WFCM 2016-BNK1 pooling and servicing agreement have not yet been finalized. Prospective investors should be aware that they will not have any control over, nor any assurance as to whether, the closing of the WFCM 2016-BNK1 transaction actually occurs, nor will they have any assurance as to the particular terms of the WFCM 2016-BNK1 pooling and servicing agreement.
Potential Conflicts of Interest of the Directing Certificateholder and the Companion Loan Holders
It is expected that RREF III Debt AIV, LP, or its affiliate, will be the initial directing certificateholder. The special servicer may, at the direction of the directing certificateholder (for so long as a control termination event does not exist and other than with respect to any excluded loan), take actions with respect to the specially serviced mortgage loans administered under the pooling and servicing agreement that could adversely affect the holders of some or all of the classes of certificates. The directing certificateholder will be controlled by the controlling class certificateholders.
The controlling class certificateholders and the holders of the companion loans or securities backed by such companion loans may have interests in conflict with those of the other certificateholders. As a result, it is possible that the directing certificateholder on behalf of the controlling class certificateholders (for so long as a control termination event does not exist and other than with respect to any excluded loan) or the directing certificateholder (which term as used herein will include any equivalent entity or any representative thereof) under the pooling and servicing agreement governing the servicing of a non-serviced whole loan may direct the special servicer or the special servicer under such pooling and servicing agreement relating to the other securitization transaction, as the case may be, to take actions that conflict with the interests of holders of certain classes of the certificates. Set forth in the following table is the identity of the initial directing certificateholder for eachpari passu whole loan, the expected securitization trust holding the controlling note in such whole loan and the pooling and servicing agreement under which it is expected to be serviced.
Whole Loan | Pooling/Trust and Servicing | Controlling Noteholder | Directing Certificateholder(1) | |||
| 10 Hudson Yards | Hudson Yards 2016-10HY(2) | Hudson Yards 2016-10HY(2) | N/A | |||
| Westfield San Francisco Centre | DBJPM 2016-SFC | DBJPM 2016-SFC | Prima Capital Advisors LLC | |||
| Prudential Plaza | COMM 2015-CCRE26 | COMM 2015-CCRE26 | Seer Capital Partners Master Fund L.P. | |||
| U-Haul AREC Portfolio | CD 2016-CD1 | CD 2016-CD1 | RREF III Debt AIV, LP | |||
| Birch Run Premium Outlets | COMM 2016-DC2(3) | German American Capital Corporation(3) | Seer Capital Partners Master Fund L.P.(3) | |||
| Gas Company Tower & World Trade Center Parking Garage | COMM 2016-GCT | COMM 2016-GCT | H/2 Capital Partners | |||
| Vertex Pharmaceuticals HQ(4) | WFCM 2016-BNK1(4) | WFCM 2016-BNK1(4) | RREF III Debt AIV, LP(4) | |||
| 401 South State Street | CGCMT 2016-P4 | CGCMT 2016-P4 | Eightfold Real Estate Capital Fund IV, L.P. |
| (1) | The related transaction documents may provide that the directing certificateholder may either be the entity specified or an affiliate thereof. |
| (2) | The initial controlling note holder of the 10 Hudson Yards whole loan is German American Capital Corporation, as holder of the related controlling companion loan. The related controlling companion loan is expected to be contributed to the Hudson Yards 2016-10HY transaction prior to the closing date for this securitization transaction. Accordingly, the 10 Hudson Yards whole loan is expected to be (and information presented in the foregoing table is based on the assumption that the 10 Hudson Yards whole loan will be) securitized, serviced and administered pursuant to the trust and servicing agreement governing the Hudson Yards 2016-10HY transaction. |
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| (3) | The Birch Run Premium Outlets whole loan is being serviced by the master servicer and special servicer pursuant to the pooling and servicing agreement governing the COMM 2016-DC2 transaction. From and after the date on which the Birch Run Premium Outlets companion loan identified as Note A-3 is securitized, it is anticipated that the Birch Run Premium Outlets whole loan will be serviced under, and by the master servicer designated in the pooling and servicing agreement entered into in connection with such securitization. |
| (4) | The initial controlling note holder of the Vertex Pharmaceuticals HQ whole loan is Morgan Stanley Bank, N.A., as holder of the related controlling companion loan. The related controlling companion loan, which is evidenced by Note A-1, is expected to be contributed to the WFCM 2016-BNK1 transaction prior to the closing date for this securitization transaction. Accordingly, the Vertex Pharmaceuticals HQ whole loan is expected to be (and information presented in the foregoing table is based on the assumption that the Vertex Pharmaceuticals HQ whole loan will be) securitized, serviced and administered pursuant to the pooling and servicing agreement governing the WFCM 2016-BNK1 transaction. |
The special servicer, upon non-binding consultation with a serviced companion loan holder or its representative, may take actions with respect to the related serviced whole loan that could adversely affect the holders of some or all of the classes of certificates, to the extent described under “Description of the Mortgage Pool—The Whole Loans—U-Haul AREC Portfolio Whole Loan”. In connection with thepari passu whole loans serviced under the pooling and servicing agreement for this securitization, the serviced companion loan holders do not have any duties to the holders of any class of certificates, and they may have interests in conflict with those of the certificateholders. As a result, it is possible that a serviced companion loan holder (solely with respect to the related serviced whole loan) may advise the special servicer to take actions that conflict with the interests of holders of certain classes of the certificates. However, the special servicer is not permitted to take actions that are prohibited by law or violate the servicing standard or the terms of the mortgage loan documents. In addition, except as limited by certain conditions described under“Pooling and Servicing Agreement—Termination of Servicer and Special Servicer for Cause—Servicer Termination Events”, the special servicer may be replaced by the directing certificateholder for cause at any time and without cause (for so long as a control termination event does not exist and other than with respect to any excluded loan). See “Pooling and Servicing Agreement—The Directing Certificateholder” and“—Termination of Servicer and Special Servicer for Cause—Servicer Termination Events”.
Similarly, the applicable controlling class related to the securitization trust indicated in the chart above as the controlling noteholder (or, after the securitization date for the Birch Run Premium Outlets controlling companion loan, the securitization trust for the related controlling companion loan) has certain consent and/or consultation rights with respect to the non-serviced mortgage loans under the related pooling and servicing agreement governing the servicing of that related non-serviced whole loan and have similar conflicts of interest with the holders of other certificates backed by the companion loans. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
The directing certificateholder and its affiliates (and the directing certificateholder under the pooling and servicing agreement governing the servicing of a non-serviced whole loan and their respective affiliates) may have interests that are in conflict with those of certain certificateholders, especially if the applicable directing certificateholder or any of its affiliates holds certificates or companion loan securities, or has financial interests in or other financial dealings (as lender or otherwise) with a borrower or an affiliate of a borrower. In order to minimize the effect of certain of these conflicts of interest, for so long as any borrower party is the directing certificateholder or the holder of the majority of the controlling class (any such mortgage loan referred to in this prospectus as an “excluded loan”), the directing certificateholder will not have consent or consultation rights solely with respect to the related excluded loan (however, the directing certificateholder will be provided certain notices and certain information relating to such excluded loan as described in the pooling and servicing agreement). In addition, for so long as any borrower party is the directing certificateholder or a controlling class certificateholder, as applicable, the directing certificateholder or such controlling class certificateholder, as applicable, will not be given access to any excluded information solely relating to the related excluded loan and/or the related mortgaged properties pursuant to the terms of the pooling and servicing agreement. Notwithstanding those restrictions, there can be no assurance that the directing certificateholder or any controlling class certificateholder will not obtain sensitive information related to the strategy of any contemplated workout or liquidation related to an excluded loan or otherwise seek to exert its influence over the special servicer in the event an excluded loan becomes subject to a workout or liquidation. See “Description of the Certificates—Reports to Certificateholders; Certain Available Information” in this prospectus. Each of these relationships may create a conflict of interest.
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Rialto Capital Advisors, LLC, the expected special servicer for this transaction, is an affiliate of (a) the entity or entities that is committed to purchasing the Class X-D, Class X-E, Class X-F, Class E, Class F, Class G and Class V certificates and (b) RREF III Debt AIV, LP or its affiliate, which is expected to be appointed as the initial directing certificateholder with respect to each mortgage loan (other than any non-serviced mortgage loan or any excluded special servicer loan). Rialto Capital Advisors, LLC is expected to act as the special servicer and it or an affiliate assisted RREF III Debt AIV, LP and/or one or more of its affiliates with its due diligence of the mortgage loans prior to the closing date. In addition, Rialto Capital Advisors, LLC is an affiliate of the entity that is expected to be the initial controlling class certificateholder and the initial directing certificateholder under the pooling and servicing agreement governing the WFCM 2016-BNK1 transaction, which is expected to govern the servicing and administration of the Vertex Pharmaceuticals HQ whole loan.
The special servicer, in connection with obtaining the consent of, or upon consultation with, the directing certificateholder or a serviced companion loan holder or its representative, may take actions with respect to the related serviced whole loan that could adversely affect the holders of some or all of the classes of certificates, to the extent described under “Description of the Mortgage Pool—The Whole Loans—U-Haul AREC Portfolio Whole Loan”. In connection with the serviced whole loan, the serviced companion loan holder does not have any duties to the holders of any class of certificates, and it may have interests in conflict with those of the certificateholders. As a result, it is possible that the serviced companion loan holder may advise the applicable special servicer to take actions with respect to the related serviced whole loan that conflict with the interests of holders of certain classes of the certificates.
Potential Conflicts of Interest in the Selection of the Underlying Mortgage Loans
The anticipated initial investor in the Class E, Class F, Class G and Class V certificates, which is referred to in this prospectus as the “B-piece buyer” (see “Pooling and Servicing Agreement—The Directing Certificateholder—General”), was given the opportunity by the sponsors to perform due diligence on the mortgage loans originally identified by the sponsors for inclusion in the issuing entity, and to request the removal, re-sizing, decrease in the principal balance of the mortgage loan, reduction of the time during which the loan pays interest-only, increase in the amount of required reserves or change in the expected repayment dates or other features of some or all of the mortgage loans. The mortgage pool as originally proposed by the sponsors was adjusted based on certain of these requests. In addition, the B-piece buyer received or may receive price adjustments or cost mitigation arrangements in connection with accepting certain mortgage loans in the mortgage pool.
We cannot assure you that you or another investor would have made the same requests to modify the original pool as the B-piece buyer or that the final pool as influenced by the B-piece buyer’s feedback will not adversely affect the performance of your certificates and benefit the performance of the B-piece buyer’s certificates. Because of the differing subordination levels, the B-piece buyer has interests that may, in some circumstances, differ from those of purchasers of other classes of certificates, and may desire a portfolio composition that benefits the B-piece buyer but that does not benefit other investors. In addition, the B-piece buyer may enter into hedging or other transactions or otherwise have business objectives that also could cause its interests with respect to the mortgage pool to diverge from those of other purchasers of the certificates. The B-piece buyer performed due diligence solely for its own benefit and has no liability to any person or entity for conducting its due diligence. The B-piece buyer is not required to take into account the interests of any other investor in the certificates in exercising remedies or voting or other rights in its capacity as owner of its certificates or in making requests or recommendations to the sponsors as to the selection of the mortgage loans and the establishment of other transaction terms. Investors are not entitled to rely on in any way the B-piece buyer’s acceptance of a mortgage loan. The B-piece buyer’s acceptance of a mortgage loan does not constitute, and may not be construed as, an endorsement of such mortgage loan, the underwriting for such mortgage loan or the originator of such mortgage loan.
The B-piece buyer will have no liability to any certificateholder for any actions taken by it as described in the preceding two paragraphs.
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The B-piece buyer, or an affiliate, will constitute the initial directing certificateholder. The directing certificateholder will have certain rights to direct and consult with the special servicer. In addition, the directing certificateholder will generally have certain consultation rights with regard to a non-serviced mortgage loan under the pooling and servicing agreement governing the servicing of such non-serviced whole loan and the related intercreditor agreement. See “Pooling and Servicing Agreement—The Directing Certificateholder” and “Description of the Mortgage Pool—The Whole Loans—10 Hudson Yards Whole Loan—Control and Consultation”,“—Westfield San Francisco Centre Whole Loan—Control and Consultation”, “—Prudential Plaza Whole Loan—Consultation and Control”, “—Birch Run Premium Outlets Whole Loan—Consultation and Control”, “—Gas Company Tower & World Trade Center Parking Garage Whole Loan—Control and Consultation”, “—Vertex Pharmaceuticals HQ Whole Loan—Consultation and Control” and “—401 South State Street Whole Loan—Consultation and Control”.
Rialto Capital Advisors, LLC, the expected special servicer for this transaction, is an affiliate of (a) the entity or entities that is committed to purchasing the Class X-D, Class X-E, Class X-F, Class E, Class F, Class G and Class V certificates and (b) RREF III Debt AIV, LP or its affiliate, which is expected to be appointed as the initial directing certificateholder with respect to each mortgage loan (other than any non-serviced mortgage loan or any excluded special servicer loan). Rialto Capital Advisors, LLC is expected to act as the special servicer and it or an affiliate assisted RREF III Debt AIV, LP and/or one or more of its affiliates with its due diligence of the mortgage loans prior to the closing date. In addition, Rialto Capital Advisors, LLC is an affiliate of the entity that is expected to be the initial controlling class certificateholder and the initial directing certificateholder under the pooling and servicing agreement governing the WFCM 2016-BNK1 transaction, which is expected to govern the servicing and administration of the Vertex Pharmaceuticals HQ whole loan.
Because the incentives and actions of the B-piece buyers may, in some circumstances, differ from or be adverse to those of purchasers of the offered certificates, you are advised and encouraged to make your own investment decision based on a careful review of the information set forth in this prospectus and your own view of the mortgage pool.
Conflicts of Interest May Occur as a Result of the Rights of the Applicable Directing Certificateholder To Terminate the Special Servicer of the Applicable Whole Loan
With respect to each whole loan, the directing certificateholder exercising control rights over that whole loan (or, with respect to the Birch Run Premium Outlets whole loan, the holder of the related controlling companion loan) will be entitled, under certain circumstances, to remove the special servicer under the applicable pooling and servicing agreement governing the servicing of such whole loan and, in such circumstances, appoint a successor special servicer for such whole loan (or have certain consent rights with respect to such removal or replacement). The party 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, that party does not have any duties to the holders of any class of certificates, may act solely in its own interests, and will have no liability to any certificateholders for having done so. No certificateholder may take any action against the directing certificateholder or, with respect to the Birch Run Premium Outlets whole loan, the holder of the related controlling companion loan, under the pooling and servicing agreement for this securitization or under any pooling and servicing agreement governing the servicing of a non-serviced whole loan, or against any other parties for having acted solely in their respective interests. See “Description of the Mortgage Pool—The Whole Loans” for a description of these rights to terminate the special servicer.
Other Potential Conflicts of Interest May Affect Your Investment
The managers of the mortgaged properties and the borrowers may experience conflicts in the management and/or ownership of the mortgaged properties because:
| · | a substantial number of the mortgaged properties are managed by property managers affiliated with the respective borrowers; |
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| · | these property managers also may manage and/or franchise additional properties, including properties that may compete with the mortgaged properties; and |
| · | affiliates of the managers and/or the borrowers, or the managers and/or the borrowers themselves, also may own other properties, including competing properties. |
None of the borrowers, property managers or any of their affiliates or any employees of the foregoing has any duty to favor the leasing of space in the mortgaged properties over the leasing of space in other properties, one or more of which may be adjacent to or near the mortgaged properties.
Each of the foregoing relationships should be considered carefully by you before you invest in any certificates.
Other Risks Relating to the Certificates
The Certificates Are Limited Obligations
The certificates, when issued, will only represent ownership interests in the issuing entity. The certificates will not represent an interest in or obligation of, and will not be guaranteed by, the sponsors, the depositor, or any other person. The primary assets of the issuing entity will be the mortgage loans, and distributions on any class of certificates will depend solely on the amount and timing of payments and other collections in respect of the mortgage loans. We cannot assure you that the cash flow from the mortgaged properties and the proceeds of any sale or refinancing of the mortgaged properties will be sufficient to pay the principal of, and interest on, the mortgage loans or to distribute in full the amounts of interest and principal to which the certificateholders will be entitled. See “Description of the Certificates—General”.
The Certificates May Have Limited Liquidity and the Market Value of the Certificates May Decline
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. The underwriters have no obligation to make a market in the offered certificates. We cannot assure you that an active secondary market for the certificates will develop. Additionally, one or more investors may purchase substantial portions of one or more classes of certificates. Accordingly, you may not have an active or liquid secondary market for your certificates.
The market value of the certificates will also be influenced by the supply of and demand for CMBS generally. A number of factors will affect investors’ demand for CMBS, including:
| · | the availability of alternative investments that offer higher yields or are perceived as being a better credit risk than CMBS, or as having a less volatile market value or being more liquid than CMBS; |
| · | legal and other restrictions that prohibit a particular entity from investing in CMBS or limit the amount or types of CMBS that it may acquire or require it to maintain increased capital or reserves as a result of its investment in CMBS; |
| · | increased regulatory compliance burdens imposed on CMBS or securitizations generally, or on classes of securitizers, that may make securitization a less attractive financing option for commercial mortgage loans; and |
| · | investors’ perceptions of commercial real estate lending or CMBS, which may be adversely affected by, among other things, a decline in real estate values or an increase in defaults and foreclosures on commercial mortgage loans. |
We cannot assure you that your certificates will not decline in value.
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Legal and Regulatory Provisions Affecting Investors Could Adversely Affect the Liquidity of the Certificates
We make no representation as to the proper characterization of the certificates for legal investment, financial institution regulatory, financial reporting or other purposes, as to the ability of particular investors to purchase the certificates under applicable legal investment or other restrictions or as to the consequences of an investment in the certificates for such purposes or under such restrictions. Changes in federal banking and securities laws and other laws and regulations may have an adverse effect on issuers, investors or other participants in the asset-backed securities markets including the CMBS market. While the general effects of such changes are uncertain, regulatory or legislative provisions applicable to certain investors may have the effect of limiting or restricting their ability to hold or acquire CMBS, which in turn may adversely affect the ability of investors in the certificates who are not subject to those provisions to resell their certificates in the secondary market. For example:
| · | Investors should be aware of the risk retention and due diligence requirements in Europe (the“EU Risk Retention and Due Diligence Requirements”) which currently apply, or are expected to apply in the future, in respect of various types of EU regulated investors including credit institutions, authorized alternative investment fund managers, investment firms, insurance and reinsurance undertakings and UCITS funds. Amongst other things, such requirements restrict an investor who is subject to the EU Risk Retention and Due Diligence Requirements from investing in securitizations unless: (i) the originator, sponsor or original lender in respect of the relevant securitization has explicitly disclosed that it will retain, on an on-going basis, a net economic interest of not less than five per cent. in respect of certain specified credit risk tranches or securitized exposures; and (ii) such investor is able to demonstrate that they have undertaken certain due diligence in respect of various matters including but not limited to its note position, the underlying assets and (in the case of certain types of investors) the relevant sponsor or originator. Failure to comply with one or more of the requirements may result in various penalties including, in the case of those investors subject to regulatory capital requirements, the imposition of a punitive capital charge on the certificates acquired by the relevant investor. |
On September 30, 2015, the European Commission published a proposal to amend the EU Risk Retention and Due Diligence Requirements (the “Draft CRR Amendment Regulation”) and a proposed regulation relating to a European framework for simple, transparent and standardized securitization (such proposed regulation, including any implementing regulation, technical standards and official guidelines related thereto, the “Securitization Framework”, and together with the Draft CRR Amendment Regulation, the “Securitization Regulation”) which would, amongst other things, re-cast the EU risk retention rules as part of wider changes to establish a “Capital Markets Union” in Europe. The Presidency of the Council of Ministers of the European Union has also published compromise proposals concerning the Securitization Regulation. The Securitization Regulation will need to be considered, finalized and adopted by the European Parliament and Council of Ministers. It is unclear at this time when the Securitization Regulation will become effective. Investors should be aware that there are material differences between the current EU Risk Retention and Due Diligence Requirements and the Securitization Regulation. The Securitization Regulation may also enter into force in a form that differs from the published proposals and drafts.
None of the sponsors, the depositor or the issuing entity intends to retain a material net economic interest in the securitization constituted by the issue of the certificates in accordance with the EU Risk Retention and Due Diligence Requirements or to take any other action which may be required by EEA-regulated investors for the purposes of their compliance with the EU Risk Retention and Due Diligence Requirements. Consequently, the certificates are not a suitable investment for EEA-credit institutions, investment firms or the other types of EEA-regulated investors mentioned above. As a result, the price and liquidity of the certificates in the secondary market may be adversely affected. EEA-regulated investors are encouraged to consult with their own investment and legal advisors regarding the suitability of the certificates for investment.
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| · | Recent changes in federal banking and securities laws, including those resulting from the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) enacted in the United States, may have an adverse effect on issuers, investors or other participants in the asset-backed securities markets. In particular, new capital regulations were issued by the U.S. banking regulators in July 2013; these regulations implement the increased capital requirements established under the Basel Accord and are being phased in over time. These new capital regulations eliminate reliance on credit ratings and otherwise alter, and in most cases increase, the capital requirements imposed on depository institutions and their holding companies, including with respect to ownership of asset-backed securities such as CMBS. Further changes in capital requirements have been announced by the Basel Committee on Banking Supervision and it is uncertain when such changes will be implemented in the United States. When fully implemented in the United States, these changes may have an adverse effect with respect to investments in asset-backed securities, including CMBS. As a result of these regulations, investments in CMBS such as the certificates by financial institutions subject to bank capital regulations may result in greater capital charges to these financial institutions and these new regulations may otherwise adversely affect the treatment of CMBS for their regulatory capital purposes. |
| · | Regulations were adopted on December 10, 2013 to implement Section 619 of the Dodd-Frank Act (such statutory provision together with such implementing regulations, the “Volcker Rule”). The Volcker Rule generally prohibits “banking entities” (which is broadly defined to include U.S. banks and bank holding companies and many non-U.S. banking entities, together with their respective subsidiaries and other affiliates) from (i) engaging in proprietary trading, (ii) acquiring or retaining an ownership interest in or sponsoring a “covered fund” and (iii) entering into certain relationships with such funds. The Volcker Rule became effective on July 21, 2012, and final regulations implementing the Volcker Rule were adopted on December 10, 2013. Banking entities are required to be in conformance with the Volcker Rule by July 21, 2015, although ownership interests or sponsorships in covered funds in existence prior to December 31, 2013 are not required to be brought into conformance until July 21, 2017 (with the possibility of an additional five-year extension for certain illiquid funds). Prior to the applicable conformance date expiration, banking entities must make good faith efforts to conform their activities and investments to the Volcker Rule. Under the Volcker Rule, unless otherwise jointly determined otherwise by specified federal regulators, a “covered fund” does not include an issuer that may rely on an exclusion or exemption from the definition of “investment company” under the Investment Company Act other than the exclusions contained in Section 3(c)(1) and Section 3(c)(7) of the Investment Company Act. |
The issuing entity will be relying on an exclusion or exemption under the Investment Company Act contained in Section 3(c)(5) of the Investment Company Act or Rule 3a-7 under the Investment Company Act, although there may be additional exclusions or exemptions available to the issuing entity. Accordingly, the issuing entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule. The general effects of the Volcker Rule remain uncertain. Any prospective investor in the certificates, including a U.S. or foreign bank or a subsidiary or other bank affiliate, should consult its own legal advisors regarding such matters and other effects of the Volcker Rule.
| · | The Financial Accounting Standards Board has adopted changes to the accounting standards for structured products. These changes, or any future changes, may affect the accounting for entities such as the issuing entity, could under certain circumstances require an investor or its owner generally to consolidate the assets of the issuing entity in its financial statements and record third parties’ investments in the issuing entity as liabilities of that investor or owner or could otherwise adversely affect the manner in which the investor or its owner must report an investment in CMBS for financial reporting purposes. |
| · | For purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended, no class of certificates will constitute “mortgage related securities”. |
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Further changes in federal banking and securities laws and other laws and regulations may have an adverse effect on issuers, investors, or other participants in the asset-backed securities markets (including the CMBS market) and may have adverse effect on the liquidity, market value and regulatory characteristics of the certificates.
Accordingly, all 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, accounting and other advisors in determining whether, and to what extent, the certificates will constitute legal investments for them or are subject to investment or other restrictions, unfavorable accounting treatment, capital charges or reserve requirements. See “Legal Investment” in this prospectus.
Nationally Recognized Statistical Rating Organizations May Assign Different Ratings to the Certificates; Ratings of the Certificates Reflect Only the Views of the Applicable Rating Agencies as of the Dates Such Ratings Were Issued; Ratings May Affect ERISA Eligibility; Ratings May Be Downgraded
Ratings assigned to the offered certificates by the nationally recognized statistical rating organizations engaged by the depositor:
| · | are based on, among other things, the economic characteristics of the mortgaged properties and other relevant structural features of the transaction; |
| · | do not represent any assessment of the yield to maturity that a certificateholder may experience; |
| · | reflect only the views of the respective rating agencies as of the date such ratings were issued; |
| · | may be reviewed, revised, suspended, downgraded, qualified or withdrawn entirely by the applicable rating agency as a result of changes in or unavailability of information; |
| · | may have been determined based on criteria that included an analysis of historical mortgage loan data that may not reflect future experience; |
| · | may reflect assumptions by such rating agencies regarding performance of the mortgage loans that are not accurate, as evidenced by the significant amount of downgrades, qualifications and withdrawals of ratings assigned to previously issued CMBS by the hired rating agencies and other nationally recognized statistical rating organizations during the recent credit crisis; and |
| · | do not consider to what extent the offered certificates will be subject to prepayment or that the outstanding principal amount of any class of offered certificates will be prepaid. |
In addition, the rating of any class of offered certificates below an investment grade rating by any nationally recognized statistical rating organization, whether upon initial issuance of such class of certificates or as a result of a ratings downgrade, could adversely affect the ability of an employee benefit plan or other investor to purchase or retain those offered certificates. See “Certain ERISA Considerations” and “Legal Investment”.
Nationally recognized statistical rating organizations that were not engaged by the depositor to rate the offered certificates may nevertheless issue unsolicited credit ratings on one or more classes of offered certificates, relying on information they receive pursuant to Rule 17g-5 under the Securities Exchange Act of 1934, as amended, or otherwise. If any such unsolicited ratings are issued, we cannot assure you that they will not be different from any ratings assigned by a rating agency engaged by the depositor. The issuance of unsolicited ratings by any nationally recognized statistical rating organization on a class of the offered certificates that are lower than ratings assigned by a rating agency engaged by the depositor may adversely impact the liquidity, market value and regulatory characteristics of that class.
As part of the process of obtaining ratings for the offered certificates, the depositor had initial discussions with and submitted certain materials to 6 nationally recognized statistical rating organizations.
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Based on preliminary feedback from those nationally recognized statistical rating organizations at that time, the depositor selected 3 of those nationally recognized statistical rating organizations to rate certain classes of the certificates and not the other nationally recognized statistical rating organizations, due in part to their initial subordination levels for the various classes of the certificates. If the depositor had selected the other nationally recognized statistical rating organizations to rate the certificates, we cannot assure you that the ratings such other nationally recognized statistical rating organizations would have assigned to the certificates would not have been lower than the ratings assigned by the nationally recognized statistical rating organizations engaged by the depositor. Further, in the case of one nationally recognized statistical rating organization engaged by the depositor, the depositor only requested ratings for certain classes of rated certificates, due in part to the initial subordination levels provided by such nationally recognized statistical rating organization for the classes of certificates. If the depositor had selected such nationally recognized statistical rating organization to rate those other classes of rated certificates not rated by it, its ratings of those other certificates may have been different, and potentially lower, than those ratings ultimately assigned to those certificates by the other nationally recognized statistical rating organizations engaged to rate such certificates. In addition, the decision not to engage one or more other rating agencies in the rating of certain classes of certificates to be issued in connection with this transaction may negatively impact the liquidity, market value and regulatory characteristics of those classes of certificates. Although unsolicited ratings may be issued by any nationally recognized statistical rating organization, a nationally recognized statistical rating organization might be more likely to issue an unsolicited rating if it was not selected after having provided preliminary feedback to the depositor. Neither the depositor nor any other person or entity will have any duty to notify you if any other nationally recognized statistical rating organization issues, or delivers notice of its intention to issue, consolidated ratings on one or more classes of certificates after the date of this prospectus.
Furthermore, the Securities and Exchange Commission may determine that any or all of the rating agencies engaged by the depositor to rate the certificates no longer qualifies as a nationally recognized statistical rating organization, or is no longer qualified to rate the certificates or may no longer rate similar securities for a limited period as a result of an enforcement action, and that determination may also have an adverse effect on the liquidity, market value and regulatory characteristics of the offered certificates. To the extent that the provisions of any mortgage loan or the pooling and servicing agreement condition any action, event or circumstance on the delivery of a rating agency confirmation, the pooling and servicing agreement will require delivery or deemed delivery of a rating agency confirmation only from the rating agencies engaged by the depositor to rate the certificates or, in the case of a serviced whole loan, any related companion loan securities.
We are not obligated to maintain any particular rating with respect to the certificates, and the ratings initially assigned to the certificates by any or all of the rating agencies engaged by the depositor to rate the certificates could change adversely as a result of changes affecting, among other things, the mortgage loans, the mortgaged properties, the parties to the pooling and servicing agreement, or as a result of changes to ratings criteria employed by any or all of the rating agencies engaged by the depositor to rate the certificates. Although these changes would not necessarily be or result from an event of default on any mortgage loan, any adverse change to the ratings of the offered certificates would likely have an adverse effect on the market value, liquidity and/or regulatory characteristics of those certificates.
Further, certain actions provided for in loan agreements may require a rating agency confirmation be obtained from the rating agencies engaged by the depositor to rate the certificates and, in the case of a serviced whole loan, any companion loan securities as a precondition to taking such action. In certain circumstances, this condition may be deemed to have been met or waived without such a rating agency confirmation being obtained. In the event such an action is taken without a rating agency confirmation being obtained, we cannot assure you that the applicable rating agency will not downgrade, qualify or withdraw its ratings as a result of the taking of such action. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—“Due-On-Sale” and “Due-On-Encumbrance” Provisions”, “Pooling and Servicing Agreement—Rating Agency Confirmations” and “Ratings” for additional considerations regarding the ratings, including a description of the process of obtaining confirmations of ratings for the offered certificates.
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Your Yield May Be Affected by Defaults, Prepayments and Other Factors
General. The yield to maturity on each class of offered certificates will depend in part on the following:
| · | the purchase price for the certificates; |
| · | the rate and timing of principal payments on the mortgage loans (both voluntary and involuntary), and the allocation of principal prepayments to the respective classes of offered certificates with certificate balances; and |
| · | the allocation of shortfalls and losses on the mortgage loans to the respective classes of offered certificates. |
For this purpose, principal payments include voluntary and involuntary prepayments, such as prepayments resulting from the application of loan reserves, property releases, casualty or condemnation, defaults and liquidations as well as principal payments resulting from repurchases due to material breaches of representations and warranties or material document defects or purchases by a companion loan holder or mezzanine lender (if any) pursuant to a purchase option or sales of defaulted mortgage loans.
Any changes in the weighted average lives of your certificates may adversely affect your yield. 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.
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.
In addition, the extent to which prepayments on the mortgage loans in the issuing entity ultimately affect the weighted average life of the certificates will depend on the terms of the certificates, more particularly:
| · | a class of certificates that entitles the holders of those certificates to a disproportionately larger share of the prepayments on the mortgage loans increases the “call risk” or the likelihood of early retirement of that class if the rate of prepayment is relatively fast; and |
| · | a class of certificates that entitles the holders of the certificates to a disproportionately smaller share of the prepayments on the mortgage loans increases the likelihood of “extension risk” or an extended average life of that class if the rate of prepayment is relatively slow. |
The Timing of Prepayments and Repurchases May Change Your Anticipated Yield. The rate at which voluntary prepayments occur on the mortgage loans will be affected by a variety of factors, including:
| · | the terms of the mortgage loans, including, the length of any prepayment lockout period and the applicable yield maintenance charges and prepayment premiums and the extent to which the related mortgage loan terms may be practically enforced; |
| · | the level of prevailing interest rates; |
| · | the availability of credit for commercial real estate; |
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| · | the master servicer’s or special servicer’s ability to enforce yield maintenance charges and prepayment premiums; |
| · | the failure to meet certain requirements for the release of escrows; |
| · | the occurrence of casualties or natural disasters; and |
| · | economic, demographic, tax, legal or other factors. |
Although a yield maintenance charge or other prepayment premium provision of a mortgage loan is intended to create an economic disincentive for a borrower to prepay voluntarily a mortgage loan, we cannot assure you that mortgage loans that have such provisions will not prepay.
The extent to which the master servicer or the special servicer, if any, forecloses upon, takes title to and disposes of any mortgaged property related to a mortgage loan or sells defaulted mortgage loans will affect the weighted average lives of your certificates. If the master servicer or the special servicer, if any, forecloses upon a significant number of the related mortgage loans, and depending upon the amount and timing of recoveries from the related mortgaged properties or sells defaulted mortgage loans, your certificates may have a shorter weighted average life.
Delays in liquidations of defaulted mortgage loans and modifications extending the maturity of mortgage loans will tend to delay the payment of principal on the mortgage loans. The ability of the related borrower to make any required balloon payment typically will depend upon its ability either to refinance the mortgage loan or to sell the related mortgaged property. A significant number of the mortgage loans require balloon payments at maturity or provide incentives for the borrower to repay by the related anticipated repayment date and there is a risk that a number of those mortgage loans may default at maturity, or that the master servicer or the special servicer, if any, may extend the maturity of a number of those mortgage loans in connection with workouts. We cannot assure you as to the borrowers’ abilities to make mortgage loan payments on a full and timely basis, including any balloon payments at maturity or anticipated repayment date. Bankruptcy of the borrower or adverse conditions in the market where the mortgaged property is located may, among other things, delay the recovery of proceeds in the case of defaults. Losses on the mortgage loans due to uninsured risks or insufficient hazard insurance proceeds may create shortfalls in distributions to certificateholders. Any required indemnification of a party to the pooling and servicing agreement in connection with legal actions relating to the issuing entity, the related agreements or the certificates may also result in shortfalls.
See “—Risks Relating to the Mortgage Loans—Risks Relating to Enforceability of Yield Maintenance Charges, Prepayment Premiums or Defeasance Provisions” above and “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—Prepayment Protections and Certain Involuntary Prepayments”.
In addition, if a sponsor repurchases a mortgage loan from the issuing entity due to a material breach of one or more of its representations or warranties or a material document defect, 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 or other prepayment premium would be payable. Additionally, any mezzanine lender (if any) may have the option to purchase the related mortgage loan after certain defaults, and the purchase price may not include any yield maintenance charges or prepayment premiums. As a result of such a repurchase or purchase, investors in the Class X-A, Class X-B, Class X-C, Class X-D, Class X-E and Class X-F certificates and any other certificates purchased at a premium might not fully recoup their initial investment. A repurchase, a prepayment 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 Loan Purchase Agreements” and “Pooling and Servicing Agreement—Realization Upon Mortgage Loans”.
The certificates with notional amounts will not be entitled to distributions of principal but instead will accrue interest on their respective notional amounts. Because the notional amount of the certificates indicated in the following table is based upon all or a portion of the outstanding certificate balances of the
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related class of certificates, the yield to maturity on the indicated certificates will be extremely sensitive to the rate and timing of prepayments of principal, liquidations and principal losses on the mortgage loans to the extent allocated to the related certificates.
Interest-Only | Underlying Class or Classes | |
| Class X-A | Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class A-M | |
| Class X-B | Class B, Class C | |
| Class X-C | Class D | |
| Class X-D | Class E | |
| Class X-E | Class F | |
| Class X-F | Class G |
A rapid rate of principal prepayments, liquidations and/or principal losses on the mortgage loans could result in the failure to recoup the initial investment in the Class X-A, Class X-B, Class X-C, Class X-D, Class X-E and/or Class X-F certificates. Investors in the Class X-A, Class X-B, Class X-C, Class X-D, Class X-E and Class X-F certificates should fully consider the associated risks, including the risk that an extremely rapid rate of amortization, prepayment or other liquidation of the mortgage loans could result in the failure of such investors to recoup fully their initial investments. The yield to maturity of the certificates with notional amounts may be adversely affected by the prepayment of mortgage loans with higher net mortgage loan rates. See “Yield and Maturity Considerations—Yield on the Certificates with Notional Amounts”.
Losses and Shortfalls May Change Your Anticipated Yield. If losses on the mortgage loans exceed the aggregate certificate balance 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 balance of that class). 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.
For example, certain shortfalls in interest as a result of involuntary prepayments may reduce the funds available to make payments on your certificates. In addition, if the master servicer, the special servicer or the trustee reimburses itself (or a master servicer, special servicer, trustee or other party to a pooling and servicing agreement governing the servicing of the non-serviced whole loan) out of general collections on the mortgage loans included in the issuing entity for any advance that it (or any such other party) 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 issuing entity, that reimbursement will reduce the amount of principal available to be distributed on the certificates and will result in a reduction of the certificate balance (or notional amount) of a class of certificates. See “Description of the Certificates—Distributions”. Likewise, if the master 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 (other than the Class R certificates and the certificates with notional amounts) and extending the weighted average lives of the offered certificates with certificate balances. See “Description of the Certificates—Distributions”.
In addition, to the extent losses are realized on the mortgage loans, first the Class G certificates, then the Class F certificates, then the Class E certificates, then the Class D certificates, then the Class C certificates, then the Class B certificates, then the Class A-M certificates and, thenpro rata, the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, based on their respective certificate balances, will bear such losses up to an amount equal to the respective outstanding certificate balance of that class. A reduction in the certificate balance of the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4 or Class A-M certificates will result in a corresponding reduction in the notional amount of the Class X-A certificates. A reduction in the certificate balance of the Class B or Class C certificates will result in a corresponding reduction in the notional amount of the Class X-B certificates. A reduction in the certificate balance of the Class D certificates will result in a corresponding reduction in
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the notional amount of the Class X-C certificates. A reduction in the certificate balance of the Class E certificates will result in a corresponding reduction in the notional amount of the Class X-D certificates. A reduction in the certificate balance of the Class F certificates will result in a corresponding reduction in the notional amount of the Class X-E certificates. A reduction in the certificate balance of the Class G certificates will result in a corresponding reduction in the notional amount of the Class X-F certificates. We make no representation as to the anticipated rate or timing of prepayments (voluntary or involuntary) or rate, timing or amount of liquidations or losses on the mortgage loans or as to the anticipated yield to maturity of any such offered certificate. See “Yield and Maturity Considerations”.
Risk of Early Termination. The issuing entity is subject to optional termination under certain circumstances. See “Pooling and Servicing Agreement—Termination; Retirement of Certificates”. In the event of this termination, you might receive some principal payments earlier than otherwise expected, which could adversely affect your anticipated yield to maturity.
Your Lack of Control Over the Issuing Entity and the Mortgage Loans Can Impact Your Investment
You Have Limited Voting Rights. Except as described in this prospectus, 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 issuing entity and the mortgage loans. With respect to mortgage loans (other than any mortgage loan that will be serviced under a separate pooling and servicing agreement), those decisions are generally made, subject to the express terms of the pooling and servicing agreement for this transaction, by the master servicer, the special servicer, the trustee or the certificate administrator, as applicable, subject to any rights of the directing certificateholder under the pooling and servicing agreement for this transaction and the rights of the holders of the related companion loans and mezzanine debt under the related intercreditor agreement. With respect to the non-serviced mortgage loans, you will generally not have any right to vote or make decisions with respect the non-serviced mortgage loans, and those decisions will generally be made by the master servicer or the special servicer under the pooling and servicing agreement governing the servicing of the related non-serviced mortgage loan and the related companion loan, subject to the rights of the directing certificateholder appointed under such pooling and servicing agreement. See “Pooling and Servicing Agreement”and “Description of the Mortgage Pool—The Whole Loans”. In particular, with respect to the risks relating to a modification of a mortgage loan, see “—Risks Relating to Modifications of the Mortgage Loans” below.
In certain limited circumstances where certificateholders have the right to vote on matters affecting the issuing entity, in some cases, these votes are by certificateholders taken as a whole and in others the vote is by class. In all cases voting is based on the outstanding certificate balance, which is reduced by realized losses. In certain cases with respect to the termination of the special servicer and the operating advisor, certain voting rights will also be reduced by appraisal reductions, as described below. These limitations on voting could adversely affect your ability to protect your interests with respect to matters voted on by certificateholders. See “Description of the Certificates—Voting Rights”. You will have no rights to vote on any servicing matters related to the mortgage loans that will be serviced under a pooling and servicing agreement governing the servicing of a non-serviced whole loan.
In general, a certificate beneficially owned by the master servicer, the special servicer (including, for the avoidance of doubt, any excluded special servicer), the trustee, the certificate administrator, the depositor, any mortgage loan seller, a borrower party or affiliate of any of such persons will be deemed not to be outstanding and a holder of such certificate will not have the right the vote, subject to certain exceptions, as further described in the definition of “Certificateholder” under “Description of the Certificates—Reports to Certificateholders; Certain Available Information—Certificate Administrator Reports” in this prospectus.
The Rights of the Directing Certificateholder and the Operating Advisor Could Adversely Affect Your Investment. The directing certificateholder will have certain consent and consultation rights with respect to certain matters relating to the mortgage loans (other than a non-serviced mortgage loan or any excluded loan) and the right to replace the special servicer with or without cause, except that if a control termination event (i.e., an event in which the certificate balance of the most senior class of certificates that is eligible to be a controlling class, as reduced by the application of appraisal reductions and realized
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losses, is less than 25% of its initial certificate balance), occurs and is continuing, the directing certificateholder will lose the consent rights and the right to replace the special servicer, and if a consultation termination event (i.e., an event in which the certificate balance of the most senior class of certificates that is eligible to be a controlling class (as reduced by the application of realized losses) is less than 25% of its initial certificate balance) occurs, then the directing certificateholder will lose the consultation rights. See “Pooling and Servicing Agreement—The Directing Certificateholder”.
These actions and decisions with respect to which the directing certificateholder has consent or consultation rights include, among others, certain modifications to the mortgage loans or serviced whole loans, including modifications of monetary terms, foreclosure or comparable conversion of the related mortgaged properties, and certain sales of mortgage loans or REO properties for less than the outstanding principal amount plus accrued interest, fees and expenses. As a result of the exercise of these rights by the directing certificateholder, the special servicer may take actions with respect to a mortgage loan that could adversely affect the interests of investors in one or more classes of offered certificates.
Similarly, with respect to a non-serviced mortgage loan, the special servicer under the pooling and servicing agreement governing the servicing of such non-serviced mortgage loan may, at the direction or upon the advice of the directing certificateholder of the related securitization trust holding the controlling note for the related non-serviced whole loan, take actions with respect to such non-serviced mortgage loan and related companion loan that could adversely affect such non-serviced mortgage loan, and therefore, the holders of some or all of the classes of certificates. The issuing entity (as the holder of the non-controlling notes) will have limited consultation rights with respect to major decisions relating to each non-serviced whole loan and in connection with a sale of a defaulted loan, and such rights will be exercised by the directing certificateholder for this transaction so long as no control termination event has occurred and is continuing and by the special servicer if a control termination event has occurred and is continuing. See “Description of the Mortgage Pool—The Whole Loans” and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
Although the special servicer under the pooling and servicing agreement and the special servicer for a non-serviced mortgage loan are not permitted to take actions which are prohibited by law or violate the servicing standard under the applicable pooling and servicing agreement or the terms of the related loan documents, it is possible that the directing certificateholder (or equivalent entity) under such pooling and servicing agreement may direct or advise, as applicable, the related special servicer to take actions with respect to such mortgage loan that conflict with the interests of the holders of certain classes of the certificates.
You will be acknowledging and agreeing, by your purchase of offered certificates, that the directing certificateholder and the directing certificateholder (or equivalent entity) under the pooling and servicing agreement governing the servicing of each non-serviced mortgage loan:
| (i) | may have special relationships and interests that conflict with those of holders of one or more classes of certificates; |
| (ii) | may act solely in the interests of the holders of the controlling class (or, in the case of a non-serviced mortgage loan, the controlling class of the securitization trust formed under the pooling and servicing agreement governing the servicing of such non-serviced mortgage loan); |
| (iii) | does not have any duties to the holders of any class of certificates other than the controlling class (or, in the case of a non-serviced mortgage loan, the controlling class of the securitization trust formed under the pooling and servicing agreement governing the servicing of such non-serviced mortgage loan); |
| (iv) | may take actions that favor the interests of the holders of the controlling class (or, in the case of a non-serviced mortgage loan, the controlling class of the securitization trust formed under |
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| the pooling and servicing agreement governing the servicing of such non-serviced mortgage loan) over the interests of the holders of one or more other classes of certificates; and |
| (v) | will have no liability whatsoever (other than to a controlling class certificateholder) for having so acted as set forth in clauses (i) – (iv) above, and that no certificateholder may take any action whatsoever against the directing certificateholder or the directing certificateholder under the pooling and servicing agreement governing the servicing of such non-serviced mortgage loan or any of their respective affiliates, directors, officers, employees, shareholders, members, partners, agents or principals for having so acted. |
In addition, if a control termination event has occurred and is continuing, the operating advisor will have certain consultation rights with respect to certain matters relating to the mortgage loans (other than a non-serviced mortgage loan). Further, if a consultation termination event has occurred and is continuing, the operating advisor will have the right to recommend a replacement of a special servicer, as described under “Pooling and Servicing Agreement—The Operating Advisor”. The operating advisor is generally required to act on behalf of the issuing entity and in the best interest of, and for the benefit of, the certificateholders and, with respect to any serviced whole loan for the benefit of the holders of the related companion loan (as a collective whole as if the certificateholders and companion loan holders constituted a single lender). We cannot assure you that any actions taken by the special servicer as a result of a recommendation or consultation by the operating advisor will not adversely affect the interests of investors in one or more classes of certificates. With respect to a non-serviced mortgage loan, the operating advisor appointed under the pooling and servicing agreement governing the servicing of such non-serviced mortgage loan will have similar rights and duties under such pooling and servicing agreement. Further, the operating advisor will generally have no obligations or consultation rights under the pooling and servicing agreement for this transaction with respect to any non-serviced mortgage loan or any related REO Property. There will be no operating advisor under (i) the Hudson Yards 2016-10HY trust and servicing agreement with respect to the 10 Hudson Yards mortgage loan, (ii) the DBJPM 2016-SFC trust and servicing agreement with respect to the Westfield San Francisco Centre mortgage loan and (iii) the COMM 2016-GCT trust and servicing agreement with respect to the Gas Company Tower & World Trade Center Parking Garage mortgage loan. See “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
You Have Limited Rights to Replace the Master Servicer, the Special Servicer, the Trustee, the Certificate Administrator, the Operating Advisor or the Asset Representations Reviewer. In general, the directing certificateholder will have the right to terminate and replace the special servicer with or without cause so long as no control termination event has occurred and is continuing as described in this prospectus. After the occurrence and during the continuance of a control termination event under the pooling and servicing agreement, the special servicer may also be removed in certain circumstances (x) if a request is made by certificateholders evidencing not less than 25% of the voting rights (taking into account the application of appraisal reductions to notionally reduce the respective certificate balances) and (y) upon receipt of approval by (i) certificateholders holding at least 66 2/3% of a quorum of the certificateholders (which is the holders of certificates evidencing at least 50% of the voting rights (taking into account the application of realized losses and the application of appraisal reductions to notionally reduce the respective certificate balances)) or (ii) evidencing more than 50% of each class of “non-reduced certificates” (each class of certificates (other than the Class X-A, Class X-B, Class X-C, Class X-D, Class X-E and Class X-F and Class Rcertificates) outstanding that has not been reduced to less than 25% of its initial certificate balance through the application of appraisal reduction amounts and realized losses). See“Pooling and Servicing Agreement—Replacement of Special Servicer Without Cause”.
The certificateholders will generally have no right to replace and terminate the master servicer, the trustee and the certificate administrator without cause. The vote of the requisite percentage of certificateholders may terminate the operating advisor or the asset representations reviewer without cause. The vote of the requisite percentage of the certificateholders will be required to replace the master servicer, the special servicer, the operating advisor and the asset representations reviewer even for cause, and certain termination events may be waived by the vote of the requisite percentage of the
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certificateholders. The certificateholders will have no right to replace the master servicer or the special servicer of the pooling and servicing agreement relating to a non-serviced mortgage loan. We cannot assure you that your lack of control over the replacement of these parties will not have an adverse impact on your investment.
The Rights of Companion Loan Holders and Mezzanine Debt Could Adversely Affect Your Investment. The holders of apari passucompanion loan relating to the serviced mortgage loans will have certain consultation rights (on a non-binding basis) with respect to major decisions relating to the related whole loan under the related intercreditor agreement. Such companion loan holder and its representative may have interests in conflict with those of the holders of some or all of the classes of certificates, and may advise the special servicer to take actions that conflict with the interests of the holders of certain classes of the certificates. Although any such consultation is non-binding and the special servicer is not obligated to consult with the companion loan holder if required under the servicing standard, we cannot assure you that the exercise of the rights of such companion loan holder will not delay any action to be taken by the special servicer and will not adversely affect your investment.
With respect to mortgage loans that have mezzanine debt, the related mezzanine lender will have the right under certain limited circumstances to (i) cure certain defaults with respect to, and under certain default scenarios, purchase (without payment of any yield maintenance charge or prepayment premium) the related mortgage loan and (ii) so long as no event of default with respect to the related mortgage loan continues after the mezzanine lender’s cure right has expired, approve certain modifications and consent to certain actions to be taken with respect to the related mortgage loan. See “Description of the Mortgage Pool—Mortgage Pool Characteristics” and “—Additional Indebtedness”.
The purchase option that the holder of mezzanine debt holds pursuant to the related intercreditor agreement generally permits such holder to purchase its related defaulted mortgage loan for a purchase price generally equal to the outstanding principal balance of the related defaulted mortgage loan, together with accrued and unpaid interest (exclusive of default interest) on, and unpaid servicing expenses, protective advances and interest on advances related to, such defaulted mortgage loan. However, in the event such holder is not obligated to pay some or all of those fees and additional expenses, including any liquidation fee payable to the special servicer under the terms of the pooling and servicing agreement, then the exercise of such holder’s rights under the intercreditor agreement to purchase the related mortgage loan from the issuing entity may result in a loss to the issuing entity in the amount of those fees and additional expenses. In addition, such holder’s right to cure defaults under the related defaulted mortgage loan could delay the issuing entity’s ability to realize on or otherwise take action with respect to such defaulted mortgage loan.
In addition, with respect to a non-serviced mortgage loan, you will not have any right to vote with respect to any matters relating to the servicing and administration of the non-serviced mortgage loan. See “Description of the Mortgage Pool—The Whole Loans—10 Hudson Yards Whole Loan”, “—Westfield San Francisco Centre Whole Loan”, “—Prudential Plaza Whole Loan”, “—Birch Run Premium Outlets Whole Loan”, “—Gas Company Tower & World Trade Center Parking Garage Whole Loan”, “—Vertex Pharmaceuticals HQ Whole Loan”, “—401 South State Street Whole Loan” and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
You will be acknowledging and agreeing, by your purchase of offered certificates, that the companion loan holders:
| · | may have special relationships and interests that conflict with those of holders of one or more classes of certificates; |
| · | may act solely in its own interests, without regard to your interests; |
| · | do not have any duties to any other person, including the holders of any class of certificates; |
| · | may take actions that favor its interests over the interests of the holders of one or more classes of certificates; and |
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| · | will have no liability whatsoever for having so acted and that no certificateholder may take any action whatsoever against the companion loan holder or its representative or any director, officer, employee, agent or principal of the companion loan holder or its representative for having so acted. |
Risks Relating to Modifications of the Mortgage Loans
As delinquencies or defaults occur, the special servicer and any sub-servicer will be required to utilize an increasing amount of resources to work with borrowers to maximize collections on the mortgage loans serviced by it. This may include modifying the terms of such mortgage loans that are in default or whose default is reasonably foreseeable. At each step in the process of trying to bring a defaulted mortgage loan current or in maximizing proceeds to the issuing entity, the special servicer and any sub-servicer will be required to invest time and resources not otherwise required when collecting payments on performing mortgage loans. Modifications of mortgage loans implemented by the special servicer or any sub-servicer in order to maximize ultimate proceeds of such mortgage loans to issuing entity may have the effect of, among other things, reducing or otherwise changing the mortgage rate, forgiving or forbearing payments of principal, interest or other amounts owed under the mortgage loan, extending the final maturity date of the mortgage loan, capitalizing or deferring delinquent interest and other amounts owed under the mortgage loan, forbearing payment of a portion of the principal balance of the mortgage loan or any combination of these or other modifications.
Any modified mortgage loan may remain in the issuing entity, and the modification may result in a reduction in (or may eliminate) the funds received with respect of such mortgage loan. In particular, any modification to reduce or forgive the amount of interest payable on the mortgage loan will reduce the amount cash flow available to make distributions of interest on the certificates, which will likely impact the most subordinated classes of certificates that suffer the shortfall. To the extent the modification defers principal payments on the mortgage loan (including as a result of an extension of its stated maturity date), certificates entitled to principal distributions will likely be repaid more slowly than anticipated, and if principal payments on the mortgage loan are forgiven, the reduction will cause a write-down of the certificate balances of the certificates in reverse order of seniority. See “Description of the Certificates—Subordination; Allocation of Realized Losses”.
The ability to modify mortgage loans by the special servicer may be limited by several factors. First, if the special servicer has to consider a large number of modifications, operational constraints may affect the ability of the special servicer to adequately address all of the needs of the borrowers. Furthermore, the terms of the related servicing agreement may prohibit the special servicer from taking certain actions in connection with a loan modification, such as an extension of the loan term beyond a specified date such as a specified number of years prior to the rated final distribution date. You should consider the importance of the role of the special servicer in maximizing collections for the transaction and the impediments the special servicer may encounter when servicing delinquent or defaulted mortgage loans. In some cases, failure by a special servicer to timely modify the terms of a defaulted mortgage loan may reduce amounts available for distribution on the certificates in respect of such mortgage loan, and consequently may reduce amounts available for distribution to the related certificates. In addition, even if a loan modification is successfully completed, we cannot assure you that the related borrower will continue to perform under the terms of the modified mortgage loan.
Modifications that are designed to maximize collections in the aggregate may adversely affect a particular class of certificates. The pooling and servicing agreement obligates the special servicer not to consider the interests of individual classes of certificates. You should note that in connection with considering a modification or other type of loss mitigation, the special servicer may incur or bear related out-of-pocket expenses, such as appraisal fees, which would be reimbursed to the special servicer from the transaction as servicing advances and paid from amounts received on the modified loan or from other mortgage loans in the mortgage pool but in each case, prior to distributions being made on the certificates.
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Sponsors May Not Make Required Repurchases or Substitutions of Defective Mortgage Loans or Pay Any Loss of Value Payment Sufficient to Cover All Losses on a Defective Mortgage Loan
Each sponsor is the sole warranting party in respect of the mortgage loans sold by such sponsor to us. Neither we nor any of our affiliates (except German American Capital Corporation, in its capacity as a sponsor) is obligated to repurchase or substitute any mortgage loan or make any payment to compensate the issuing entity in connection with a breach of any representation or warranty of a sponsor or any document defect, if the sponsor defaults on its obligation to do so. We cannot assure you that the sponsors will effect such repurchases or substitutions or make such payment to compensate the issuing entity. Although a loss of value payment may only be made to the extent that the special servicer deems such amount to be sufficient to compensate the issuing entity for such material defect or material breach, we cannot assure you that such loss of value payment will fully compensate the issuing entity for such material defect or material breach in all respects. In addition, the sponsors may have various legal defenses available to them in connection with a repurchase or substitution obligation or an obligation to pay the loss of value payment. In particular, in the case of a non-serviced loan that is serviced under the pooling and servicing agreement entered into in connection with the securitization of the relatedpari passu companion loan, the asset representations reviewer (if applicable) under that pooling and servicing agreement may review the diligence file relating to suchpari passu companion loan concurrently with the review of the asset representations reviewer of the related mortgage loan for this transaction, and their findings may be inconsistent, and such inconsistency may allow the related mortgage loan seller to challenge the findings of the asset representations reviewer of the affected mortgage loan. Any mortgage loan that is not repurchased or substituted and that is not a “qualified mortgage” for a REMIC may cause designated portions of the issuing entity to fail to qualify as one or more REMICs or cause the issuing entity to incur a tax. See “Description of the Mortgage Loan Purchase Agreements”.
Risks Relating to Interest on Advances and Special Servicing Compensation
To the extent described in this prospectus, the master servicer, the special servicer and the trustee will each be entitled to receive interest on unreimbursed advances made by it at the “Prime Rate” as published inThe 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 will be 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.
Bankruptcy of a Servicer May Adversely Affect Collections on the Mortgage Loans and the Ability to Replace the Servicer
The master servicer or the special servicer may be eligible to become a debtor under the federal bankruptcy code or enter into receivership under the Federal Deposit Insurance Act (“FDIA”). If a master servicer or special servicer, as applicable, were to become a debtor under the federal bankruptcy code or enter into receivership under the FDIA, although the pooling and servicing agreement provides that such an event would entitle the issuing entity to terminate the master servicer or special servicer, as applicable, the provision would most likely not be enforceable. However, a rejection of the pooling and servicing agreement by a master servicer or special servicer, as applicable, in a bankruptcy proceeding or repudiation of the pooling and servicing agreement in a receivership under the FDIA would be treated as a breach of the pooling and servicing agreement and give the issuing entity a claim for damages and the ability to appoint a successor master servicer or special servicer, as applicable. An assumption under the federal bankruptcy code would require the master servicer or special servicer, as applicable, to cure its pre-bankruptcy defaults, if any, and demonstrate that it is able to perform following assumption. The bankruptcy court may permit the master servicer or special servicer, as applicable, to assume the pooling and servicing agreement and assign it to a third party. An insolvency by an entity governed by state insolvency law would vary depending on the laws of the particular state. We cannot assure you that a bankruptcy or receivership of the master servicer or special servicer, as applicable, would not adversely
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impact the servicing of the mortgage loans or the issuing entity would be entitled to terminate the master servicer or special servicer, as applicable, in a timely manner or at all.
If any master servicer or special servicer, as applicable, becomes the subject of bankruptcy or similar proceedings, the issuing entity claim to collections in that master servicer or special servicer’s, as applicable, possession at the time of the bankruptcy filing or other similar filing may not be perfected. In this event, funds available to pay principal and interest on your certificates may be delayed or reduced.
The Sponsors, the Depositor and the Issuing Entity Are Subject to Bankruptcy or Insolvency Laws That May Affect the Issuing Entity’s Ownership of the Mortgage Loans
In the event of the bankruptcy or insolvency of a sponsor or the depositor, it is possible the issuing entity’s right to payment from or ownership of the mortgage loans could be challenged, and if such challenge were successful, delays, reductions in payments and/or losses on the certificates could occur.
The transfer of the mortgage loans by the sponsors in connection with this offering is not expected to qualify for the securitization safe harbor adopted by the Federal Deposit Insurance Corporation (the “FDIC”) for securitizations sponsored by insured depository institutions. However, the safe harbor is non-exclusive.
In the case of each sponsor, an opinion of counsel will be rendered on the closing date, based on certain facts and assumptions and subject to certain qualifications, to the effect that the transfer of the applicable mortgage loans by such sponsor to the depositor would generally be respected in the event of a bankruptcy or insolvency of such sponsor. A legal opinion is not a guaranty as to what any particular court would actually decide, but rather an opinion as to the decision a court would reach if the issues are competently presented and the court followed existing precedent as to legal and equitable principles applicable in bankruptcy cases. In any event, we cannot assure you that the Federal Deposit Insurance Corporation, a bankruptcy trustee or another interested party, as applicable, would not attempt to assert that such transfer was not a sale. Even if a challenge were not successful, it is possible that payments on the certificates would be delayed while a court resolves the claim.
In addition, since the issuing entity 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 issuing entity would be characterized as a “business trust”. Regardless of whether a bankruptcy court ultimately determines that the issuing entity is a “business trust”, it is possible that payments on the offered certificates would be delayed while the court resolved the issue.
Title II of the Dodd-Frank Act provides for an orderly liquidation authority (“OLA”) under which the FDIC can be appointed as receiver of certain systemically important non-bank financial companies and their direct or indirect subsidiaries in certain cases. We make no representation as to whether this would apply to any of the sponsors. In January 2011, the then-acting general counsel of the FDIC issued a letter (the “Acting General Counsel’s Letter”) in which he expressed his view that, under then-existing regulations, the FDIC, as receiver under the OLA, would not, in the exercise of its OLA repudiation powers, recover as property of a financial company assets transferred by the financial company,provided that the transfer satisfies the conditions for the exclusion of assets from the financial company’s estate under the federal bankruptcy code. The letter further noted that, while the FDIC staff may be considering recommending further regulations under OLA, the then-acting general counsel would recommend that such regulations incorporate a 90-day transition period for any provisions affecting the FDIC’s statutory power to disaffirm or repudiate contracts. If, however, the FDIC were to adopt a different approach than that described in the Acting General Counsel’s Letter, delays or reductions in payments on the offered certificates would occur.
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The Requirement of the Special Servicer to Obtain FIRREA-Compliant Appraisals May Result in an Increased Cost to the Issuing Entity
Each appraisal obtained pursuant to the pooling and servicing agreement is required to contain a statement, or is accompanied by a letter from the appraiser, to the effect that the appraisal was performed in accordance with the requirements of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”), as in effect on the date such appraisal was obtained. Any such appraisal is likely to be more expensive than an appraisal that is not FIRREA compliant. Such increased cost could result in losses to the issuing entity. Additionally, FIRREA compliant appraisals are required to assume a value determined by a typically motivated buyer and seller, and could result in a higher appraised value than one prepared assuming a forced liquidation or other distress situation. In addition, because a FIRREA compliant appraisal may result in a higher valuation than a non-FIRREA compliant appraisal, there may be a delay in calculating and applying appraisal reductions, which could result in the holders of a given class of certificates continuing to hold the full non-notionally reduced amount of such certificates for a longer period of time than would be the case if a non-FIRREA compliant appraisal were obtained.
Tax Matters and Changes in Tax Law May Adversely Impact the Mortgage Loans or Your Investment
Tax Considerations Relating to Foreclosure. If the issuing entity acquires a mortgaged property (or, in the case of a non-serviced mortgage loan, a beneficial interest in a mortgaged property) subsequent to a default on the related mortgage loan pursuant to a foreclosure or deed in lieu of foreclosure, the special servicer (or, in the case of a non-serviced mortgage loan, the related non-serviced special servicer) would be required to retain an independent contractor to operate and manage such mortgaged 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 more than 10% completed when the mortgage loan defaulted or when the default of the mortgage loan becomes imminent. Any (i) net income from such operation (other than qualifying “rents from real property”), (ii) rental income based on the net profits of a tenant or sub-tenant or allocable to a service that is non-customary in the area and for the type of property involved and (iii) rental income attributable to personal property leased in connection with a lease of real property, if the rent attributable to the personal property exceeds 15% of the total rent for the taxable year, will subject the Prudential Plaza Loan REMIC or the Lower-Tier REMIC to federal tax (and possibly state or local tax) on such income at the highest marginal corporate tax rate. No determination has been made whether any portion of the income from the mortgaged properties constitutes “rent from real property”. Any such imposition of tax will reduce the net proceeds available for distribution to certificateholders. The special servicer (or, in the case of a non-serviced mortgage loan, the related non-serviced 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. See “Pooling and Servicing Agreement—Realization Upon Mortgage Loans”. In addition, if the issuing entity were to acquire one or more mortgaged properties (or, in the case of a non-serviced mortgage loan, a beneficial interest in a mortgaged property) pursuant to a foreclosure or deed in lieu of foreclosure, upon acquisition of those mortgaged properties (or, in the case of a non-serviced mortgage loan, a beneficial interest in a mortgaged property), the issuing entity 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.
REMIC Status. If an entity intended to qualify as a REMIC fails to satisfy one or more of the REMIC provisions of the Code during any taxable year, the Code provides that such entity will not be treated as a REMIC for such year and any year thereafter. In such event, the issuing entity, including the Prudential Plaza Loan REMIC, Upper-Tier REMIC and the Lower-Tier REMIC, would likely be treated as one or more separate associations taxable as corporations under Treasury regulations, and the offered certificates may be treated as stock interests in those associations and not as debt instruments.
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Description of the Mortgage Pool
General
The assets of the issuing entity will consist of a pool of 32 fixed rate mortgage loans (the “Mortgage Loans” or, collectively, the “Mortgage Pool”) with an aggregate principal balance as of the Cut-off Date of $703,219,986 (the “Initial Pool Balance”) The “Cut-off Date” with respect to each Mortgage Loan is the later of the related due date in August 2016 and the date of origination of such Mortgage Loan.
Eight (8) of the Mortgage Loans, representing approximately 50.1% of the Initial Pool Balance, are each part of a larger whole loan (a “Whole Loan”), each of which is comprised of (i) the related Mortgage Loan, (ii) one or more loans that arepari passu in right of payment to the related Mortgage Loan (each referred to in this prospectus as a “Pari Passu Companion Loan”) and (iii) in the case of three of the Mortgage Loans, representing approximately 23.5% of the Initial Pool Balance, one or more loans that are subordinate in right of payment to the related Mortgage Loan and the related Pari Passu Companion Loans (each referred to in this prospectus as a “Subordinate Companion Loan”). Each of the Pari Passu Companion Loans and the Subordinate Companion Loans are referred to in this prospectus as a “Companion Loan”. Each Companion Loan is secured by the same mortgages and the same assignments of leases and rents securing the related Mortgage Loan. See “—The Whole Loans” below for more information regarding the rights of the holders of the Companion Loans and the servicing and administration of the Whole Loans that will not be serviced under the pooling and servicing agreement for this transaction.
The Mortgage Loans were originated or acquired by the mortgage loan sellers set forth in the following chart. The mortgage loan sellers will sell their respective Mortgage Loans to the depositor, which will in turn sell the Mortgage Loans to the issuing entity:
Sellers of the Mortgage Loans
Seller | Number of Mortgage | Aggregate Cut-off Date | Approx. % of Initial | ||||||
| German American Capital Corporation(1)(2)(3)(4)(5) | 24 | $581,640,510 | 82.7 | % | |||||
| Citigroup Global Markets Realty Corp.(6) | 8 | 121,579,476 | 17.3 | ||||||
| Total | 32 | $703,219,986 | 100.0 | % | |||||
| (1) | Nineteen (19) Mortgage Loans, representing approximately 63.6% of the Initial Pool Balance, were originated by Deutsche Bank AG, New York Branch (an affiliate of German American Capital Corporation) and acquired by German American Capital Corporation. |
| (2) | Three (3) Mortgage Loans, representing approximately 4.9% of the Initial Pool Balance, were originated by Pillar Funding LLC and acquired by German American Capital Corporation. German American Capital Corporation has re-underwritten such Mortgage Loans in accordance with the procedures described under “Transaction Parties—The Sponsors and Mortgage Loan Sellers—German American Capital Corporation” in this prospectus. |
| (3) | The Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 10 Hudson Yards, representing approximately 9.2% of the Initial Pool Balance, is part of a loan combination that was co-originated by Deutsche Bank AG, New York Branch (an affiliate of German American Capital Corporation) and Goldman Sachs Mortgage Company, and will be sold to the depositor by German American Capital Corporation. |
| (4) | The Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Westfield San Francisco Centre, representing approximately 8.5% of the Initial Pool Balance, is part of a loan combination that was co-originated by Deutsche Bank AG, New York Branch (an affiliate of German American Capital Corporation) and JPMorgan Chase Bank, National Association, and will be sold to the depositor by German American Capital Corporation. |
| (5) | The mortgage loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Gas Company Tower & World Trade Center Parking Garage, representing approximately 5.7% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, is part of a loan combination that was co-originated by Deutsche Bank AG, New York Branch (an affiliate of German American Capital Corporation) and Barclays Bank PLC, and will be sold to the depositor by German American Capital Corporation. |
| (6) | The Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Vertex Pharmaceuticals HQ, representing approximately 4.3% of the Initial Pool Balance, and as to which Citigroup Global Markets Realty Corp. will act as Mortgage Loan Seller, is part of a Whole Loan that was co-originated by Citigroup Global Markets Realty Corp. and Morgan Stanley Bank, N.A. |
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Each of the Mortgage Loans or Whole Loans is evidenced by one or more promissory notes or similar evidence of indebtedness (each a “Mortgage Note”) and, in each case, secured by (or, in the case of an indemnity deed of trust, backed by a guaranty that is secured by) one or more mortgages, deeds of trust or other similar security instruments (each, a “Mortgage”) creating a first lien on a fee simple and/or leasehold interest in one or more commercial, multifamily or manufactured housing community real properties (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 or Properties, as applicable, and the other limited assets securing such Mortgage Loan, and not against the related borrower’s other assets. The Mortgage Loans are not insured or guaranteed by the sponsors, the mortgage loan sellers or any other person or entity unrelated to the respective borrower. You should consider all of the Mortgage Loans to be nonrecourse loans as to which recourse in the case of default will be limited to the specific property and other assets, if any, pledged to secure the related Mortgage Loan.
The Mortgage Loans included in this transaction were selected for this transaction from mortgage loans specifically originated or acquired for securitizations of this type by the Mortgage Loan Sellers taking into account rating agency criteria and feedback, subordinate investor feedback, property type and geographic location.
Certain Calculations and Definitions
This prospectus sets forth certain information with respect to the Mortgage Loans and the Mortgaged Properties. The sum in any column of the tables presented in Annex A-2 may not equal the indicated total due to rounding. The information in Annex A-1 with respect to the Mortgage Loans and the Mortgaged Properties is based upon the pool of the Mortgage Loans as it is expected to be constituted as of the close of business on August 25, 2016 (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. The statistics in Annex A-1, Annex A-2 and Annex A-3 were primarily derived from information provided to the depositor by each sponsor, which information may have been obtained from the borrowers.
All percentages of the Mortgage Loans and Mortgaged Properties, or of any specified group of Mortgage Loans and Mortgaged Properties, referred to in this prospectus without further description are approximate percentages of the Initial Pool Balance by Cut-off Date Balance (in the case of Mortgage Loan information) or by Allocated Loan Amount as of the Cut-off Date (in the case of Mortgaged Property information).
The information presented in this prospectus with respect to the Loan Per Net Rentable Area, Loan-to-Value Ratio, Loan-to-Value Ratio at Maturity or ARD, Underwritten NCF DSCR, Underwritten NCF Debt Yield and Underwritten NOI Debt Yield for each Mortgage Loan with one or morePari Passu Companion Loans is calculated in a manner that reflects the aggregate indebtedness evidenced by that Mortgage Loan and the relatedPari Passu Companion Loan(s), but excluding any related Subordinate Companion Loan(s), unless otherwise indicated.
Definitions. For purposes of this prospectus, including the information presented in the Annexes to this prospectus, the indicated terms have the following meanings:
“ADR” means, for any hospitality property, average daily rate.
“Allocated Loan Amount” generally means, (a) with respect to any single Mortgaged Property that is the only real property collateral for the related Mortgage Loan, the total outstanding principal balance of such Mortgage Loan; and (b) with respect to any Mortgaged Property that is one of multiple Mortgaged Properties securing a Mortgage Loan, the portion of the total outstanding principal balance of such Mortgage Loan allocated to the subject Mortgaged Property in accordance with net cash flow, appraised value or otherwise in accordance with or as set forth in the related Mortgage Loan documents.
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“Annual Debt Service” generally means, for any Mortgage Loan, 12 times the average of the principal and interest payments for the first 12 payment periods of the Mortgage Loan following the Cut-off Date (but without regard to any leap year adjustments) or: (i) in the case of a Mortgage Loan that provides for interest only payments through maturity, the aggregate interest payments scheduled to be due on the Due Date following the Cut-off Date and the 11 Due Dates thereafter or (ii) in the case of a Mortgage Loan that provides for an initial interest only period and provides for scheduled amortization payments thereafter, 12 times the monthly payment of principal and interest payable during such subsequent amortization period. Monthly debt service and debt service coverage ratios are calculated using the average of the principal and interest payments for the first twelve payment periods of the Mortgage Loan following the Cut-off Date (but without regard to any leap year adjustments), subject to the proviso to the prior sentence. In the case of any Whole Loan, Annual Debt Service is calculated with respect to the Mortgage Loan including any related Pari Passu Companion Loan and without regard to any related Subordinate Companion Loan.
“Appraised Value” means, for any Mortgaged Property, the appraised value of such Mortgaged Property as determined by the most recent third party appraisal of the Mortgaged Property available to the applicable mortgage loan seller. In certain cases, in addition to an “as-is” value, the appraisal states an “as complete”, “hypothetical as-is”, “as-is with reserves” or “as-stabilized” value for the related Mortgaged Property that assumes that certain events will occur with respect to re-tenanting, construction, renovation or repairs at such Mortgaged Property. In most such cases, the applicable mortgage loan seller has taken reserves sufficient to complete such re-tenanting, construction, renovation or repairs. We make no representation that sufficient amounts have been reserved or that the appraised value would approximate either the value that would be determined in a current appraisal of the related Mortgaged Property or the amount that would be realized upon a sale. In the case of certain Mortgage Loans as described under “—Appraised Value” in this prospectus, the Loan-to-Value Ratio at Maturity or ARD for such Mortgage Loans has been calculated based on the “as complete”, “as-is with reserves”, “hypothetical as-is” or “as-stabilized” Appraised Value of a related Mortgaged Property, and in certain other cases, based on an Appraised Value that includes certain property that does not constitute real property. The Appraised Value set forth on Annex A-1 is the “as-is” value unless otherwise specified in this prospectus, on Annex A-1 and/or the related footnotes.
We cannot assure you that the value of any particular Mortgaged Property will not have declined from the Appraised Value shown on Annex A-1. We make no representation that any Appraised Value presented in this prospectus would approximate either the value that would be determined in a current appraisal of the Mortgaged Property or the amount that would be realized upon a sale of the Mortgaged Property. See “—Appraised Value” below.
“Balloon Balance” means, with respect to any Mortgage Loan, the principal amount that will be due at maturity (or, in the case of any ARD Loan, outstanding at the related Anticipated Repayment Date or due at maturity, as the case may be) for such Mortgage Loan, assuming no payment defaults or principal prepayments.
“Cut-off Date Balance” of any Mortgage Loan or Companion Loan, will be the unpaid principal balance of that Mortgage Loan or Companion Loan, as of the Cut-off Date, after application of all payments due on or before that date, whether or not received.
“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 lockbox account even though cash, checks or “over the counter” receipts are deposited by the manager of the related Mortgaged Property into the lockbox account controlled by the lender.
“In-Place Cash Management” means, for funds directed into a lockbox, such funds are generally not made immediately available to the related borrower, but instead are forwarded to a cash management account controlled by the lender and the funds are disbursed according to the related Mortgage Loan documents with any excess remitted to the related borrower (unless an event of default under the
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Mortgage Loan documents or one or more specified trigger events have occurred and are outstanding), generally on a daily basis.
“Largest Tenant” means, with respect to any Mortgaged Property, the tenant occupying the largest amount of net rentable square feet.
“Lease Expiration” means the date at which the applicable tenant’s lease is scheduled to expire.
“Loan Per Net Rentable Area” means the principal balance per unit of measurement as of the Cut-off Date.
“Loan-to-Value Ratio,” “Cut-off Date LTV Ratio,” “LTV Ratio” or “Current LTV” means, with respect to any Mortgage Loan, (a) the Cut-off Date Balance of such Mortgage Loan divided (b) by the Appraised Value of the related Mortgaged Property or aggregate Appraised Values of the Mortgaged Properties; provided that:
| · | In the case of a Mortgage Loan that is part of a Whole Loan, unless otherwise indicated, the Loan-to-Value Ratio was calculated with respect to such Mortgage Loan including any related Pari Passu Companion Loans and without regard to any related Subordinate Companion Loan. |
| · | With respect to each Mortgaged Property identified in “—Appraised Value” below, unless otherwise indicated, the respective Cut-off Date LTV Ratio was calculated using the related “as complete”, “as-is with reserves”, “hypothetical as-is” or “as-stabilized” Appraised Values, as opposed to the “as-is” Appraised Value. |
“Loan-to-Value Ratio at Maturity or ARD”, “LTV Ratio at Maturity or ARD”, “Balloon LTV” or “Maturity Date LTV Ratio” means, with respect to any Mortgage Loan, (a) the Balloon Balance of such Mortgage Loan, divided by (b) the Appraised Value of the related Mortgaged Property or Mortgaged Properties; provided that:
| · | In the case of a Mortgage Loan that is part of a Whole Loan, unless otherwise indicated,Loan-to-Value Ratio at Maturity or ARD was calculated with respect to such Mortgage Loan including any related Pari Passu Companion Loans and without regard to any related Subordinate Companion Loan. |
| · | In the case of an ARD Loan, the Loan-to-Value Ratio at Maturity or ARD is calculated with respect to the related Balloon Balance on the related Anticipated Repayment Date. |
| · | With respect to each Mortgaged Property identified in “—Appraised Value” below, unless otherwise indicated, the respective Loan-to-ValueRatio at Maturity or ARD was calculated using the related “as complete”, “as-is with reserves”, “hypothetical as-is” or “as-stabilized” Appraised Values, as opposed to the “as-is” Appraised Value. |
“Most Recent NOI” and “Trailing 12 NOI” (which is for the twelve-month period ending as of the date specified in Annex A-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 as depreciation or amortization. In some cases, capital expenditures may have been treated by a borrower as an expense or expenses treated as capital expenditures. 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 substitutes for net income determined in accordance with generally accepted accounting principles as a measure of the results of a property’s operations or substitutes 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.
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“MSA” means metropolitan statistical area.
“Net Operating Income” or “NOI,” with respect to any Mortgaged Property, means historical net operating income for the annual or other period specified (or ending on the “NOI Date” specified). In general, it is the revenue derived from the use and operation of such Mortgaged Property less the sum of (a) actual operating expenses (such as utilities, administrative expenses, repairs and maintenance, management and franchise fees and advertising) and (b) actual fixed expenses (such as insurance, real estate taxes and, if applicable, ground, space or air rights lease payments). Net operating income generally does not reflect (i.e., it does not deduct for) capital expenditures, including tenant improvement costs and leasing commissions, interest expenses and non-cash items such as depreciation and amortization.
“NRA” means net rentable area.
“Occupancy” means, unless the context indicates otherwise, (i) in the case of multifamily, rental, manufactured housing community and mixed use (to the extent the related Mortgaged Property includes multifamily space) properties, the percentage of rental Units or Pads, as applicable, that are rented as of the Occupancy Date; (ii) in the case of office, retail, industrial and mixed use (to the extent the related Mortgaged Property includes retail or office space) properties, the percentage of the net rentable square footage rented as of the Occupancy Date (subject to, in the case of certain Mortgage Loans, one or more of the additional leasing assumptions); and (iii) in the case of hospitality properties, the percentage of available Rooms occupied for the trailing 12-month period ending on the Occupancy Date. In some cases, occupancy was calculated based on assumptions regarding occupancy, such as the assumption that a certain tenant at the Mortgaged Property that has executed a lease, but has not yet taken occupancy and/or has not yet commenced paying rent, will take occupancy on a future date generally expected to occur within twelve months of the Cut-off Date; assumptions regarding the renewal of particular leases and/or the re-leasing of certain space at the related Mortgaged Property; in some cases, assumptions regarding leases under negotiation being executed; in some cases, assumptions regarding tenants taking additional space in the future if currently committed to do so or, in some cases, the exclusion of dark tenants, tenants with material aged receivables, tenants that may have already given notice to vacate their space, bankrupt tenants that have not yet affirmed their lease and certain additional leasing assumptions. See the footnotes to Annex A-1 for additional occupancy assumptions. We cannot assure you that the assumptions made with respect to any Mortgaged Property will, in fact, be consistent with that Mortgaged Property’s actual occupancy. See “—Tenant Issues” below.
“Occupancy Date” means the date of determination of the Occupancy of a Mortgaged Property.
“Original Balance” means the principal balance of the Mortgage Loan as of the date of origination.
“Prepayment Provision” means the number of payments from the first due date through and including the maturity date for which a Mortgage Loan is, as applicable, (i) locked out from prepayment, (ii) provides for payment of a prepayment premium or yield maintenance charge in connection with a prepayment, (iii) permits defeasance and/or (iv) permits prepayment without a payment of a prepayment premium or a yield maintenance charge.
“RevPAR” means, with respect to any hospitality property, revenues per available room.
“Soft Lockbox” means that the related borrower is required to deposit or cause the property manager to deposit all rents collected into a lockbox account. Hospitality, multifamily and manufactured housing community properties are considered to have a soft lockbox if credit card receivables, cash, checks or “over the counter” receipts are deposited into the lockbox account by the borrower or property manager.
“Soft Springing Hard Lockbox” means that the related borrower is required to deposit, or cause the property manager to deposit, all rents collected into a lockbox account or cash management account until the occurrence of an event of default under the Mortgage Loan documents or one or more specified trigger events, at which time the lockbox account converts to a Hard Lockbox.
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“Springing Cash Management” means, until the occurrence of an event of default under the Mortgage Loan documents or one or more specified trigger events, revenue from the lockbox (if any) is forwarded to an account controlled by the related borrower or is otherwise made available to the related borrower. Upon the occurrence of an event of default or such a trigger event, the Mortgage Loan documents require the related revenue to be forwarded to a cash management account controlled by the lender and the funds are disbursed according to the related Mortgage Loan documents.
“Springing Lockbox” means a lockbox that is not currently in place, but the related Mortgage Loan documents require the imposition of a lockbox account upon the occurrence of an event of default under the Mortgage Loan documents or one or more specified trigger events.
“Square Feet”, “SF” or “Sq. Ft.” means, in the case of a Mortgaged Property operated as a retail center, office, industrial/warehouse facility, any combination of the foregoing or other special purpose property, the square footage of the net rentable or leasable area.
“T-12” and “TTM” each means trailing 12 months.
“Term to Maturity” means, with respect to any Mortgage Loan, the remaining term, in months, from the Cut-off Date for such Mortgage Loan to the related maturity date or, in the case of an ARD Loan, the related Anticipated Repayment Date, as applicable. Annex A-1 indicates which Mortgage Loans are ARD Loans.
“Underwritten Expenses” or “UW Expenses” means, with respect to any Mortgage Loan or Mortgaged Property, an estimate of (a) operating expenses (such as utilities, administrative expenses, repairs and maintenance, management and franchise fees and advertising); and (b) fixed expenses (such as insurance, real estate taxes and, if applicable, ground, space or air rights lease payments), as determined by the related mortgage loan seller and generally derived from historical expenses at the Mortgaged Property, the borrower’s budget or appraiser’s estimate, in some cases adjusted for significant occupancy increases and a market rate management fee and subject to certain assumptions and subjective judgments of each mortgage loan seller as described under the definition of “Underwritten Net Operating Income”. We cannot assure you that the assumptions made with respect to any Mortgaged Property will, in fact, be consistent with that Mortgaged Property’s actual performance.
“Underwritten NCF Debt Yield”, “UW NCF Debt Yield” or “Cut-off Date UW NCF” means, with respect to any Mortgage Loan, the Underwritten Net Cash Flow for the related Mortgaged Property or Mortgaged Properties divided by the Cut-off Date Balance of such Mortgage Loan;provided that:
| · | In the case of a Mortgage Loan that is part of a Whole Loan, unless otherwise indicated, Underwritten NCF Debt Yield was calculated with respect to such Mortgage Loan including any related Pari Passu Companion Loan(s) and without regard to any related Subordinate Companion Loan(s). |
“Underwritten NOI Debt Yield” or “UW NOI Debt Yield” means, with respect to any Mortgage Loan, the Underwritten Net Operating Income for the related Mortgaged Property or Mortgaged Properties divided by the Cut-off Date Balance for the related Mortgage Loan;provided that:
| · | In the case of a Mortgage Loan that is part of a Whole Loan, unless otherwise indicated, the debt yield was calculated with respect to such Mortgage Loan including any related Pari Passu Companion Loan(s) and without regard to any related Subordinate Companion Loan(s). |
“Underwritten Net Cash Flow,” “Underwritten NCF” or “UW NCF“, with respect to any Mortgaged Property, means the Underwritten Net Operating Income decreased by an amount that the related mortgage loan seller has determined for the capital expenditures and reserves for capital expenditures, including tenant improvement costs and leasing commissions, as applicable. Underwritten Net Cash Flow generally does not reflect interest expense and non-cash items such as depreciation and amortization.
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“Underwritten Net Cash Flow DSCR,” “Underwritten NCF DSCR,” or “UW NCF DSCR,” means, with respect to any Mortgage Loan, (a) the Underwritten Net Cash Flow for the related Mortgaged Property or Mortgaged Properties, divided by (b) the Annual Debt Service for such Mortgage Loan;provided that:
| · | In the case of a Mortgage Loan that is part of a Whole Loan, unless otherwise indicated,Underwritten Net Cash FlowDSCR was calculated with respect to such Mortgage Loan including any related Pari Passu Companion Loan(s) and without regard to any related Subordinate Companion Loan(s). |
In general, debt service coverage ratios are used by income property lenders to measure the ratio of (a) cash currently generated by a property that is available for debt service to (b) required debt service payments. However, debt service coverage ratios only measure the current, or recent, ability of a property to service mortgage debt. If a property does not possess a stable operating expectancy (for instance, if it is subject to material leases that are scheduled to expire during the loan term and that provide for above market rents and/or that may be difficult to replace), a debt service coverage ratio may not be a reliable indicator of a property’s ability to service the mortgage debt over the entire remaining loan term. The UnderwrittenNet Cash Flow DSCRs are presented in this prospectus for illustrative purposes only and, as discussed above, are limited in their usefulness in assessing the current, or predicting the future, ability of a Mortgaged Property to generate sufficient cash flow to repay the related Mortgage Loan. Accordingly, no assurance can be given, and no representation is made, that the UnderwrittenNet Cash Flow DSCRs accurately reflect that ability.
“Underwritten Net Operating Income,” “Underwritten NOI,” or “UW NOI“, with respect to any Mortgaged Property, means Underwritten Revenues less Underwritten Expenses, which is an estimate of cash flow available for debt service in a typical year of stable, normal operations as determined by the related mortgage loan seller.
The Underwritten Net Operating Income for each Mortgaged Property is calculated on the basis of numerous assumptions and subjective judgments, which, if ultimately proven erroneous, could cause the actual net cash flow for such Mortgaged Property to differ materially from the Underwritten Net Operating Income set forth in this prospectus. Certain of such assumptions and subjective judgments of each mortgage loan seller relate to future events, conditions and circumstances, including future expense levels, future increases in rents over current rental rates (including in circumstances where a tenant may currently be in a free or reduced rent period), future vacancy rates, the levels and stability of cash flows for properties with short term rentals (such as hospitality properties), commencement of occupancy and rent payments with respect to leases for which rentals have not yet commenced and/or a “free rent” period is still in effect, the re-leasing of vacant space and the continued leasing of occupied space, which will be affected by a variety of complex factors over which none of the depositor, the applicable mortgage loan seller, the master servicer or the special servicer have control. In certain cases, Net Operating Income includes rents paid on “dark” space by a tenant that has ceased operations at the subject Mortgaged Property prior to the end of its lease. In some cases, the Underwritten Net Operating Income set forth in this prospectus for any Mortgaged Property is higher, and may be materially higher, than the annual net operating income for such Mortgaged Property based on historical operating statements.
In determining Underwritten Net Operating Income for a Mortgaged Property, the applicable mortgage loan seller generally relied on rent rolls and/or other generally unaudited financial information provided by the respective borrowers; and in some cases, the appraisal, borrower budgets and/or local market information was the primary basis for the determination. From that information, the applicable mortgage loan seller calculated stabilized estimates of cash flow that took into consideration historical financial statements (where available), appraiser estimates, borrower budgets, material changes in the operating position of a Mortgaged Property of which the applicable mortgage loan seller was aware (e.g., current rent roll information including newly signed leases (regardless of whether the tenant has taken occupancy), near term rent steps, expirations of “free rent” periods, market rents, and market vacancy data), and estimated capital expenditures, leasing commissions and tenant improvement costs. In certain cases, the applicable mortgage loan seller’s estimate of Underwritten Net Operating Income reflected differences from the information contained in the operating statements obtained from the respective
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borrowers (resulting in either an increase or decrease from the recent historical net operating income set forth therein) based upon the applicable mortgage loan seller’s own analysis of such operating statements and the assumptions applied by the respective borrowers in preparing such statements and information. In certain instances, for example, property management fees and other expenses may have been taken into account in the calculation of Underwritten Net Operating Income even though such expenses may not have been reflected in actual historic operating statements. In most of those cases, the information was annualized, with some exceptions, before using it as a basis for the determination of Underwritten Net Operating Income. In certain cases with respect to certain credit rated tenants, or credit worthy tenants, the applicable mortgage loan seller may have calculated Underwritten Net Operating Income based on certain adjustments to the rental income, such as using the average rent due under the related lease from such tenant over such Mortgage Loan or lease term. Historical operating statements may not be available for newly constructed Mortgaged Properties, Mortgaged Properties with triple net leases, Mortgaged Properties that have recently undergone substantial renovations and newly acquired Mortgaged Properties.
Specifically, the rental revenue included in the Net Operating Income is based on leases in place, leases that have been executed but the tenant is not yet paying rent and/or in occupancy, leases that are being negotiated and expected to be signed, additional space that a tenant has committed to take and in certain cases contractual rent steps generally within 12 months past the Cut-off Date, in certain cases certain appraiser estimates of rental income, and in some cases adjusted downward to market rates, with vacancy rates equal to the Mortgaged Property’s historical rate, current rate, market rate or an assumed vacancy as determined by the related originator or appraiser; plus any additional recurring revenue fees. In some cases the related originator included revenue otherwise payable by a tenant but for the existence of an initial “free rent” period or a permitted rent abatement while the leased space is built out. Additionally, in determining rental revenue for multifamily rental and manufactured housing community properties, the related mortgage loan seller either reviewed rental revenue shown on the certified rolling 12-month operating statements or annualized the rental revenue and reimbursement of expenses shown on rent rolls or recent partial year operating statements with respect to the prior one- to 12-month periods or in some cases may have relied on information provided in the appraisal for market rental rates and vacancy. In some cases the related originator included revenue otherwise payable by a tenant but for the existence of an initial “free rent” period or a permitted rent abatement while the leased space is built out. See “—Tenant Issues” below.
“Underwritten Net Operating Income DSCR”, “Underwritten NOI DSCR” or “UW NOI DSCR” or means, with respect to any Mortgage Loan, (a) the Underwritten Net Operating Income for the related Mortgaged Property or Mortgaged Properties, divided by (b) the Annual Debt Service for such Mortgage Loan;provided that:
| · | In the case of a Mortgage Loan that is part of a Whole Loan, unless otherwise indicated,Underwritten Net Operating IncomeDSCR was calculated with respect to such Mortgage Loan including any related Pari Passu Companion Loan(s) and without regard to any related Subordinate Companion Loan(s). |
TheUnderwritten Net Operating IncomeDSCRs are presented in this prospectus for illustrative purposes only and, as discussed above, are limited in their usefulness in assessing the current, or predicting the future, ability of a Mortgaged Property to generate sufficient cash flow to repay the related Mortgage Loan. Accordingly, no assurance can be given, and no representation is made, that theUnderwritten Net Operating IncomeDSCRs accurately reflect that ability. See the definition of “Underwritten Net Cash Flow DSCR” for more information regarding the evaluation of debt service coverage ratios.
“Underwritten EGI”, “UW EGI” with respect to any Mortgaged Property, means the gross potential rent, recoveries and other income, less mark to market, vacancy and collection loss.
“Underwritten Revenues” with respect to any Mortgage Loan, means the gross potential rent (in certain cases, inclusive of rents under master leases with an affiliate of the borrower that relate to space not used or occupied by the master lease tenant, or, in the case of a hospitality property, room rent, food
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and beverage revenues and other hospitality income), subject to the assumptions and subjective judgments of each mortgage loan seller as described under the definition of “Underwritten Net Operating Income” in this prospectus. We cannot assure you that the assumptions made with respect to any Mortgaged Property will, in fact, be consistent with that Mortgaged Property’s actual performance
“Units”, “Rooms” or “Pads” means (a) in the case of a Mortgaged Property operated as multifamily housing, the number of apartments, regardless of the size of or number of rooms in such apartment, (b) in the case of a Mortgaged Property operated as a hospitality property, the number of guest rooms, (c) in the case of a Mortgaged Property operated as a manufactured housing community property, if any, the number of pads for manufactured homes, (d) in the case of a Mortgaged Property operated as student housing, the number of beds and (e) in the case of a Mortgaged Property operated as a parking lot or garage, the number of parking spaces.
“Weighted Average Mortgage Rate” means the weighted average of the Mortgage Rates as of the Cut-off Date.
Mortgage Pool Characteristics
Overview
The issuing entity will include 5 Mortgage Loans, representing approximately 25.2% of the Initial Pool Balance, that 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 Whole Loan and/or represent separate obligations of each borrower that are cross-collateralized and cross-defaulted with each other.
See also “—Certain Calculations and Definitions” above for important general and specific information regarding the manner of calculation of the underwritten debt service coverage ratios and loan-to-value ratios. See also “—Certain Terms of the Mortgage Loans” below for important information relating to certain payment and other terms of the Mortgage Loans.
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Property Types
The following table shows the property type concentrations of the Mortgaged Properties:
Property Type Distribution(1)
Property Type | Number of | Aggregate Cut- | Approx. % of | |||||||||
| Office | 9 | $ | 291,517,454 | 41.5 | % | |||||||
| CBD | 5 | $ | 169,242,454 | 24.1 | % | |||||||
| Suburban | 3 | $ | 118,500,000 | 16.9 | % | |||||||
| Medical | 1 | $ | 3,775,000 | 0.5 | % | |||||||
| Mixed Use | 4 | $ | 135,675,464 | 19.3 | % | |||||||
| Super Regional Mall/Office | 1 | $ | 60,000,000 | 8.5 | % | |||||||
| Office/Parking | 1 | $ | 40,000,000 | 5.7 | % | |||||||
| Office/Retail | 2 | $ | 35,675,464 | 5.1 | % | |||||||
| Retail | 11 | $ | 125,461,559 | 17.8 | % | |||||||
| Anchored(2) | 10 | $ | 118,661,559 | 16.9 | % | |||||||
| Unanchored | 1 | $ | 6,800,000 | 1.0 | % | |||||||
| Hospitality | 4 | $ | 55,038,303 | 7.8 | % | |||||||
| Full Service | 2 | $ | 43,275,000 | 6.2 | % | |||||||
| Limited Service | 2 | $ | 11,763,303 | 1.7 | % | |||||||
| Self Storage | 25 | $ | 53,494,265 | 7.6 | % | |||||||
| Multifamily | 4 | $ | 37,432,942 | 5.3 | % | |||||||
| Garden | 4 | $ | 37,432,942 | 5.3 | % | |||||||
| Manufactured Housing Community | 1 | $ | 4,600,000 | 0.7 | % | |||||||
| Total/Weighted Average | 58 | $ | 703,219,986 | 100.0 | % | |||||||
| (1) | Because this table presents information relating to Mortgaged Properties and not Mortgage Loans, the information for Mortgage Loans secured by more than one Mortgaged Property is based on Allocated Loan Amounts, which amounts, if not specified in the related mortgage loan documents, are based on the appraised values, as set forth in Annex A-1. |
| (2) | Includes Single Tenant and Shadow Anchored properties. |
Office Properties. With respect to the office properties and mixed use properties with an office component set forth in the above chart:
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Prudential Plaza, which secures a Mortgage Loan representing approximately 7.1% of the Initial Pool Balance, affiliates of the borrower purchased the Aon Center, an office building located adjacent to the Mortgaged Property, which building may compete with the Mortgaged Property for tenants and in other related matters. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Vertex Pharmaceuticals HQ, securing a Mortgage Loan that represents approximately 4.3% of the Initial Pool Balance, the largest tenant at the Mortgaged Property, occupying approximately 95.5% of the net rentable square feet, operates a portion of its premises as built-to-suit laboratory space. The Mortgaged Property’s building systems are designed to accommodate the tenant’s technical research on laboratory floors. Furthermore, approximately 14.5% of the net rentable square feet at the Mortgaged Property is mechanical space leased to the tenant. According to the appraisal, it is market standard that laboratory tenants pay full rent for all mechanical areas. If the Mortgaged Property were to be converted to a multi-tenant office use in the future, it is likely that the net rentable area of the Mortgaged Property would be reduced by the amount of the mechanical areas. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as 401 South State Street, securing a Mortgage Loan representing approximately 2.2% of the Initial Pool Balance, the largest tenant at such Mortgaged Property, occupying approximately 75.0% of the |
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| net rentable square feet of the Mortgaged Property, is an educational institution. The remaining occupied net rentable square feet at such Mortgaged Property, representing approximately 1.5% of the net rentable square feet of such Mortgaged Property, is leased to a church. |
See “Risk Factors—Risks Relating to the Mortgage Loans—Retail Properties Have Special Risks” and “—Specialty Use Concentrations” below and “Risk Factors—Risks Relating to the Mortgage Loans—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses”.
Mixed Use Properties. With respect to the mixed-use properties set forth in the above chart:
| · | Each of the mixed use Mortgaged Properties has one or more office and retail components. See “Risk Factors—Risks Relating to the Mortgage Loans—Office Properties Have Special Risks”and “—Retail Properties Have Special Risks”, as applicable. |
Certain of the mixed use Mortgaged Properties may have specialty uses. See “—Specialty Use Concentrations” below.
See “Risk Factors—Risks Relating to the Mortgage Loans—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses”.
Retail Properties. With respect to the retail properties set forth in the above chart and mixed use properties and office properties with retail components, see “Risk Factors—Risks Relating to the Mortgage Loans—Retail Properties Have Special Risks” and “—Specialty Use Concentrations” below and “Risk Factors—Risks Relating to the Mortgage Loans—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses”.
Hospitality Properties. With respect to the hospitality properties set forth in the above chart:
| · | Four (4) Mortgaged Properties identified on Annex A-1 as Embassy Suites Columbus, Hilton Garden Inn San Leandro, Holiday Inn Express Cocoa Beach and Hampton Inn Eugene, securing approximately 7.8% of the Initial Pool Balance by Allocated Loan Amount, are flagged hospitality properties that are affiliated with a franchise or hospitality management company through a franchise or management agreement. |
| · | The following table shows the breakdown of each Mortgaged Property associated with a hotel brand through a license, franchise agreement, operating agreement or management agreement. |
| Mortgaged Property Name | Mortgage Loan Cut-off Date Balance | Percentage (%) of the Initial Pool Balance by Allocated Loan Amount | Expiration of Franchise Agreement, Operating Agreement or Management Agreement | Maturity Date | Upfront PIP Reserve | Renewal Option | |||||||||
| Embassy Suites Columbus | $ | 23,000,000 | 3.3% | 1/26/2029 | 1/6/2026 | N/A | No | ||||||||
| Hilton Garden Inn San Leandro | $ | 20,275,000 | 2.9% | 6/30/2031 | 7/6/2026 | $ 4,183,856 | No | ||||||||
| Holiday Inn Express Cocoa Beach | $ | 6,100,000 | 0.9% | 8/2/2022 | 8/6/2026 | N/A | No | ||||||||
| Hampton Inn Eugene | $ | 5,663,303 | 0.8% | 6/30/2031 | 7/6/2026 | $ 1,102,000 | No | ||||||||
| · | Certain of the hospitality properties securing the Mortgage Loans are currently undergoing or are scheduled to undergo renovations or property improvement plans. See “—Redevelopment, Renovation and Expansion” below. |
See “Risk Factors—Risks Relating to the Mortgage Loans—Risks Relating to Affiliation with a Franchise or Hotel Management Company” and “—Hospitality Properties Have Special Risks” and
“—Specialty Use Concentrations” below and “Risk Factors—Risks Relating to the Mortgage Loans—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses”.
Self Storage Properties. With respect to the self-storage properties set forth in the above chart:
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| · | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as U-Haul AREC Portfolio, representing approximately 6.9% of the Initial Pool Balance, approximately 9.5% of the underwritten effective gross income from the related Mortgaged Properties is received from or associated with several agreements by and among the related borrower and certain affiliates of U-Haul International Inc. (an affiliate of the borrower), including a dealership contract, pursuant to which the related borrower receives commissions for renting trucks, motor vehicles, trailers and related equipment, and other non-storage related business. |
| · | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as U-Haul AREC Portfolio, each Mortgaged Property derives a portion of the Underwritten Revenues from one or more of (a) rent derived from truck rentals located at the related Mortgaged Property, (b) rent derived from cell tower leases, (c) the leasing of certain parking spaces located at the related Mortgaged Properties for purposes of recreational vehicle and boat storage and/or (d) rent derived from commercial/retail tenants operating at the related Mortgaged Property. |
See “Risk Factors—Risks Relating to the Mortgage Loans—Self Storage Properties Have Special Risks”.
Multifamily Properties. With respect to the multifamily properties set forth in the above chart, see “Risk Factors—Risks Relating to the Mortgage Loans—Multifamily Properties Have Special Risks”.
Manufactured Housing Community Properties. With respect to the manufactured housing community properties set forth in the above chart:
| · | One (1) Mortgaged Property identified on Annex A-1 as Shady Haven MHC, securing approximately 0.7% of the Initial Pool Balance by Allocated Loan Amount, such Mortgaged Properties are age restricted to tenants at least 55 years of age. |
See “Risk Factors—Risks Relating to the Mortgage Loans—Manufactured Housing Community Properties Have Special Risks”.
Specialty Use Concentrations. Certain Mortgaged Properties have one or more tenants that operate their space as a specialty use. Such specialty uses may not allow the space to be readily converted to be suitable for another type of tenant, they may rely on contributions from individuals and government grants or other subsidies to pay rent and other operating expenses or they may have primarily seasonal use that makes income potentially more volatile than for properties with longer term leases. For example, with respect to certain of the Mortgaged Properties, one or more of the 5 largest tenants operates its space as a specialty use, as set forth in the following table:
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Specialty Use | Number of Mortgaged | Approx. % of Initial Pool | ||||||
| Restaurant | 6 | 14.0 | % | |||||
| Theater | 2 | 10.9 | % | |||||
| School or educational facility | 2 | 10.8 | % | |||||
| Not-for-profit organizations/religious institutions | 3 | 5.9 | % | |||||
| Medical, dental, physical therapy or veterinary offices or clinics, outpatient facilities, research or diagnostic laboratories or health management services and/or health professional schools | 4 | 5.2 | % | |||||
| Laboratory and mechanical space | 1 | 4.3 | % | |||||
| Private club (including spa and health club facilities) | 1 | 3.6 | % | |||||
| Bank branch | 1 | 1.7 | % | |||||
| Government tenant | 1 | 1.6 | % | |||||
| Salon or day spa | 1 | 1.0 | % | |||||
See “Risk Factors—Risks Relating to the Mortgage Loans—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses”.
Mortgage Loan Concentrations
Top Ten Mortgage Loans
The following table shows certain information regarding the ten largest Mortgage Loans by Cut-off Date Balance:
Loan Name | Mortgage Loan Cut-off Date Balance | Approx. % of | Loan per | UW NCF | Cut-off | U/W NOI | Property | |||||||||||||||||||
| 10 Hudson Yards | $ | 65,000,000 | 9.2 | % | $390 | 4.18 | x | 32.9 | % | 12.9 | % | Office | ||||||||||||||
| Fiserv at 2900 Westside | $ | 65,000,000 | 9.2 | % | $173 | 1.52 | x | 67.1 | % | 9.5 | % | Office | ||||||||||||||
| Westfield San Francisco Centre | $ | 60,000,000 | 8.5 | % | $545 | 3.68 | x | 35.5 | % | 13.1 | % | Mixed Use | ||||||||||||||
| Prudential Plaza | $ | 50,000,000 | 7.1 | % | $183 | 1.34 | x | 59.3 | % | 9.0 | % | Office | ||||||||||||||
| U-Haul AREC Portfolio | $ | 48,500,000 | 6.9 | % | $77 | 1.64 | x | 67.4 | % | 10.3 | % | Self Storage | ||||||||||||||
| Birch Run Premium Outlets | $ | 43,000,000 | 6.1 | % | $181 | 2.90 | x | 59.4 | % | 13.2 | % | Retail | ||||||||||||||
| Hall Office Park 16 | $ | 42,000,000 | 6.0 | % | $216 | 1.41 | x | 74.8 | % | 8.9 | % | Office | ||||||||||||||
| Gas Company Tower & World Trade Center Parking Garage | $ | 40,000,000 | 5.7 | % | $105 | 5.23 | x | 23.6 | % | 19.9 | % | Mixed Use | ||||||||||||||
| Vertex Pharmaceuticals HQ | $ | 30,000,000 | 4.3 | % | $375 | 6.28 | x | 35.5 | % | 17.9 | % | Office | ||||||||||||||
| 60 East 55th Street | $ | 25,000,000 | 3.6 | % | $677 | 1.40 | x | 45.5 | % | 8.9 | % | Mixed Use | ||||||||||||||
| Top 10 Total/Weighted Average | $ | 468,500,000 | 66.6 | % | 2.89 | x | 50.6 | % | 12.1 | % | ||||||||||||||||
| (1) | With respect to the 10 Hudson Yards, Westfield San Francisco Centre, Gas Company Tower & World Trade Center Parking Garage and Vertex Pharmaceuticals HQ Mortgage Loans, Loan per NRA, UW NCF DSCR, Cut-off Date LTV Ratio and U/W NOI Debt Yield calculations include the related pari passu companion loan(s) and exclude the related subordinate companion loans and mezzanine loan. |
See “—Assessment of Property Value and Condition” for additional information.
For more information regarding the ten largest Mortgage Loans and/or loan concentrations and related Mortgaged Properties, see the individual Mortgage Loan and portfolio descriptions under “Description of Top Twenty Mortgage Loans and Additional Mortgage Loan Information” in Annex A-3. Other than with respect to the top ten Mortgage Loans identified in the table above, each of the other Mortgage Loans represents no more than 3.3% of the Initial Pool Balance.
See “Risk Factors—Risks Relating to the Mortgage Loans-—Concentrations Based on Property Type, Geography, Related Borrowers and Other Factors May Disproportionately Increase Losses”.
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Multi-Property Mortgage Loans and Related Borrower Mortgage Loans
The pool of Mortgage Loans will include 3 Mortgage Loans, set forth in the following table entitled “Multi-Property Mortgage Loans”, representing approximately 9.3% of the Initial Pool Balance, which are each secured by two or more properties. In some cases, however, the amount of the mortgage lien encumbering a particular property may be less than the full amount of indebtedness under the Mortgage Loan, generally to minimize recording tax. In such instances, the mortgage amount may equal a specified percentage (generally ranging from 100% to 150%, inclusive) of the appraised value or Allocated Loan Amount for the particular Mortgaged Property. This would limit the extent to which proceeds from that property would be available to offset declines in value of the other Mortgaged Properties securing the same Mortgage Loan.
The following table shows each individual Mortgage Loan that is secured by two or more Mortgaged Properties.
Multi-Property Mortgage Loans
Mortgage Loan/Property Portfolio Names | Aggregate Cut-off Date | Approx. % of Initial Pool | ||||||
| U-Haul AREC Portfolio | $ | 48,500,000 | 6.9 | % | ||||
| NY Rite Aid Portfolio | 11,950,830 | 1.7 | ||||||
| National Self Storage Portfolio | 4,994,265 | 0.7 | ||||||
| Total | $ | 65,445,095 | 9.3 | % | ||||
In addition, an individual Mortgaged Property may be comprised of two or more parcels that may not be contiguous or may be owned by separate borrowers. For example, with respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 401 South State Street, representing approximately 2.2% of the Initial Pool Balance, the related Mortgaged Property comprises two buildings located on two non-contiguous parcels (each of which is a separate tax lot) divided by a public alleyway and connected via a private, lower level maintenance tunnel. One building has a net rentable area of 479,522 sq. ft. and the second building has a net rentable area of 7,500 sq. ft.
Geographic Concentrations
This table shows the states that have concentrations of Mortgaged Properties that secure 5.0% or more of the Initial Pool Balance:
Geographic Distribution(1)
State | Number of Mortgaged | Aggregate Cut-off Date | % of Initial Pool Balance | |||||||
| CA | 5 | $136,375,000 | 19.4 | % | ||||||
| NY | 7 | $113,450,830 | 16.1 | % | ||||||
| GA | 6 | $95,237,165 | 13.5 | % | ||||||
| TX | 6 | $80,044,265 | 11.4 | % | ||||||
| IL | 3 | $69,517,454 | 9.9 | % | ||||||
| MI | 1 | $43,000,000 | 6.1 | % | ||||||
| OR | 3 | $35,513,303 | 5.1 | % | ||||||
| (1) | Because this table presents information relating to Mortgaged Properties and not the Mortgage Loans, the information for any Mortgaged Property that is one of multiple Mortgaged Properties securing a particular Mortgage Loan is based on an Allocated Loan Amount, which amounts, if not specified in the related mortgage loan documents, are based on the appraised values, as stated in Annex A-1. |
The remaining Mortgaged Properties are located throughout 14 other states, with no more than 4.3% of the Initial Pool Balance by Allocated Loan Amount secured by Mortgaged Properties located in any such jurisdiction.
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In addition, with respect to the Mortgaged Properties in the Mortgage Pool, we note the following in respect of their geographic concentration:
Mortgaged Properties securing approximately 50.4% of the Initial Pool Balance by Allocated Loan Amount, are located in Florida, Georgia, Louisiana, Massachusetts, New York, South Carolina, Texas and Virginia, and may be more generally susceptible to floods or hurricanes than properties in other parts of the country.
Mortgaged Properties securing approximately 30.8% of the Initial Pool Balance by Allocated Loan Amount, are located in California and Texas and are more susceptible to wildfires.
Mortgaged Properties securing approximately 24.4% of the Initial Pool Balance by Allocated Loan Amount, are located in areas that are considered a high earthquake risk (seismic zones 3 or 4), and seismic reports were prepared with respect to these Mortgaged Properties, and based on those reports, no Mortgaged Property has a seismic expected loss greater than 16.0%.
Mortgaged Properties With Limited Prior Operating History
Four (4) of the Mortgage Loans secured by the Mortgaged Properties identified on Annex A-1 to this prospectus as 10 Hudson Yards, Fiserv at 2900 Westside, Hall Office Park 16 and Fresenius Medical Center Summit, collectively representing approximately 25.0% of the Initial Pool Balance, are secured by Mortgaged Properties that were constructed, in a lease-up period or were the subject of a major renovation that was completed within 12 calendar months prior to the cut-off date and, therefore, the related Mortgaged Property has no prior operating history or the related mortgage loan seller did not take the operating history into account in the underwriting of the related Mortgage Loan.
One (1) of the Mortgage Loans secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as NY Rite Aid Portfolio, representing approximately 1.7% of the Initial Pool Balance, are secured by Mortgaged Properties that are single tenant properties subject to double-net or triple-net leases with the related tenant where the related borrower did not provide the related Mortgage Loan Seller with historical financial information for the related Mortgaged Property.
See “Risk Factors—Risks Relating to the Mortgage Loans-—Limited Information Causes Uncertainty”.
Tenancies-in-Common
One (1) Mortgaged Property identified on Annex A-1 to this prospectus as Columbia Gorge Premium Outlets, representing 3.0% of the Initial Pool Balance, has one or more borrowers that own all or a portion of the related Mortgaged Property as tenants-in-common, and the respective tenants-in-common have agreed to a waiver of their rights of partition. See “Risk Factors—Risks Relating to the Mortgage Loans—Tenancies-in-Common May Hinder Recovery”.
See “Risk Factors—Risks Relating to the Mortgage Loans—The Borrower’s Form of Entity May Cause Special Risks” and “—Tenancies-in-Common May Hinder Recovery”.
Condominium Interests
Four (4) of the Mortgage Loans secured by the Mortgaged Properties identified on Annex A-1 to this prospectus as 60 East 55th Street, Kahana Retail, Shoppes at Vickery Village and Altmonte Apartments, representing in the aggregate approximately 7.8% of the Initial Pool Balance is secured, in part, by the related borrower’s interest in one or more units in a condominium. Except as described below, 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 A-1 to this prospectus as 60 East 55th Street, representing approximately 3.6% of the Initial Pool Balance, the
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related Mortgaged Property is a four-unit retail/commercial condominium located in a building with 76 residential condominium units. The related condominium board consists of 5 residential members and 3 commercial members. Only the commercial members are controlled by the related borrower.
In addition, with respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Shoppes at Vickery Village, representing approximately 1.5% of the Initial Pool Balance, there are two condominiums located within the office portion of the related Mortgaged Property, known as Office Park Condominium and Office Park III Condominium. The related borrower owns 1 of 6 units of Office Park Condominium, representing only 16.67% of the votes of the related condominium board, but owns all 12 units of Office Park III Condominium. Furthermore, the entire related Mortgaged Property, including the condominiums, is located within a master development governed by and subject to a master declaration.
See “Risk Factors—Risks Relating to the Mortgage Loans—Condominium Ownership May Limit Use and Improvements”.
Fee & Leasehold Estates; Ground Leases
The following table shows the distribution of underlying interests encumbered by the mortgages related to the Mortgaged Properties:
Property Ownership Interest(1)
Property Ownership Interest | Number of | Aggregate Cut-off Date | Approx. % of Initial | ||||||
| Fee Simple(2)(3) | 57 | $643,219,986 | 91.5 | % | |||||
| Fee Simple/Leasehold | 1 | 60,000,000 | 8.5 | ||||||
| Total | 58 | $703,219,986 | 100.0 | % | |||||
| (1) | Because this table presents information relating to Mortgaged Properties and not Mortgage Loans, the information for Mortgage Loans secured by more than one Mortgaged Property is based on Allocated Loan Amounts, which amounts, if not specified in the related mortgage loan documents, are based on the appraised values, as set forth in Annex A-1. |
| (2) | May include mortgaged properties constituting the borrower’s leasehold interest in the mortgaged property along with the corresponding fee interest of the ground lessor in such mortgaged property. |
| (3) | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Fiserv at 2900 Westside, which secures a Mortgage Loan representing approximately 9.2% of the Initial Pool Balance, pursuant to a real estate tax abatement arrangement, the borrower exchanged its fee interest in the Mortgaged Property for a leasehold interest, which fee interest will revert to the borrower upon the expiration of such tax abatement structure. For information regarding the tax abatement structure, see “—Real Estate and Other Tax Considerations” and “—Additional Indebtedness—Other Unsecured Indebtedness”. |
In general, unless the related fee interest is also encumbered by the related Mortgage (and therefore treated as a fee simple interest in the chart above), each of the ground leases has a term that extends at least 20 years beyond the maturity date of the Mortgage Loan (taking into account all freely exercisable extension options) and, except as noted below or in the exceptions to representation and warranty number 34 in Annex D-1 indicated on Annex D-2 and Annex D-3, contains customary mortgagee protection provisions, including notice and cure rights and the right to enter into a new lease with the applicable ground lessor in the event a ground lease is rejected or terminated.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Westfield San Francisco Centre, representing approximately 8.5% of the Initial Pool Balance, the Mortgage Loan is secured in part by the one of the borrower’s leasehold interests in the portion of the Mortgaged Property known as San Francisco Centre, constituting approximately 22.2% of the total net rentable area, and by the other borrower’s fee simple interest in the portion of the Mortgaged Property known as the Emporium, constituting approximately 77.8% of the total net rentable area of the Mortgaged Property. The related ground lease, between the San Francisco Unified School District, as ground lessor and S.F. Centre Limited Partnership, as ground lessee, has an original expiration date of June 30, 2043, with one option to extend the term for 15 years (which option is freely exercisable by the
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lender). Annual minimum ground rent is $3,260,000per annum, subject to periodic adjustments according to criteria forth in the ground lease.
Mortgage loans secured by ground leases present certain bankruptcy and foreclosure risks not present with Mortgage Loans secured by fee simple estates. See “Risk Factors—Risks Relating to the Mortgage Loans—Risks Related to Ground Leases and Other Leasehold Interests”, “Certain Legal Aspects of Mortgage Loans—Foreclosure” and “—Bankruptcy Laws”.
Environmental Considerations
An environmental report was prepared for each Mortgaged Property securing a Mortgage Loan no more than 9 months (or, in the case of the Kahana Retail Mortgaged Property, 15 months, in the case of the Prudential Plaza Mortgaged Property, 14 months and in the case of the Deerbrook Commons Mortgaged Property, 13 months ) prior to the Cut-off Date. See Annex A-1 for the date of the environmental report for each Mortgaged Property. The environmental reports were generally prepared pursuant to the American Society for Testing and Materials standard for a “Phase I” environmental site assessment (“ESA”). In addition to the Phase I standards, some of the environmental reports will include additional research, such as limited sampling for asbestos-containing material, lead-based paint, radon or water damage with limited areas of potential or identified mold, depending on the property use and/or age. Additionally, as needed pursuant to American Society for Testing and Materials standards, supplemental “Phase II” site investigations have been completed for some Mortgaged Properties to further evaluate certain environmental issues, including certain recognized environmental conditions. A Phase II investigation generally consists of sampling and/or testing.
| · | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as U-Haul AREC Portfolio, representing approximately 6.9% of the Initial Pool Balance, the related Phase I ESAs identified the presence of certain environmental concerns, including recognized environmental conditions, at the U-Haul N Miami Beach Mortgaged Property and the U-Haul Center North Irby St Mortgaged Property. The U-Haul N Miami Beach Mortgaged Property (2269 Northeast 163rd Street location) is listed on regulatory databases as a leaking underground storage tank (LUST) facility in connection with former onsite USTs and is reported to be ineligible for state-funded cleanup. The related Phase I ESA does note a discrepancy in the regulatory records due to a lack of documented discharge or contamination. With respect the U-Haul Center North Irby St Mortgaged Property, the Phase I ESA reported, among other environmental concerns, the presence of a UST associated with the past operation of an ice cream manufacturer at the Mortgaged Property and recommended that a limited Phase II be performed. To address these environmental concerns, and in lieu of a Phase II at the U-Haul Center North Irby St Mortgaged Property, the borrower obtained a blanket environmental insurance policy. The environmental insurance policy, issued by Chartis Specialty Insurance Company, has a term expiring on August 12, 2016, a $100,000 deductible and a limit of $10,000,000 per occurrence and in the aggregate. Under the Mortgage Loan documents, the borrower is required to extend such policy (or provide coverage under a substantially similar replacement policy) for so long as the related Mortgage Loan debt is outstanding. On July 27, 2016, the borrower obtained a replacement blanket environmental insurance policy, issued by Illinois Union Insurance Co, with the same deductible and policy limits as the current policy for a term commencing on August 12, 2016 and expiring on August 12, 2019. |
| · | With respect to the Mortgaged Property identified on Annex A-1 as Birch Run Premium Outlets, which secures a Mortgage Loan representing approximately 6.1% of the Initial Pool Balance, a Phase I environmental site assessment (“ESA”) reported that previous onsite oil well activity had resulted in chloride impacts to soil and groundwater. Pursuant to the Michigan Environmental Remediation program that offers qualified cleanup cost liability protection to new owners of previously contaminated properties, Baseline Environmental Assessments (“BEAs”) were completed in 1999 and 2013. The ESA recommended no further action in regard to this matter other than noting that upon any future transfer of ownership the new owner should complete a new BEA within 45 days of the transfer. |
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| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Vertex Pharmaceuticals HQ, which secures a Mortgage Loan representing approximately 4.3% of the Initial Pool Balance, the groundwater beneath the Mortgaged Property exceeds U.S. Environmental Protection Agency (“EPA”) National Pollution Discharge Elimination System limits for certain metals (cyanide, antimony, copper, lead, iron and zinc). The groundwater treatment system represents a controlled recognized environmental condition based on the established control (the treatment system) as issued by the EPA in order for the groundwater to meet levels below the U.S. EPA Remediation General Permit limits. Pursuant to the related Mortgage Loan documents, in the event that the related environmental indemnitor does not have a long-term unsecured debt rating of at least “BBB-” by Fitch and S&P and “Baa3” by Moody’s, the related borrower is required to procure an environmental impairment liability insurance policy in the form of an ECLIPSE (Enviro Covered Location Insurance Policy (Site Environmental)), PLL (Pollution Legal Liability Select), PARLL (Pollution and Remedial Legal Liability) or other similar policy, reasonably acceptable to the lender, providing coverage for both existing and new environmental conditions for first- and third-party claims (a “Vertex Environmental Insurance Policy”) within 10 days of such downgrade or replacement of the related environmental indemnitor. The Vertex Environmental Insurance Policy is required to be provided on a claims-made-and-reported basis with policy limits of no less than $10,000,000 per incident and in the aggregate, with a per incident deductible of no more than $50,000 and a term that extends beyond the related maturity date, with an optional extended reporting period of no less than 36 months. Pursuant to the related mezzanine intercreditor agreement, if the mezzanine lender or a qualified transferee forecloses or otherwise realizes upon its equity interests in the related borrower, it will not be subject to the foregoing environmental insurance policy requirement. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Deerbrook Commons, which secures a Mortgage Loan representing approximately 2.4% of the Initial Pool Balance, the Phase I ESA recommended that (i) due to the age of the Mortgaged Property, a survey for asbestos-containing materials (“ACMs”) be conducted prior to any planned renovation or demolition activities, (ii) water damage and/or apparent mold growth identified in several areas within certain suites be cleaned and the mold and/or water-stained materials be replaced as part of routine maintenance, and (iii) a limited Phase II subsurface investigation be conducted in order to determine the presence or absence of soil and/or groundwater contamination due to the current and historical on-site dry cleaning operations. The Phase II assessment identified limited dry cleaning solvent in soil and groundwater, however at levels below applicable regulatory guidelines and the environmental consultant recommended no further investigation of the site and did not have any additional recommendations with respect to the current and historical on-site dry cleaning operations at this time. |
| · | With respect to the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as NY Rite Aid Portfolio, which secures a Mortgage Loan representing approximately 1.7% of the Initial Pool Balance, a portion of the Rite Aid – Cheektowaga Mortgaged Property was formerly occupied by an automobile dealership and repair facility from the 1930s to the 1990s, prior to construction of the current improvements at the related Mortgaged Property in 1999. According to the underground storage tank (“UST”) database and the New York State Department of Conservation (the “NYSDEC”) Petroleum Bulk Storage file for the related Mortgaged Property, multiple USTs and hydraulic lifts were previously located and reportedly removed from the related Mortgaged Property. The Spills database also reported impacts at the Mortgaged Property, but the NYSDEC approved a no further action status and, as of June 2006, its regulatory database indicates a “closed” status. However, an official no further action letter was not issued and, in any event, UST and hydraulic lift removal documents were not included in the files provided by the NYSDEC. Furthermore, results of a Phase II environmental site assessment at the related Mortgaged Property in August 2005 indicated that xylenes, 1,3,5-trimethylbenzene, 1,2,4-trimethylbenzene and naphthalene were detected in one soil sample at concentrations that exceeded their respective NYSDEC Recommended Soil Cleanup Objectives. In addition, eleven volatile organic compounds (“VOCs”) and fourteen semi-volatile organic compounds (“SVOCs”) were detected above their respective NYSDEC Class GA groundwater criteria in one |
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| groundwater sample, while 1,2,4-trimethylbenzene and naphthalene were detected at concentrations that were above their respective NYSDEC Class GA groundwater criteria in a second groundwater sample. Although the Spills case was issued closure in June 2006 and the related Mortgaged Property was redeveloped with the current improvements in 1999, it does not appear that such additional impacts were reported to the NYSDEC. Therefore, the historical uses represent a recognized environmental condition associated with the related Mortgaged Property. The related borrower obtained for the benefit of the lender a lender environmental collateral protection and liability insurance policy from Steadfast Insurance Company that covers the Rite Aid – Cheektowaga Mortgaged Property, with policy limits of $1,000,000 per claim and in the aggregate, a $50,000 self-insured retention and a policy term of 10 years with a 3-year tail. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Fresenius Medical Center Summit, which secures a Mortgage Loan representing approximately 0.5% of the Initial Pool Balance, a release of gasoline from an underground tank was reported at the Mortgaged Property in 2001. The release was assigned a Leaking Underground Storage Tank (“LUST”) incident number and a responsible party was identified. According to the regulatory database report, the release received closure in the form of a No Further Remediation (“NFR”) letter in 2009, which stipulated institutional controls, including the Village of Summit Groundwater Use Ordinance (a regional restriction for installing groundwater wells in the village) and the recording of the NFR letter as part of the Mortgaged Property’s chain of title. Based on the regulatory conditional closure of the LUST by the Illinois Environmental Protection Agency (“IEPA”), the release at the Mortgaged Property represents a controlled recognized environmental condition. In addition, the property adjacent to the Mortgaged Property was identified in the regulatory database as a LUST and underground storage tank site. Multiple LUST incidents have been reported at the site, and a Corrective Action Plan (“CAP”) for those cases was approved by the IEPA in 2014. According to the information contained within the CAP, concentrations of one or more petroleum constituents were found to exceed the most stringent IEPA Tiered Approach to Corrective Action (“TACO”) Objectives Tier 1 Soil Remediation Objectives in several soil samples, and concentrations of one or more petroleum constituents were found to exceed the IEPA TACO Tier 1 Groundwater Remediation Objectives in two monitoring wells. Although the site is located within approximately 200 feet of the Mortgaged Property and groundwater from the site is flowing toward the Mortgaged Property, documentation reflects that the Mortgaged Property was constructed with a chemical vapor barrier. Therefore, the adjacent site and potential impacts to the Mortgaged Property represent a controlled recognized environmental condition. |
Redevelopment, Renovation and Expansion
Certain of the Mortgaged Properties are properties which are currently undergoing or are expected to undergo redevelopment, renovation or expansion, including with respect to hospitality properties, executing property improvement plans(“PIPs”). In certain cases, such PIPs may be required by the franchisor to maintain franchise affiliation, as described in “—Mortgage Pool Characteristics—Property Types—Hospitality Properties” above. For example, with respect to a Mortgaged Property that is currently undergoing or is expected to undergo material redevelopment, renovation or expansion and is a Mortgaged Property that (i) secures a Mortgage Loan that is one of the top 20 Mortgage Loans or (ii) where the related costs are anticipated to be more than 10% of the Cut-off Date Balance of the related Mortgage Loan:
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as 10 Hudson Yards, which secures a Mortgage Loan representing approximately 9.2% of the Initial Pool Balance (which is part of a whole loan with an aggregate original principal balance of $900.0 million), the borrower reserved approximately $91.0 million with the lender in connection with the remaining construction work, tenant improvements and build-out, which work is projected to be completed by June 30, 2017. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Hilton Garden Inn San Leandro, which secures a Mortgage Loan representing approximately 2.9% of |
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| the Initial Pool Balance, the Mortgaged Property is currently undergoing a change-of-ownership property improvement plan with an estimated cost of approximately $3.8 million. Such property improvement plan is required pursuant to the related franchise agreement, which further requires such plan to be completed within 12 months of acquisition of the related Mortgaged Property (with guestroom television replacements to be completed within 24 months). At origination, the borrower reserved $4,183,856 to cover the cost of the property improvement plan. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Oxford Glen Apartments, which secures a Mortgage Loan representing approximately 2.2% of the Initial Pool Balance, the borrower is currently renovating twelve units that were damaged in a February 2016 fire. On March 18, 2016, the borrower received $147,904.13 in insurance proceeds as a result of the fire damage, of which the borrower has spent $77,404.13 on repairs and estimates that the cost to complete the repairs will be $73,952. The potential shortfall of $3,452 in estimated construction costs was not reserved by the borrower at origination. The borrower estimates that the construction will be completed in two to three months. In addition, the borrower anticipates additional renovations at the Mortgaged Property that are required to be completed by July 2018. At origination, the borrower reserved approximately $953,637 in connection with such renovations. The extensive nature of the renovations may result in disruption of business at the Mortgaged Property. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Hampton Inn Eugene, which secures a Mortgage Loan representing approximately 0.8% of the Initial Pool Balance, the borrower reserved $1,102,000 at origination of the Mortgage Loan for completion of a franchisor required PIP, the majority of which is required to be completed by June 8, 2017, to update the Mortgaged Property to the franchisor’s Forever Young brand standard. The PIP includes improvements and refurbishments of the guestrooms, building exterior and the public areas. The extensive nature of the renovations may result in disruption of business at the Mortgaged Property. |
Certain risks related to redevelopment, renovation and expansion at a Mortgaged Property are described in “Risk Factors—Risks Relating to the Mortgage Loans—Risks Related to Redevelopment, Expansion and Renovation at Mortgaged Properties”.
Assessment of Property Value and Condition
In connection with the origination or acquisition of each Mortgage Loan or otherwise in connection with this offering, an appraisal was conducted in respect of the related Mortgaged Property by an independent appraiser that was state certified and/or a member of the Appraisal Institute or an update of an existing appraisal was obtained. In each case, the appraisal complied, or the appraiser certified that it complied, 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. In general, those appraisals represent the analysis and opinion of the person performing the appraisal and are not guarantees of, and may not be indicative of, present or future value. We cannot assure you that another person would not have arrived at a different valuation, even if such person used the same general approach to and same method of valuing the property or that different valuations would not have been reached separately by the mortgage loan sellers based on their internal review of such appraisals. The appraisals obtained as described above sought to establish the amount a typically motivated buyer would pay a typically motivated seller. Such amount could be significantly higher than the amount obtained from the sale of a Mortgaged Property under a distress or liquidation sale.
In addition, in general, a licensed engineer, architect or consultant inspected the related Mortgaged Property, in connection with the origination or acquisition of each of the Mortgage Loans or otherwise in connection with this offering, to assess the condition of the structure, exterior walls, roofing, interior structure and mechanical and electrical systems. Engineering reports by licensed engineers, architects or consultants generally were prepared, except for newly constructed properties, certain manufactured housing community properties and properties for which the borrower’s interest consists of a fee interest solely on the land and not any improvements, for the Mortgaged Properties in connection with the
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origination of the related Mortgage Loan or in connection with this offering. None of these engineering reports are more than 14 months old as of the Cut-off Date. In certain cases where material deficiencies were noted in such reports, the related borrower was required to establish reserves for replacement or repair or remediate the deficiency.
Litigation and Other Considerations
There may be material pending or threatened legal proceedings against, or other past or present material criminal or material adverse regulatory circumstances experienced by, the borrowers, their sponsors and managers of the Mortgaged Properties and their respective affiliates. In addition, the Mortgaged Property may be subject to ongoing litigation. For example:
With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as Prudential Plaza, representing approximately 7.1% of the Initial Pool Balance, the Prudential Plaza Property was previously security for a $415 million first mortgage (the “Prior Loan”), which was deposited in equal portions in the JPMCC 2006-LDP7 and JPMCC 2006-CB16 securitization trusts (together, the “Prior Securitization”) and an affiliate of the borrower under the Prior Loan also obtained a $60.0 million original principal balance mezzanine loan from an affiliate of Northstar. In 2012, the first mortgage loan was transferred into special servicing as a result of impending lease expirations with two major tenants totaling approximately 19% of the total NRA, which tenants ultimately vacated the property.
Mark Karasick and Michael Silberberg, the non-recourse carveout guarantors under the Prudential Plaza Whole Loan (the “Prudential Plaza Guarantors”) (then unaffiliated with the sponsorship of the Prior Loan), reached an agreement with the sponsor under the Prior Loan (the “Prior Sponsorship”) for an equity recapitalization. The Prudential Plaza Guarantors thereafter reached an agreement with the special servicer of the Prior Securitization, and in June 2013 the special servicer agreed to modify the Prior Loan to reflect a $336 million senior portion (the A note) and a $74 million junior portion (the hope note). As part of the loan modification, the Prudential Plaza Guarantors took control of the Prudential Plaza Property and the borrower under the Prior Loan. In connection with the recapitalization, the Prudential Plaza Guarantors contributed $76.5 million of new equity into the Prudential Plaza Property (while the Prior Sponsorship retained a minority non-controlling interest in the property).
In addition, in connection with the modification of the Prior Loan, the N-Star CDO VIII securitization, as the holder of the $60 million mezzanine loan, agreed to convert the mezzanine loan into an unsecured loan (the “N-Star Unsecured Loan”) and entered into a subordination and standstill agreement which restricts the lender under the N-Star Unsecured Loan from (i) exercising remedies under the N-Star Unsecured Loan until the Prudential Plaza Whole Loan is fully satisfied and (ii) receiving any payments under the N-Star Unsecured Loan during any event of default or trigger period under the Prudential Plaza Whole Loan. In addition, a Northstar affiliate contributed $8.5 million of new equity into the Prudential Plaza Property at the time of the 2013 recapitalization.
On February 24, 2016, the trustees of the Prior Securitizations (the “Plaintiffs”) filed suit in the United States District Court for the Southern District of New York (Docket # 1:16-CV-01450 (JGK)) against (1) the Prudential Plaza Guarantors and (2) BFPRU I, LLC (the prior borrower) (together with the Prudential Plaza Guarantors, the “Defendants”). The current borrower under the Prudential Plaza Whole Loan is not named as a defendant in the suit.
The suit alleges among other things, that in connection with the calculation of the discounted payoff of the Prior Loan based on appraisals ordered by Plaintiffs and Defendants, the Defendants (i) breached agreements relating to the Prior Loan, (ii) engaged in fraud, willful misconduct and intentional misrepresentation by failing to provide complete and accurate information to the Plaintiffs and their appraisers about the Prudential Plaza Property, including approximately $5.8 million in prospective leasing activity relating to the Prudential Plaza Property, which failure had a material adverse effect on the “as-is” appraised value of the Prudential Plaza Property, and (iii) falsely certified that they had provided all financial, operating and leasing information about the Prudential Plaza Property and that none of the Defendants was aware of any additional financial, operating or leasing information that would
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have a material effect on the value of the Prudential Plaza Property. The complaint alleges that the Defendants’ actions resulted in a discount of approximately $83,794,494 in the payoff amount of the Prior Loan. Plaintiffs claim damages in the amount of the discount, plus prejudgment interest and all costs and expenses associated with the complaint.
On April 11, 2016, the Defendants filed a third-party complaint against the special servicer of the Prior Securitization for contribution and indemnity with respect to the claims of Plaintiffs, denying the allegations of the Plaintiffs’ complaint and alleging, among other things, that any prospective leasing activity was of no consequence to the “as is” appraisals obtained in connection with the early payoff and that a substantial portion of the prospective new leasing activity alleged in the complaint was actually disclosed to the special servicer, which is alleged to have had a duty to the Defendants to disclose it to the Plaintiffs’ appraiser.
On May 4, 2016, the Plaintiffs filed an amended complaint and the Defendants filed an amended third-party complaint, both containing substantially the same causes of action as the initial complaint and expanding on certain allegations. On May 24, 2016, the Defendants filed a motion to dismiss the amended complaint of the Plaintiffs. In addition, the special servicer of the Prior Securitization filed a motion to dismiss the Defendants’ third-party complaint. Opposition to the motions to dismiss were filed on June 16, 2016, and replies in support of the motions to dismiss were filed on June 30, 2016. The court has not ruled on either motion to dismiss.
The Prudential Plaza Guarantors are guarantors with respect to certain matters relating to the Prudential Plaza Whole Loan. A judgment against the Prudential Plaza Guarantors in this matter, depending on the dollar amount involved, could have a material impact on the ability of the Prudential Plaza Guarantors to fulfill their obligations under the recourse guaranty. A personal bankruptcy of a Prudential Plaza Guarantor would trigger an event of default under the loan agreement; however, the Prudential Plaza Loan does not become recourse to the Prudential Plaza Guarantors upon personal bankruptcy of a Prudential Plaza Guarantor. The Prudential Plaza Whole Loan would also go into default if the Prudential Plaza Guarantors failed to collectively maintain the net worth or minimum liquid assets, as specified in the recourse guaranty. An event of default under the loan agreement would cause the Prudential Plaza Whole Loan to become a specially serviced loan under the COMM 2015-CCRE26 pooling and servicing agreement. The borrower is required under the loan agreement to pay special servicing fees associated with the Prudential Plaza Whole Loan. To the extent that the special servicing fees are not recovered from the borrower, the trust would be responsible for its proportionate share (approximately 12.0%) of the special servicing fees. Special servicing fees of the COMM 2015-CCRE26 special servicer are substantially similar to the compensation set forth in “Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses—Special Servicing Compensation” in this prospectus.
With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as U-Haul AREC Portfolio, representing approximately 6.9% of the Initial Pool Balance, on March 11, 2015, a judgment in the amount of $60.7 million was entered against U-Haul International, Inc. (“U-Haul”), an affiliate of AMERCO, the non-recourse carveout guarantor, in connection with certain federal trademark infringement and related claims. The case is currently on appeal with the U.S. Court of Appeals for the Eleventh Circuit.
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Oxford Glen Apartments, representing approximately 2.2% of the Initial Pool Balance, the non-recourse carveout guarantor, Craig Stansberry, is the guarantor under a loan secured by another multifamily property (the “Other Loan”) that went into default in November 2011. The lender under the Other Loan filed a civil action against Stansberry in October 2012. In January 2013, the parties entered into a forbearance agreement, which agreement has been extended through February 28, 2017. In connection with the forbearance agreement, Stansberry guaranteed the payment obligations under the Other Loan.
See “Risk Factors—Risks Relating to the Mortgage Loans—Litigation Regarding the Mortgaged Properties or Borrowers May Impair Your Distributions”.
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Loan Purpose; Default History, Bankruptcy Issues and Other Proceedings
Loan Purpose
Twenty-three (23) of the Mortgage Loans, collectively representing approximately 62.4% of the Initial Pool Balance, were, in whole or in part, originated in connection with the borrower’s refinancing of a previous mortgage loan or credit facility secured by the Mortgaged Property.
Seven (7) of the Mortgage Loans, collectively representing approximately 21.4% of the Initial Pool Balance, were, in whole or in part, originated in connection with the borrower’s acquisition of the related Mortgaged Property.
Two (2) of the Mortgage Loans, collectively representing approximately 16.1% of the Initial Pool Balance, were, in whole or in part, originated in connection with the borrower’s recapitalization of the related Mortgaged Property.
Default History, Bankruptcy Issues and Other Proceedings
Three (3) of the Mortgage Loans, collectively representing approximately 12.6% of the Initial Pool Balance, (i) were refinancings in whole or in part of a prior loan secured by, or a mezzanine loan secured by interests in the owner of, the related Mortgaged Property, which prior loan was in default at the time of refinancing and/or otherwise involved a discounted pay-off, maturity extension, short sale or other restructuring or (ii) provided acquisition financing for the related borrower’s purchase of the related Mortgaged Property at a foreclosure sale or after becoming REO Property as described below;
| · | With respect to the Mortgaged Property identified on Annex A-1 as Prudential Plaza, which secures a Mortgage Loan representing approximately 7.1% of the initial pool balance, a portion of the proceeds of the $415,000,000 original principal balance whole loan refinanced a prior loan secured by the mortgaged property and paid off a $336,000,000 A note. In connection with pay off, the prior lender cancelled a $24,000,000 B note (the “Hope Note”) (also secured by the Mortgaged Property) without repayment. For further information, see “Description of the Mortgage Pool—Litigation and Other Considerations”. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Embassy Suites Columbus, which secures a Mortgage Loan representing approximately 3.3% of the Initial Pool Balance, the Mortgaged Property was previously encumbered by a $25,200,000 construction loan made by two lenders, Huntington Bank ($14,000,000) and Citizens Bank ($11,200,000). In 2010, in anticipation of a breach of certain DSCR covenants in the construction loan agreement, the borrower requested a one-year extension. Citizens Bank denied such request but offered a $7,700,000 discounted payoff of its $11,200,000 participation which borrower accepted after obtaining an additional approximately $5,000,000 from Huntington Bank. In November, 2014, the borrower paid off a portion of the Huntington loan ($17,920,000) with proceeds from a $21,260,000 loan from NXT Capital. The current mortgage loan refinanced and paid off in full the NXT Capital loan and the remaining $1,080,000 outstanding on the Huntington Bank loan. |
| · | With respect to the Mortgaged Property identified on Annex A-1 as Oxford Glen Apartments, which secures a Mortgage Loan representing approximately 2.2% of the Initial Pool Balance, the Mortgage Loan refinanced a prior loan to the borrower approximately two months after the prior loan maturity date. In connection with the payoff, the prior lender waived $275,236.11, representing half of the late fees that were otherwise due on the payoff date (but did not waive default interest). |
In addition, with respect to certain of the Mortgage Loans, (a) related borrowers, sponsors and/or key principals (or affiliates thereof) have previously sponsored, been a key principal with respect to, or been a payment or non-recourse carveout guarantor on mortgage loans secured by, real estate projects (including in some such cases, the particular Mortgaged Property or Properties referenced above in this
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sentence) that became the subject of foreclosure proceedings or a deed in lieu of foreclosure or bankruptcy proceedings or directly or indirectly secured a real estate loan or a real estate related mezzanine loan that was the subject of a discounted payoff or (b) a Mortgaged Property was acquired by the related borrower or an affiliate thereof through foreclosure or a deed in lieu of foreclosure, as part of an REO transaction, at a foreclosure sale or out of receivership.
For example, within approximately the last 10 years, with respect to the 20 largest Mortgage Loans:
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Birch Run Premium Outlets, which secures a Mortgage Loan representing approximately 6.1% of the Initial Pool Balance, the related sponsor, Simon Property Group, L.P., has sponsored other real estate projects over the last 10 years that have been the subject of mortgage loan defaults, foreclosure proceedings and deeds-in-lieu of foreclosure. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Columbia Gorge Premium Outlets, which secures a Mortgage Loan representing approximately 3.0% of the Initial Pool Balance, the borrower sponsor, Francis Greenburger, was also the sponsor of another property that secured a loan that was an asset in the MSC 2006-HQ9 securitization trust, which property was sold at a foreclosure sale in April 2015. |
| · | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Hilton Garden Inn San Leandro, representing approximately 2.9% of the Initial Pool Balance, the related borrower sponsors owned two hospitality properties, one of which was transferred to a lender by deed-in-lieu of foreclosure in 2009 and the other of which was the subject of a non-judicial, uncontested foreclosure in 2010. |
| · | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Shoppes at Vickery Village, representing approximately 1.5% of the Initial Pool Balance, the related borrower sponsor owned a single family lot and a personal residence, each of which was the subject of foreclosure in 2011. |
With respect to certain of the Mortgage Loans, related borrowers, sponsors and/or key principals (or affiliates thereof) may previously have been the subject of personal bankruptcy proceedings, or a related Mortgaged Property has previously been involved in a borrower, principal or tenant bankruptcy.
We cannot assure you that there are no other bankruptcy proceedings, foreclosure proceedings, deed-in-lieu of foreclosure transactions and/or mortgage loan workout matters that involved one or more Mortgage Loans or Mortgaged Properties, and/or a guarantor, borrower, borrower sponsor or other party to a Mortgage Loan.
Certain risks relating to bankruptcy proceedings are described in “Risk Factors—Risks Relating to the Mortgage Loans—A Bankruptcy Proceeding May Result in Losses and Delays in Realizing on the Mortgage Loans”, “—Litigation Regarding the Mortgaged Properties or Borrowers May Impair Your Distributions” and “Certain Legal Aspects of Mortgage Loans—Bankruptcy Laws”.
Tenant Issues
Tenant Concentrations
The Mortgaged Properties have tenant concentrations as set forth below:
| · | Six (6) of the Mortgaged Properties, securing in whole or in part three (3) Mortgage Loans, representing approximately 11.5% of the Initial Pool Balance by Allocated Loan Amount, are leased to a single tenant. |
See “—Lease Expirations and Terminations” below, “Risk Factors—Risks Relating to the Mortgage Loans—Risks of Commercial and Multifamily Lending Generally”, “—Performance of the Mortgage Loans
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Will Be Highly Dependent on the Performance of Tenants and Tenant Leases—A Tenant Concentration May Result in Increased Losses” and “—Concentrations Based on Property Type, Geography, Related Borrowers and Other Factors May Disproportionately Increase Losses”.
Lease Expirations and Terminations
Expirations. Certain of the Mortgaged Properties are subject to tenant leases that expire before the maturity date of the related Mortgage Loan. For tenant lease expiration information in the form of a lease rollover chart relating to each of the top ten Mortgage Loans, see the related summaries attached as Annex A-3 to this prospectus. In addition, see Annex A-1 for tenant lease expiration dates for the five largest tenants (based on net rentable area leased) at each retail, office and mixed use Mortgaged Property. Even if none of the top five tenants at a particular Mortgaged Property as identified on Annex A-1 have leases that expire before, or shortly after, the maturity of the related Mortgage Loan, there may still be a significant percentage of leases at a particular Mortgaged Property that expire in a single calendar year, a rolling 12-month period or prior to, or shortly after, the maturity of a Mortgage Loan. Furthermore, some of the Mortgaged Properties have significant leases or a significant concentration of leases that expire before, or shortly after, the maturity of the related Mortgage Loan. Identified below are certain material lease expirations or concentrations of lease expirations with respect to the Mortgaged Properties:
| · | In certain cases, the lease of a single tenant, major tenant or anchor tenant at a multi-tenanted Mortgaged Property expires prior to the maturity date of the related Mortgage Loan. |
With respect to the Mortgage Loans secured, in whole or in part, by the Mortgaged Property identified in the following table, such Mortgaged Property is occupied by a single tenant under a lease which expires prior to, or in the same year of, the maturity (or, in the case of an ARD Loan, the anticipated repayment date) of the related Mortgage Loan.
| Mortgaged Property Name | % of the Initial Pool Balance by Allocated Loan Amount | Lease Expiration Date | Maturity Date | |||
| Rite Aid – Batavia, NY | 0.5% | 1/14/2026 | 7/6/2026 | |||
| Rite Aid – West Seneca, NY | 0.5% | 5/31/2026 | 7/6/2026 | |||
| Rite Aid – Cheektowaga | 0.4% | 10/11/2026 | 7/6/2026 | |||
| Rite Aid – Greece, NY | 0.4% | 2/28/2026 | 7/6/2026 |
| · | With respect to the Mortgaged Properties shown in the following table, one or more leases representing 50% or greater of the net rentable square footage of the related Mortgaged Property (excluding Mortgaged Properties leased to a single tenant and set forth in the bullet above) expire in a single calendar year prior to, or the same year as, the maturity of the related Mortgage Loan. There may be other Mortgaged Properties as to which leases representing at least 50% or greater of the net rentable square footage of the related Mortgaged Property expire over several calendar years prior to maturity (or, in the case of an ARD Loan, the anticipated repayment date) of the related Mortgage Loan. |
| Mortgaged Property Name | Tenant Name | % of the Initial Pool Balance by Allocated Loan Amount | % of NRSF Expiring | Date(s) of Expiration | Maturity Date | ||||||
| Vertex Pharmaceuticals HQ | Vertex | 4.3% | 95.5% | 12/31/2028 | 11/6/2028(1) | ||||||
| 60 East 55th Street | The Core Club | 3.6% | 87.6% | 6/30/2026 | 8/6/2026 | ||||||
| 401 South State Street | Robert Morris University | 2.2% | 75.0% | 6/30/2024 | 7/6/2026 | ||||||
| 465 Columbus Ave | NYC Department of Environmental Protection | 1.6% | 51.7% | 4/30/2024 | 8/6/2026 | ||||||
| Emporia Marketplace | Various | 0.6% | 83.8% | Various dates in 2020 | 7/6/2026 |
| (1) | The anticipated repayment date is August 6, 2026. |
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| · | In addition, with respect to certain other Mortgaged Properties, there are leases that represent in the aggregate a material portion (but less than 50%) of the net rentable square footage of the related Mortgaged Property that expire in a single calendar year prior to, or shortly after, the maturity (or, in the case of an ARD Loan, the anticipated repayment date) of the related Mortgage Loan. |
See Annex A-1 for tenant lease expiration dates for the five largest tenants (based on net rentable area leased) at each retail, office and mixed use Mortgaged Property.
Furthermore, commercial retail tenants having stores at multiple locations may experience adverse business conditions that result in their deciding to close under-performing stores. We are aware that (i) in May 2014, Office Depot, Inc., which also operates stores under the Office Max brand, announced that it will be closing 400 locations over two years; (ii) on April 9, 2015, Walgreens Boots Alliance, Inc. announced its plan to close approximately 200 stores across the United States (which could affect stores operated as Walgreens or Duane Reade); (iii) on January 7, 2015, J.C. Penney Co. identified 39 stores that it plans to close and on January 13, 2016, J.C. Penney Co. identified 7 stores that it plans to close; (iv) on August 21, 2014, Sears Holdings announced a net loss of $573 million and its intentions to close approximately 130 stores in 2014, and in February 2016, Sears announced its plan to accelerate the closing of at least 50 of its U.S. unprofitable stores; (v) on January 15, 2016, Wal-Mart Stores, Inc., announced plans to close 269 stores globally, including 154 stores located in the United States; (vi) on October 27, 2015, Walgreens Boots Alliance, Inc. announced its intention to acquire Rite Aid Corporation, subject to necessary regulatory approvals, and if such acquisition were to occur, there can be no assurance that Walgreens or Rite Aid store closings would not occur as part of the transaction or otherwise; and (vii) on August 11, 2016, Macy’s, Inc. announced plans to close 100 underperforming stores. While Walgreens Boots Alliance, Inc., Office Depot, Inc., Rite Aid Corporation and Macy’s, Inc. have not identified specific stores slated to close, we cannot assure you that any such store closings will not have a material adverse effect on the mortgaged properties that have Walgreens Boots Alliance, Inc., Office Depot, Inc., Rite Aid Corporation or Macy’s, Inc. as a tenant or shadow anchor. We cannot assure you that any other tenant or anchor tenant at a Mortgaged Property will not close stores, including stores at or near the Mortgaged Property.
Terminations. In addition to termination options tied to certain triggers as described in “Risk Factors—Risks Relating to the Mortgage Loans—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases—Early Lease Termination Options May Reduce Cash Flow” that are common with respect to retail properties, certain tenant leases permit the related tenant to unilaterally terminate its lease. For example (with respect to the largest 20 Mortgage Loans and the largest five tenants at each Mortgaged Property as identified on Annex A-1):
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as 10 Hudson Yards, which secures a Mortgage Loan representing approximately 9.2% of the Initial Pool Balance, Boston Consulting Group, Inc. (“BCG”), the third largest tenant, has a one-time right to reduce its leased space by up to two full contiguous floors (either in the top half or bottom half of their space), which right may be exercised either (i) between January 31, 2026 and January 31, 2027 or (ii) between January 31, 2028 and January 31, 2029, with 18 months’ prior written notice and payment of a contraction fee. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Fiserv at 2900 Westside, which secures a Mortgage Loan representing approximately 9.2% of the Initial Pool Balance, Fiserv, the sole tenant, has the right to reduce its leased space by up to one floor effective December 31, 2020 or by up to two cumulative floors (after taking into consideration the space previously reduced under the first contraction option) effective December 31, 2022 with notice delivered at least twelve months’ prior to the applicable effective date and the payment of a contraction fee. If the second contraction option is exercised, the space contracted must be contiguous to any space contracted through the exercise of the first contraction option and include the balance of the floor on which the first contraction space was located if the first contraction space is less than one full floor. Any space contracted through exercise of either the |
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| first or second contraction option must consist of at least one-half of the rentable square feet on a floor. | ||
| · | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Westfield San Francisco Centre, representing approximately 8.5% of the Initial Pool Balance, the largest tenant, San Francisco State University, leasing approximately 15.8% of the net rentable area at the Mortgaged Property (of which approximately 29.5% of such space has been subleased to two subtenants), has a one-time termination option for the entirety of its space effective December 31, 2018, with notice by September 30, 2017 and payment of a termination fee equal to the sum of three months of base rent and any unamortized tenant improvements and broker commissions. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Prudential Plaza, which secures a Mortgage Loan representing approximately 7.1% of the Initial Pool Balance, the second largest tenant, Clark Hill, has the right to terminate its lease beginning on December 31, 2027, by providing at least 15 months prior written notice and the payment a termination fee. The fifth largest tenant, The Prudential Insurance Company, has the right to terminate its lease beginning on July 31, 2022 by providing 12 months written notice and the payment of a termination fee. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Hall Office Park 16, which secures a Mortgage Loan representing approximately 6.0% of the Initial Pool Balance, the (i) second largest tenant, Jamba Juice, has a one-time termination option to terminate its lease effective April 30, 2024 by giving written notice at any time prior to April 30, 2023 and the payment of a termination fee and (ii) the fourth largest tenant, Amica Insurance, has the option to terminate its lease effective October 31, 2020, with nine month’s prior notice and payment of a termination fee equal to the sum of two months’ base rent and any unamortized tenant improvements and brokerage commissions. |
| · | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Gas Company Tower & World Trade Center Parking Garage, representing approximately 5.7% of the Initial Pool Balance, Southern California Gas Company, the largest tenant, has a one-time termination right to terminate its main lease effective November 9, 2021 by giving notice at any time prior to May 9, 2020 and the payment of a termination fee, and may also terminate various portions of its leased space effective on various dates from June 30, 2016 through November 9, 2021 by giving the applicable notice and paying the applicable termination fee for the related portion of its leased space. Sidley Austin, the second largest tenant, has a one-time right to reduce its leased space effective December 31, 2018, with notice delivered on or before December 31, 2017 and the payment of a contraction fee. Deloitte US, the third largest tenant, has a one-time termination right to terminate its lease effective on March 31, 2027 by giving notice at any time prior to December 31, 2025 and the payment of a termination fee, and has one-time right to reduce its leased space effective February 28, 2023, with notice delivered on or before November 30, 2021 and the payment of a contraction fee. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Deerbrook Commons, which secures a Mortgage Loan representing approximately 2.4% of the Initial Pool Balance, Workforce Solutions, the second largest tenant, may terminate its lease effective September 30 of each year of the term starting on September 30, 2006, if the Houston-Galveston Area Council withdraws its funding for this specific facility of the tenant, subject to 60 days’ notice and the payment of a termination fee equal to the borrower’s unamortized lease costs. |
| · | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 465 Columbus Ave, representing approximately 1.6% of the Initial Pool Balance, the largest tenant, NYC Department of Environmental Protection, has the option to terminate its lease effective April 2018, April 2020 and April 2022 upon one year’s prior written |
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| notice. The second largest tenant, Westchester Health Associates, has the option to terminate its lease effective July 2021 and July 2023 upon eight months’ written notice. |
See Annex A-3 for more information on material termination options relating to the largest 10 Mortgage Loans.
Other.Tenants under certain leases included in the Underwritten Net Cash Flow, Underwritten NOI and/or Occupancy may not be in physical occupancy, may not have begun paying rent or may be in negotiation. For example, with respect to single tenant properties or tenants that are one of the top five tenants at a Mortgaged Property identified on Annex A-1 with respect to the largest 20 Mortgage Loans or tenants individually or in the aggregate representing more than 25% of the net rentable area at the Mortgaged Property, certain of such tenants have not taken possession or commenced paying rent or are in rent abatement periods as set forth below:
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as 10 Hudson Yards, which secures a Mortgage Loan representing approximately 9.2% of the Initial Pool Balance, L’Oreal, the second largest tenant, is in occupancy but has a free rent period in August 2016. BCG, the third largest tenant, is expected to take occupancy by the end of 2016, with rent commencing in May 2017, following a free rent period from August 2016 through April 2017. SAP, the fourth largest tenant, is expected to take occupancy in the fall of 2016, with rent commencing in June 2017, following a free rent period from August 2016 through June 2017. Intersection, the fifth largest tenant, is expected to take occupancy in the fall of 2016, with rent commencing in January 2017 for the space on the 26th floor, following a free rent period from August 2016 through January 2017 and July 2017 for the space on the 27th floor, following a free rent period from August 2016 through July 2017. The borrower reserved $34,160,073 at origination of the Mortgage Loan, $1,851,106 of which relates to L’Oreal, $12,032,622 of which relates to BCG, $10,529,239 of which relates to SAP, $3,367,625 of which relates to Intersection, and the remaining portion of the reserve relates to free rent periods for other smaller tenants. |
| · | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Westfield San Francisco Centre, representing approximately 8.5% of the Initial Pool Balance, the largest tenant, San Francisco State University, leasing approximately 15.8% of the net rentable area at the Mortgaged Property, subleases a 18,712 sq. ft. portion of its space (constituting approximately 2.4% of the net rentable at the Mortgaged Property) to Westfield Labs Corporation (an affiliate of the borrower) and a 18,354 sq. ft. portion of its space (constituting approximately 2.3% of the net rentable area at the Mortgaged Property) to the San Francisco Examiner. Each sublease is coterminous with the related prime lease, which expires on December 31, 2021. In addition, the second largest tenant, Crunchyroll, Inc., leasing approximately 9.0% of the net rentable area at the Mortgaged Property, subleases a 30,000 sq. ft. portion of its space (representing approximately 3.8% of the net rentable at the Mortgaged Property), to GoPro, Inc. The related sublease expires on June 30, 2017 (which is prior to the related prime lease). During the sublease period, Crunchyroll, Inc. is required to pay the borrower as additional rent 50% of all rent, additional rent or other consideration paid by GoPro, Inc. to Crunchyroll, Inc. in excess of the rent and additional rent already payable for such space under the prime lease. The lender did not include any related sublease income in its underwriting. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Prudential Plaza, which secures a Mortgage Loan representing approximately 7.1% of the Initial Pool Balance, the largest tenant, Optiver US LLC, has a rent abatement period from December 2016 to May 2017 and a rent abatement period from May 2018 to September 2018. Optiver US LLC has also entered into a lease to occupy an additional 25,450 sq. ft., which will commence in May 2017. The second largest tenant, Clark Hill, has entered into a lease to occupy 71,813 sq. ft., which will commence in January 2017 and has a rent abatement period from January 2017 to July 2017. The fourth largest tenant, CBS Radio Holdings Corp., has a rent abatement period from May 2018 to December 2019. The fifth largest tenant, The Prudential Insurance Company, |
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| has a rent abatement period from August 2016 to October 2016 and a rent abatement period from August 2017 to September 2017. The borrower reserved $12,911,435 at origination of the Mortgage Loan, $611,871 of which relates to Optiver US LLC, $706,592 of which relates to Clark Hill, $1,280,091 relates to CBS Radio Holdings Corp., $494,698 of which relates to The Prudential Insurance Company, and the remaining portion of the reserve relates to rent abatement periods for other smaller tenants. Furthermore, McGraw Hill Financial, Inc. is currently a tenant under various leases that represent in the aggregate 175,888 square feet, of which 151,662 sq. ft. will expire on November 30, 2016. McGraw Hill Financial, Inc. currently subleases 23,199 sq. ft. to The University of Chicago and 49,998 sq. ft. to McDermott Will & Emery LLP, with both subleases expiring on November 30, 2016. McDermott Will & Emery LLP has signed a direct lease to take over the space that it is currently subleasing from McGraw Hill Financial, Inc. when McGraw Hill Financial, Inc.’s lease expires on November 30, 2016. Other than the lease for 24,226 sq. ft. that expires on November 30, 2026, the McGraw Hill Financial, Inc. leased space was not given any value in underwriting the Prudential Plaza Whole Loan. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Hall Office Park 16, which secures a Mortgage Loan representing approximately 6.0% of the Initial Pool Balance, Paycor, the largest tenant, expanded its leased space by an additional 25,321 square feet in June 2016 and is expected to take occupancy of the expansion space in August 2016. Paycor has a rent abatement period from June 2016 until December 2016 for its original space and from June 2016 until February 2017 for its expansion space as well as an additional reduction of rent payment of $12,600 for the month of November 2016 as a one-time payment to offset certain parking charges. The borrower reserved $124,719 at origination of the Mortgage Loan with respect to Paycor’s original space and $405,136 with respect to Paycor’s expansion space. In addition, Jamba Juice, the second largest tenant, signed a lease in May 2016 but is not yet in occupancy and has not commenced paying rent as it is building out its space. Jamba Juice is expected to take occupancy and commence paying rent on October 1, 2016. Jamba Juice is permitted to pay abated rent for the first six months following the date that it commences paying rent, which rent abatement may not extend past March 31, 2017. The borrower reserved $609,144 at origination of the Mortgage Loan with respect to Jamba Juice Inc. In addition, $61,787 was reserved by the borrower at origination of the Mortgage Loan for the rent abatement periods for other smaller tenants. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Gas Company Tower & World Trade Center Parking Garage, which secures a Mortgage Loan representing approximately 5.7% of the Initial Pool Balance, Southern California Gas Co., the largest tenant, is entitled to free rent under its primary lease through October 2016. In addition, Latham & Watkins, the fourth largest tenant, is not required to pay base rent (although it will still be required to pay its share of the Mortgaged Property’s common area expenses) for the months of January 2017, January 2018, January 2019 and January 2020 so long as no event of default has occurred under its lease. At origination, the borrower reserved $4,160,630 (with respect to Southern California Gas Co.) and $317,695 (with respect to Latham & Watkins). In addition, the borrower is required to make monthly deposits of $14,150 into the lease reserve account related to the free rent periods for Latham & Watkins and another tenant. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Vertex Pharmaceuticals HQ, which secures a Mortgage Loan representing approximately 4.3% of the Initial Pool Balance, the fourth largest tenant represents unoccupied space that is master leased by an affiliate of the original developer of the property. Underwritten revenues include income from the fourth largest tenant. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as 60 East 55th Street, which secures a Mortgage Loan representing approximately 3.6% of the Initial Pool Balance, the second largest tenant, Sweetgreen, is entitled to free rent for the first six months and five days of its lease term. At origination of the Mortgage Loan, the related borrower funded a free rent reserve in the amount of $257,500. At origination, the related borrower also deposited a |
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| $1,545,000 holdback, which represented three years of Sweetgreen’s rent; provided, that such funds were released to the borrower following the borrower’s satisfaction of certain conditions, including that the lender is in receipt of an executed commencement date agreement between the borrower and Sweetgreen confirming among other things that the lease commencement date is deemed to be July 25, 2016. | ||
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Deerbrook Commons, which secures a Mortgage Loan representing approximately 2.4% of the Initial Pool Balance, Workforce Solutions, the second largest tenant, is permitted a rent abatement of $17,536 on the first day of October of each year from 2011 through 2020, and Olive Garden, the third largest tenant, is permitted to a rent abatement of $768 per month through and including the rent payment date in December 2016. Additionally, Deerbrook Beauty Supply, the fifth largest tenant, executed a lease and is expected to take occupancy in August 2016. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Shoppes at Vickery Village, which secures a Mortgage Loan representing approximately 1.5% of the Initial Pool Balance, the largest tenant, The ReThink Group, has commenced paying rent for its retail space at the Mortgaged Property but is not yet opened for business. |
See“Risk Factors—Risks Relating to the Mortgage Loans—Underwritten Net Cash Flow Could Be Based On Incorrect or Failed Assumptions”.
See Annex A-3 for more information on other tenant matters relating to the largest 20 Mortgage Loans.
Purchase Options and Rights of First Refusal
Below are certain purchase options and rights of first refusal to purchase all or a portion of the Mortgaged Property with respect to certain of the Mortgaged Properties.
| · | With respect to the Mortgaged Property identified on Annex A-1 as Fiserv at 2900 Westside, which secures a Mortgage Loan representing approximately 9.2% of the Initial Pool Balance, a tenant, franchisor or other party may have a right of first refusal, right of first offer or purchase option with regard to the Mortgaged Property or its leased premises. |
See “Risk Factors—Risks Relating to the Mortgage Loans—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases—Leases That Are Not Subordinated to the Lien of the Mortgage or Do Not Contain Attornment Provisions May Have an Adverse Impact at Foreclosure”.
Affiliated Leases
Certain of the Mortgaged Properties are leased in whole or in part by borrowers or borrower affiliates including, in certain circumstances under an operating lease between a borrower and an affiliate of the related borrower. Set forth below are examples of Mortgaged Properties or portfolios of Mortgaged Properties at which at least 20% of (i) the gross income at the Mortgaged Property or portfolio of Mortgaged Properties relates to leases between the borrower and an affiliate of the borrower or (ii) the net rentable area at the Mortgaged Property or portfolio of Mortgaged Properties is leased to an affiliate of the borrower, excluding Mortgaged Properties that are leased to an affiliate of the borrower that functions as an operating lease:
| · | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Westfield San Francisco Centre, representing approximately 8.5% of the Initial Pool Balance, the fourth largest tenant, Bespoke, is an affiliate of the borrower and occupies approximately 4.7% of the net rentable area of the Mortgaged Property as a coworking, technology demonstration and event space. Additionally, the largest tenant, San Francisco State University, leasing approximately 15.8% of the net rentable are at the Mortgaged Property, |
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| subleases a portion of its space, representing approximately 1.9% of the net rentable area at the Mortgaged Property, to Westfield Labs Corporation, which is an affiliate of the borrower and uses its space as a global digital laboratory. See “—Tenant Issues—Lease Expirations and Terminations—Other” for additional information. |
Insurance Considerations
The Mortgage Loans generally require that each Mortgaged Property be insured by a hazard insurance policy in an amount (subject to an approved deductible) at least equal to the lesser of the outstanding principal balance of the related Mortgage Loan and 100% of the replacement cost of the improvements located on the related Mortgaged Property, and if applicable, that the related hazard insurance policy contain appropriate endorsements or have been issued in an amount sufficient to avoid the application of co-insurance and not permit reduction in insurance proceeds for depreciation;provided that in the case of certain of the Mortgage Loans, the hazard insurance may be in such other amounts as was required by the related originators.
In general, the standard form of hazard insurance policy covers physical damage to, or destruction of, the improvements on the Mortgaged Property by fire, lightning, explosion, smoke, windstorm and hail, riot or strike and civil commotion, subject to the conditions and exclusions set forth in each policy. Each Mortgage Loan generally also requires the related borrower to maintain comprehensive general liability insurance against claims for personal and bodily injury, death or property damage occurring on, in or about the related Mortgaged Property in an amount generally equal to at least $1,000,000. Each Mortgage Loan generally further requires the related borrower to maintain business interruption insurance in an amount not less than approximately 100% of the gross rental income from the related Mortgaged Property for not less than 12 months. In general, the Mortgage Loans (including those secured by Mortgaged Properties located in California) do not require earthquake insurance. Eight (8) of the Mortgaged Properties, securing 24.4% of the Initial Pool Balance, are located in areas that are considered a high earthquake risk. These areas include all or parts of the states of California and Oregon.
In the case of 49 Mortgaged Properties which secure in whole or in part 23 Mortgage Loans, representing approximately 87.7% of the Initial Pool Balance by Allocated Loan Amount, the related borrowers maintain insurance under blanket policies.
Further, with respect to Mortgaged Properties that are part of condominium regimes, the insurance may be maintained by the condominium association rather than the related borrower. Many Mortgage Loans contain limitations on the obligation to obtain terrorism insurance. See “Risk Factors—Risks Relating to the Mortgage Loans—Terrorism Insurance May Not Be Available for All Mortgaged Properties”.
See “Risk Factors—Risks Relating to the Mortgage Loans—Risks Associated with Blanket Insurance Policies or Self-Insurance”.
Use Restrictions
Certain of the Mortgaged Properties are subject to restrictions that restrict the use of such Mortgaged Properties to its current use, place other use restrictions on such Mortgaged Property or limit the related borrower’s ability to make changes to such Mortgaged Property.
| · | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as U-Haul AREC Portfolio, representing approximately 6.9% of the Initial Pool Balance, the U-Haul Moving & Storage Of Historic Ybor City Mortgaged Property is legal non-conforming as to use. In the event of an intentional or voluntary abandonment of such legal non-conforming use for more than 180 days or of damage or destruction of 60% or more of the current assessed taxable value of all structures comprising the legal non-conforming use, the Mortgaged Property must be rebuilt in accordance with current zoning. |
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| · | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 60 East 55th Street, representing approximately 3.6% of the Initial Pool Balance, the related Mortgaged Property is occupied, in part, by a certain tenant (the “Core Club”) that is required to have a special permit (the “BSA Approval”), with respect to certain of its operations being a gym and spa facility, issued by the New York City Board of Standards and Appeals (the “BSA”). The BSA Approval is necessary in order for the Core Club to continue certain of its intended uses as a physical culture establishment. The BSA Approval was obtained but, as of the origination date of the subject Mortgage Loan, has expired. Notwithstanding the BSA Approval expiration, the physical culture establishment that was the subject of the BSA Approval has been in continuous use. The related borrower is required to cause the Core Club to: (i) file (A) an application together with all documents required by the BSA for an extension of the term of the BSA Approval pursuant to the BSA’s special order calendar, and (B) a waiver together with all documents required by the BSA on account that the BSA Approval has expired (the “BSA Application”) within the timeframe required by the BSA to renew and extend the term of the BSA Approval; (ii) pursue the BSA Application to completion; and (iii) cooperate in every way with the Core Club, the BSA and with all requirements of the BSA Application (x) in order to cause the BSA to provide one or more renewals of the BSA Approval, and (y) as necessary for the BSA Approval to be renewed and in effect for the term of the subject Mortgage Loan. In addition, the certificate of occupancy at the related Mortgaged Property is a temporary certificate of occupancy (a “TCO”). Although the current TCO does not reflect the physical culture use of the Core Club, the related borrower has confirmed that the city has approved the physical culture use. Such use is anticipated to be reflected on the TCO when the same is renewed. The related Mortgage Loan documents require that the related borrower (i) use commercially reasonable efforts to cause the related condominium board to maintain the current TCO and to cause the condominium board to cause the TCO to be continuously renewed at all times until a new, permanent certificate of occupancy is obtained for the related Mortgaged Property (the “New PCO”), (ii) diligently and in good faith pursue completion of all of the conditions required under applicable legal requirements including, without limitation, causing any violations with respect to the unit to be removed of record, for the issuance of the New PCO and (iii) cause to be delivered to the lender copies of each updated TCO as and when issued and deliver to the lender a copy of the New PCO upon its issuance. |
| · | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 401 South State Street, representing approximately 2.2% of the Initial Pool Balance, the related Mortgaged Property has been landmarked by the City of Chicago and is registered with the National Register of Historic Places, protecting certain features of the Mortgaged Property including portions of interior staircases and the façade. We cannot assure you such designation will not interfere with any redevelopment or future use of the related Mortgaged Property. |
| · | With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as NY Rite Aid Portfolio, representing approximately 1.7% of the Initial Pool Balance, the Rite Aid – Batavia, NY Mortgaged Property and the Rite Aid – Greece, NY Mortgaged Property each constitutes a legal non-conforming use which, following a casualty or destruction, may not be resumed if, among other things, the replacement cost or damage exceeds a specified threshold and/or the restoration or repair is not completed or the prior use is not resumed (or certain key steps in connection therewith are not taken) within a specified time frame. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Holiday Inn Express Cocoa Beach, which secures a Mortgage Loan representing approximately 0.9% of the Initial Pool Balance, the Mortgaged Property is legal non-conforming as to use. In the event the Mortgaged Property is subject to a casualty or condemnation of over 50% of the replacement cost, the Mortgaged Property must be rebuilt in accordance with current zoning. |
See “Risk Factors—Risks Relating to the Mortgage Loans—Risks Related to Zoning Non-Compliance and Use Restrictions”.
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Appraised Value
In certain cases, in addition to an “as-is” value, the appraisal states an “as complete”, “as-is with reserves”, “hypothetical as-is” or “as-stabilized” value for the related Mortgaged Property that assumes that certain events will occur with respect to re-tenanting, construction, renovation or repairs at such Mortgaged Property. The Appraised Value set forth on Annex A-1 is the “as-is” value unless otherwise specified in this prospectus, on Annex A-1 and/or the related footnotes. With respect to the Mortgaged Properties that secure the Mortgage Loans listed in the following table, the respective Cut-off Date LTV Ratio was calculated using the related “as complete”, “as-is with reserves”, “hypothetical as-is” or “as-stabilized” Appraised Value, as opposed to the “as-is” Appraised Values, each as set forth in the following table:
| Mortgage Loan Name | % of Initial Pool Balance | Cut-off Date LTV Ratio (“As Complete”, “As- Is With Reserves”, “Hypothetical As- Is” or “As- Stabilized”) | “As Complete”,“As -Is With Reserves”, “Hypothetical As-Is” or “As-Stabilized” Appraised Value | Cut-off Date LTV Ratio (“As-Is”) | “As-Is” Appraised Value | |||||
| 10 Hudson Yards | 9.2% | 32.9% | $2,150,000,000(1) | 34.5% | $2,050,000,000 | |||||
| Hall Office Park 16 | 6.0% | 74.8% | $56,130,017(2) | 79.8% | $52,600,000 | |||||
| Hilton Garden Inn San Leandro | 2.9% | 59.1% | $34,300,000(3) | 71.1% | $28,500,000 | |||||
| Huntington Park | 0.8% | 67.8% | $8,700,000(4) | 69.4% | $8,500,000 | |||||
| Hampton Inn Eugene | 0.8% | 65.9% | $8,600,000(5) | 77.6% | $7,300,000 |
| (1) | Reflects an appraisal on a “Hypothetical As-Is” basis, which assumes remaining contractual obligations and remaining costs of approximately $108,600,000 are expended as of July 1, 2016. As of August 1, 2016, approximately $91.0 million of such contractual obligations and costs remain, which amount was reserved upon origination of the 10 Hudson Yards Whole Loan. |
| (2) | Reflects an appraisal based on an “As-Is with reserves” basis, which takes into account that the scheduled outstanding tenant improvement, leasing commission, rent reserves and rent abatement costs were reserved at loan closing. |
| (3) | Reflects an appraisal on an “As-Stabilized” basis, which assumes that the remaining renovations required by the PIP are completed as of April 27, 2017, the costs of which were reserved at origination of the related Mortgage Loan. |
| (4) | Reflects an appraisal on an “As-Stabilized” basis as of May 1, 2017, which assumes that the remaining renovations are completed and the Mortgaged Property is operated at a stabilized occupancy. The costs of the planned sponsor renovation was reserved at origination of the Huntington Park Mortgage Loan. |
| (5) | Reflects an appraisal on an “As Complete” basis, which assumes the completion of a PIP renovation at the mortgaged property, for which reserves have been established, on May 23, 2017. |
With respect to the Mortgaged Properties that secure the Mortgage Loans listed in the following table, the respective Maturity Date LTV Ratio was calculated using the related “as complete”, “as-is with reserves”, “hypothetical as-is” or “as-stabilized” Appraised Value, as opposed to the “as-is” Appraised Values, each as set forth in the following table:
| Mortgage Loan Name | % of Initial Pool Balance | Maturity Date LTV Ratio (“As Complete”, “As- Is With Reserves”, “Hypothetical As- Is” or “As- Stabilized”) | “As Complete”, “As- Is With Reserves”, “Hypothetical As-Is” or “As-Stabilized” Appraised Value | Maturity Date LTV Ratio (“As-Is”) | “As-Is” Appraised Value | |||||
| 10 Hudson Yards | 9.2% | 32.9% | $2,150,000,000(1) | 34.5% | $2,050,000,000 | |||||
| Hall Office Park 16 | 6.0% | 59.6% | $56,130,017(2) | 63.6% | $52,600,000 | |||||
| Hilton Garden Inn San Leandro | 2.9% | 50.8% | $34,300,000(3) | 61.2% | $28,500,000 | |||||
| Huntington Park | 0.8% | 55.3% | $8,700,000(4) | 56.6% | $8,500,000 | |||||
| Hampton Inn Eugene | 0.8% | 53.4% | $8,600,000(5) | 62.9% | $7,300,000 |
| (1) | Reflects an appraisal on a “Hypothetical As-Is” basis, which assumes remaining contractual obligations and remaining costs of approximately $108,600,000 are expended as of July 1, 2016. As of August 1, 2016, approximately $91.0 million of such contractual obligations and costs remain, which amount was reserved upon origination of the 10 Hudson Yards Whole Loan. |
| (2) | Reflects an appraisal based on an “As-Is with reserves” basis, which takes into account that the scheduled outstanding tenant improvement, leasing commission, rent reserves and rent abatement costs were reserved at loan closing. |
| (3) | Reflects an appraisal on an “As-Stabilized” basis, which assumes that the remaining renovations required by the PIP are completed as of April 27, 2017, the costs of which were reserved at origination of the related Mortgage Loan. |
| (4) | Reflects an appraisal on an “As Stabilized” basis as of May 1, 2017, which assumes that the remaining renovations are completed and the Mortgaged Property is operated at a stabilized occupancy. The costs of the planned sponsor renovation was reserved at origination of the Huntington Park Mortgage Loan. |
| (5) | Reflects an appraisal on an “As Complete” basis, which assumes the completion of a PIP renovation at the mortgaged property, for which reserves have been established, on May 23, 2017. |
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For additional information regarding the appraisals obtained by the sponsors or, in the case of any mortgage loan acquired and re-underwritten by the related sponsor, appraisal(s) obtained by the related originator and relied upon by such sponsor, see “Transaction Parties—The Sponsors and Mortgage Loan Sellers—German American Capital Corporation” and “—Citigroup Global Markets Realty Corp.” in this prospectus. See also “Risk Factors—Risks Relating to the Mortgage Loans—Appraisals May Not Reflect Current or Future Market Value of Each Property”.
Non-Recourse Carveout Limitations
While the Mortgage Loans are generally non-recourse, the Mortgage Loans generally provide for recourse to the borrower and the related guarantor for liabilities that result from, for example fraud by the borrower, certain voluntary insolvency proceedings or other matters. However, certain of the Mortgage Loans may not contain such non-recourse carveouts or contain limitations to such carveouts. In general, the liquidity and net worth of a non-recourse guarantor under a Mortgage Loan will be less, and may be materially less, than the outstanding principal amount of that Mortgage Loan. As such, we cannot assure you that the related guarantor will be willing or able to satisfy its obligations under the Mortgage Loan documents. In addition, certain Mortgage Loans have additional limitations to the non-recourse carveouts. See the exceptions to representation and warranty number 26 in Annex D-1 indicated on Annex D-2 and Annex D-3 for additional information.
| · | The non-recourse carveout provisions contained in certain of the Mortgage Loan documents may also limit the liability of the non-recourse carveout guarantor for certain monetary obligations or covenants related to the use and operation of the Mortgaged Property to the extent that there is sufficient cash flow generated by the Mortgaged Property and made available to the related borrower and/or non-recourse carveout guarantor to take or prevent such required action. |
| · | Certain of the Mortgage Loans provide, with respect to liability for breaches of the environmental covenants in the Mortgage Loan documents, that the recourse obligations for environmental indemnification may terminate immediately (or in some cases, following a specified period, such as two years) after payment or defeasance in full of such Mortgage Loans (or in some cases, after a permitted transfer of the Mortgaged Property). |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as 10 Hudson Yards, which secures a Mortgage Loan representing 9.2% of the Initial Pool Balance, there is no separate nonrecourse carveout guarantor or environmental indemnitor other than the related borrower. |
| · | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Westfield San Francisco Centre, representing approximately 8.5% of the Initial Pool Balance, the liability of Westfield America, Inc., the related non-recourse carveout guarantor, for certain claims under the related guaranty is subject to a cap of 10% of the then outstanding principal balance of the Whole Loan. In addition, in no event will the guarantor be liable for losses solely related to the borrowers’ failure to pay debt service on or repay the Whole Loan, to remain solvent or to remain adequately capitalized or to pay their debts as they become due. Additionally, at origination, the borrowers were required to deposit $4,300,000 into a Zara Free Rent/TI Reserve. In lieu of depositing cash, the borrowers delivered two letters of credit in the aggregate amount of $4,300,000 from UBS AG bank to cover the related gap rent and tenant improvement obligations for Zara, a tenant at the Mortgaged Property. In addition, in the event the borrowers are required (on a later date) to make payments to any reserve accounts, the |
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| borrowers are permitted to deliver to the lender a letter of credit or guaranty with respect to any reserve in lieu of cash. |
| · | With respect to the Mortgaged Property identified on Annex A-1 as Birch Run Premium Outlets, which secures a Mortgage Loan representing approximately 6.1% of the Initial Pool Balance, the liability of the guarantor under its related guaranty is capped at an amount equal to 20% of the original principal balance of the related Whole Loan for so long as Simon Property Group, L.P. (“Simon L.P.”) is the guarantor. In addition, subject to the satisfaction of certain requirements in the Mortgage Loan documents, the borrower is permitted to replace the existing guarantor with an entity controlled by Simon L.P. or Simon Property Group, Inc. for liabilities covered under the existing guaranty (which includes environmental indemnity provisions) for the Mortgage Loan accruing after the date of such replacement. |
In addition, there may be impediments and/or difficulties in enforcing some or all of the non-recourse carveout liability obligations of individual guarantors depending on the domicile or citizenship of the guarantor.
See “Risk Factors—Risks Relating to the Mortgage Loans—Mortgage Loans Are Non-Recourse and Are Not Insured or Guaranteed”.
Real Estate and Other Tax Considerations
Below are descriptions of real estate tax matters relating to certain Mortgaged Properties.
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as 10 Hudson Yards, which secures a Mortgage Loan representing approximately 9.2% of the Initial Pool Balance, the Mortgaged Property is subject to (i) that certain Amended and Restated Company Lease Agreement, dated as of August 1, 2016 (the “Company Lease”), between the borrower, as landlord, and the New York City Industrial Development Agency (the “IDA”), as tenant, pursuant to which Borrower leased the Mortgaged Property to the IDA, and (ii) that certain Amended and Restated Agency Lease Agreement, dated as of August 1, 2016 (the “IDA Lease”), between the IDA, as sublandlord, and the borrower, as subtenant, pursuant to which the IDA subleased the Mortgaged Property to the borrower. The Company Lease and the IDA Lease each have terms expiring on June 30, 2043, approximately 17 years beyond the maturity of the Mortgage Loan, with no extension options. During the term of the IDA Lease, the borrower is required to make payments in lieu of New York City real property taxes (“PILOT”) with respect to the Mortgaged Property in the amounts set forth in a schedule to the IDA Lease. After the 15th fiscal tax year, the PILOT amounts payable by the borrower under the IDA Lease increase annually thereafter until the 20th tax fiscal year when the borrower is required to pay 100% of the New York City real property taxes that would otherwise be payable with respect to the Mortgaged Property in the absence of any real property tax exemption. The borrower’s obligation to pay PILOT under the IDA Lease is secured by three amended and restated fee and leasehold PILOT mortgages (collectively, the “PILOT Mortgages”), from the borrower and the IDA in favor of the Hudson Yards Infrastructure Corporation in the aggregate principal amount of $475,000,000 encumbering the borrower’s fee interest in the Mortgaged Property and subtenant’s interest under the IDA Lease and the IDA’s interest under the Company Lease. The liens of the PILOT Mortgages are senior in priority to the Mortgage securing the 10 Hudson Yards Whole Loan. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Fiserv at 2900 Westside, which secures a Mortgage Loan representing approximately 9.2% of the Initial Pool Balance, the Mortgaged Property benefits from a tax abatement in real property taxes provided through the Development Authority of Alpharetta (the “Authority”), which expires on December 31, 2025, prior to the maturity date of the Mortgage Loan on August 6, 2026. In connection with the tax abatement, the Authority acquired the fee interest in the Mortgaged Property in 2014 and issued certain municipal bonds (the “Authority Bonds”). In exchange, the predecessor to the borrower obtained the leasehold interest in the Mortgaged Property pursuant to a lease agreement with the Authority (the “Authority Lease”) and received 100.0% of the |
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| Authority Bonds. In connection with the acquisition of the Mortgaged Property, the borrower acquired ownership of the leasehold interest in the Mortgaged Property, with the right to the related fee interest upon termination of the tax abatement structure. The rent payable by the borrower to the Authority under the ground lease is equal to the principal and interest payments due to the borrower under the Authority Bonds and, therefore the rental payments and bond payments offset each other. At any time prior to December 31, 2025, the borrower is entitled to purchase the Mortgaged Property back from the Authority and end the tax abatement structure. In order to effectuate the purchase, (i) the Authority has executed a deed conveying the property to borrower, which deed is currently held in escrow with a third party escrow agent and (ii) such deed of conveyance will be recorded upon the surrender of the Authority Bonds by the borrower to the bond trustee and payment of certain nominal fees and expenses in connection with such surrender. The loan documents require the borrower to exercise this purchase option at the expiration of the ground lease term on December 31, 2025 and the fee interest will revert to the borrower. The Authority Bonds are additional collateral for the Fiserv at 2900 Westside Loan and the Authority has encumbered its fee interest in the Mortgaged Property in favor of the lender. During the term of the Authority Lease, the Mortgaged Property will be valued for ad valorem property tax purposes based on a ten year schedule, which is 50% of fair market value in 2016, and increases by 5% each year. The fair market value of the Mortgaged Property, after being reduced by the applicable percentage, is multiplied by 40% to determine the assessed value for such year and thereafter multiplied by the millage rate. Upon such expiration, the borrower will be required to pay full real estate taxes. The lease with the sole tenant, Fiserv Solutions Inc., is structured as a triple net lease, therefore no real estate taxes were underwritten in originating the Mortgage Loan. See “—Other Unsecured Indebtedness” below. We cannot assure you that the payment of full real estate taxes will not impact the cash flow available at the Mortgaged Property. | ||
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Hall Office Park 16, which secures a Mortgage Loan representing approximately 6.0% of the Initial Pool Balance, pursuant to an Economic Development Program Agreement between the City of Frisco, Texas (the “City”) and the Borrower (the “Tax Rebate Agreement”), the Borrower is entitled to receive annual payments from the City that reimburse a portion of the annual ad valorem taxes paid by the Borrower. The Borrower assigned its interest in the Tax Rebate Agreement and reserved $731,841, (the total amount of reimbursements under the Tax Rebate Agreement) to lender . The Mortgage Loan documents provide that the full amount on reserve is required to be released to the Borrower upon delivery of the City’s consent (in substantially the form attached to the Mortgage Loan agreement) to an assignment of the Tax Rebate Agreement to the lender, and its successors and assigns, in the event of a foreclosure. In the event that the Borrower does not obtain the consent of the City, the Mortgage Loan documents provide that the amounts on reserve the may be reimbursed to the Borrower from time to time upon delivery by the Borrower of a receipt or other documentation evidencing a tax reimbursement payment to Borrower from the City pursuant to the Tax Rebate Agreement. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Vertex Pharmaceuticals HQ, which secures a Mortgage Loan representing approximately 4.3% of the Initial Pool Balance, infrastructure development assistance bonds in the initial principal amount of $34,605,000 (the “Initial IDA Bonds”) were issued by the Massachusetts Development Finance Agency (the “Agency”) pursuant to an agreement among the Agency, The Commonwealth of Massachusetts (the “Commonwealth”), the City of Boston (the “City”) and the initial developers and owners of the Mortgaged Property (the “IDA Agreement”). Up to $15,395,000 of additional bonds (the “Additional IDA Bonds” and, together with the Initial IDA Bonds, the “IDA Bonds”) may be issued under the IDA Agreement. Proceeds of the Initial IDA Bonds were paid to Vertex, which leases 100% of the office, laboratory, mechanical and storage space at the Mortgaged Property, as a tenant allowance. Issuance of the IDA Bonds is subject to the satisfaction of certain conditions under the IDA Agreement, including that the projected amount of new state tax revenues collected by the Commonwealth in each fiscal year from and after the date of issuance of the IDA Bonds that is attributed to retained or new jobs at Vertex is at least equal to the debt service that will be payable on the IDA Bonds in such fiscal year. If new state tax revenue is |
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| insufficient to pay debt service on the IDA Bonds, the shortfall is required to be collected as an assessment against the buildings at the Mortgaged Property, and the building owners are required to maintain a liquidity reserve in the event that they fail to pay such shortfalls. In addition, under the IDA Agreement, the related borrower, as the current building owner, is required to indemnify the Commonwealth, the City and the Agency against all claims relating to the participation of such parties in the transactions contemplated by the IDA Agreement, including failure to pay for infrastructure work, any accident, injury or damage to any person during construction, and breach of the IDA Agreement. |
On April 4, 2014, the Commissioner of Revenue of the Massachusetts Department of Revenue (the “Massachusetts Tax Commissioner”) issued a certification (with respect to the Initial IDA Bonds, but not with respect to any Additional IDA Bonds) reciting that under the IDA Agreement, once the new state tax revenues determined by the Massachusetts Tax Commissioner equal or exceed an amount equal to the principal amount of the IDA Bonds plus an amount equal to all interest accrued on the IDA Bonds to the date of determination, no further assessments may be levied against the buildings at the Mortgaged Property and the building owners will have no further obligations to fund a liquidity reserve. Under the related Mortgage Loan documents, the related borrower is prohibited from making any request for the issuance of any portion of the unissued Initial IDA Bonds or Additional IDA Bonds. The related Mortgage Loan documents also provide for recourse for actual losses incurred by the lender arising out of or in connection with any (i) shortfall that is not timely paid by Vertex and/or (ii) indemnification obligations of the related borrower arising under the IDA Agreement.
Furthermore, Vertex is the beneficiary of a tax increment financing (“TIF”) program that expires on June 30, 2018. Such TIF program may be revoked or reduced prior to such expiration date if Vertex does not satisfy certain employment retention and expansion obligations. The TIF program has been estimated to provide an aggregate tax savings to Vertex of approximately $9,000,000 from its inception in 2011 to its anticipated expiration date. The related Mortgage Loan was underwritten assuming that full real estate taxes are due and payable, and that such real estate taxes are fully reimbursed by Vertex. Expiration or early termination of the TIF program will increase the costs to Vertex of occupying the Mortgaged Property.
Certain risks relating to real estate taxes regarding the Mortgaged Properties or the borrowers are described in “Risk Factors—Risks Relating to the Mortgage Loans—Increases in Real Estate Taxes May Reduce Available Funds”.
Delinquency Information
As of the Cut-off Date, none of the Mortgage Loans will be 30 days or more delinquent and none of the Mortgage Loans have been 30 days or more delinquent since origination. A Mortgage Loan will be treated as 30 days delinquent if the scheduled payment for a due date is not received from the related borrower by the immediately following due date.
Certain Terms of the Mortgage Loans
Amortization of Principal
The Mortgage Loans provide for one or more of the following:
Eleven (11) Mortgage Loans, representing approximately 34.9% of the Initial Pool Balance, provide for payments of interest-only for the first 5 to 47 months following the Cut-off Date and thereafter provide for regularly scheduled payments of interest and principal based on an amortization period longer than the remaining term of the related Mortgage Loan until the maturity date or anticipated repayment date and therefore have an expected Balloon Balance at the related maturity date.
Five (5) Mortgage Loans, representing approximately 33.8% of the Initial Pool Balance, are interest-only until the maturity date or anticipated repayment date.
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Sixteen (16) Mortgage Loans (excluding interest-only and partial interest-only Mortgage Loans), representing approximately 31.2% of the Initial Pool Balance, provide for payments of interest and principal until the maturity date or anticipated repayment date and then have an expected Balloon Balance at the maturity date or anticipated repayment date.
Due Dates; Mortgage Rates; Calculations of Interest
Subject in some cases to a next business day convention, all of the Mortgage Loans have due dates upon which scheduled payments of principal, interest or both are required to be made by the related borrower under the related Mortgage Note (each such date, a “Due Date”) and grace periods that occur as described in the following table:
Overview of Due Dates
Due Date | Default Grace Period Days | Number of Mortgage Loans | Aggregate | Approx. % of Initial Pool Balance | ||||||||||||||
| 6 | 0 | 29 | $ | 597,444,986 | 85.0 | % | ||||||||||||
| 1 | 5 | 3 | 105,775,000 | 15.0 | ||||||||||||||
| 32 | $ | 703,219,986 | 100.0 | % | ||||||||||||||
As used in this prospectus, “grace period” is the number of days before a payment default is an event of default under the terms of each Mortgage Loan. A grace period does not apply to a maturity date or anticipated repayment date payment. See Annex A-1for information on the number of days before late payment charges are due under the Mortgage Loans. The information on Annex A-1 regarding the number of days before a late payment charge is due is based on the express terms of the Mortgage Loans. Some jurisdictions may impose a statutorily longer period.
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.
All of the Mortgage Loans, representing approximately 100.0% 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”).
ARD Loan(s)
Two (2) Mortgage Loans (the “ARD Loans”), representing approximately 11.2% of the Initial Pool Balance, provide that, after a certain date (the “Anticipated Repayment Date”), if the related borrower has not prepaid the related ARD Loan in full, any principal outstanding on that date will accrue interest at an increased interest rate (the “Revised Rate”) rather than the stated Mortgage Rate (the “Initial Rate”). See Annex A-1for the Anticipated Repayment Date and the Revised Rate for each ARD Loan.
After its Anticipated Repayment Date, except as described below, an ARD Loan further requires that all cash flow available from the related Mortgaged Property after payment of the monthly debt service payments required under the terms of the related Mortgage Loan documents and all escrows and property expenses required under the related Mortgage Loan documents be used to accelerate amortization of principal (without payment of any yield maintenance charge or prepayment premium) on an ARD Loan.
However, with respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Vertex Pharmaceuticals HQ, representing approximately 4.3% of the Initial Pool Balance, until the occurrence of an event of default under the related Mortgage Loan documents, such excess cash flow is required to be applied to repay the related Whole Loan and the related mezzanine loan (which mezzanine loan has an original principal balance of $195,000,000)pro rata, based on their outstanding principal balances. In addition, interest at the Revised Rate will be payable on a current basis, and excess cash flow will be calculated after payment of debt service on both the Whole Loan and
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the related mezzanine loan, which debt service will include interest at the Revised Rate on the related Whole Loan and interest at a revised rate on the related mezzanine loan (which also accrues interest at a higher rate following the Anticipated Repayment Date).
Excess Interest will be paid to the holders of the Class V certificates. See “Risk Factors—Risks Relating to the Mortgage Loans—Risks of Anticipated Repayment Date Loans”.
Single Purpose Entity Covenants
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Hilton Garden Inn San Leandro, representing approximately 2.9% of the Initial Pool Balance, the subject Mortgage Loan had an original principal balance of $20,275,000; however, the borrower does not have an independent director in place and a non-consolidation opinion was not rendered at origination of the subject Mortgage Loan.
See “Certain Legal Aspects of Mortgage Loans—Bankruptcy Laws”.
Prepayment Protections and Certain Involuntary Prepayments
All of the Mortgage Loans have a degree of voluntary prepayment protection in the form of defeasance or prepayment lockout provisions and/or yield maintenance provisions. Voluntary prepayments, if permitted, generally (except in some cases as relates to a prepayment in connection with a casualty or condemnation) require the payment of a yield maintenance charge or a prepayment premium unless the Mortgage Loan (or Whole Loan, if applicable) is prepaid within a specified period (ranging from approximately 3 to 7 payments) up to and including the stated maturity date. See Annex A-1 and Annex A-2 for more information on the prepayment protections attributable to the Mortgage Loans on a loan-by-loan basis and a pool basis.
With respect to certain of the Mortgage Loans that permit the borrower to voluntarily prepay such Mortgage Loan with payment of a prepayment premium or yield maintenance charge, the yield maintenance charge will generally, subject to variations, be equal to the greater of (i) a specified percentage of the amount being prepaid or (ii) the present value as of the prepayment date, of the remaining scheduled payments of principal and interest from the prepayment date through the maturity date or the commencement of the related open period, as applicable, determined by discounting such payments at the Discount Rate or Reinvestment Yield (or as otherwise stated in the related Mortgage Loan documents), less the amount of principal being prepaid;provided that in no event may the aggregate rate being used to discount any such payment ever exceed the applicable interest rate under the Mortgage Loan.
With respect to certain other Mortgage Loans that permit the borrower to voluntarily prepay the Mortgage Loan with the payment of a prepayment premium or a yield maintenance charge, the yield maintenance charge will generally, subject to certain variations, be an amount (in some cases not less than 0.5% of the amount prepaid) equal to the present value of a series of payments, each equal to the Interest Payment Differential as of the date of prepayment and payable on each scheduled due date over the remaining original term of the prepaid Mortgage Loan through and including the stated maturity date, the Anticipated Repayment Date or the commencement of the open period, as applicable, discounted at a rate that, when compounded monthly, is equivalent to the Reinvestment Yield when compounded semi-annually.
“Discount Rate” generally means the yield on a U.S. Treasury security that has the most closely corresponding maturity date to the maturity date or the commencement of the related open period, as applicable, or, the remaining weighted average life of the Mortgage Loan, plus an additional fixed percentage, as applicable of the Mortgage Loan.
“Reinvestment Yield” will generally equal, depending on the Mortgage Loan, either: (a) the yield calculated by the lender by the linear interpolation of the yields, “as reported in the Federal Reserve Statistical Release H.15-Selected Interest Rates under the heading U.S. Government Securities/Treasury
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Constant Maturities” for the week ending prior to the date on which prepayment is made, of U.S. Treasury Constant Maturities with maturity dates (one longer or one shorter) most nearly approximating the loan maturity date or the Anticipated Repayment Date or the day that is the first day of the open period, as applicable; or (b) the lesser of (i) the yield on the U.S. Obligations with the same maturity date as the stated maturity date, the Anticipated Repayment Date or date preceding the commencement of the open period, as applicable, of the prepaid Mortgage Loan or, if no such U.S. Obligations issue is available, then the interpolated yield on the two U.S. Obligations issues (primary issues) with maturity dates (one prior to and one following) that are closest to the stated maturity date, the Anticipated Repayment Date or the date preceding the commencement of the open period, as applicable, of the prepaid Mortgage Loan or (ii) the yield on the U.S. Obligations with a term equal to the remaining average life of the prepaid Mortgage Loan or, if no such U.S. Obligations are available, then the interpolated yield on the two U.S. Obligations issues (primary issues) with terms (one prior to and one following) that are closest to the remaining average life of the prepaid Mortgage Loan with each such yield being based on the bid price for such issue as published in The Wall Street Journal on the date that is 14 days prior to the date of prepayment set forth in borrower’s notice of repayment (or, if such bid price is not published on that date, the next preceding date on which such bid price is so published) and converted to a monthly compounded nominal yield.
“U.S. Obligations” generally means securities evidencing an obligation to timely pay principal and/or interest in a full and timely manner that are (1) direct obligations of the United States of America for the payment of which its full faith and credit is pledged, not subject to prepayment, call or early redemption, (2) other non-callable “government securities” as defined in Treasury Regulations Section 1.860G-2(a)(8)(ii), or (3) such other instruments as set forth in the related Mortgage Loan documents.
The term “Interest Payment Differential” will generally equal (i) the positive difference, if any, of the related mortgage interest rate minus the Reinvestment Yield as of the date of prepayment, divided by (ii) 12, and multiplied by (iii) the outstanding principal balance (or the portion thereof being prepaid) of the prepaid Mortgage Loan on the date of prepayment,providedthat the Interest Payment Differential will never be less than zero.
Notwithstanding the foregoing, yield maintenance charges payable (if at all) in connection with an involuntary prepayment (such as a prepayment resulting from a liquidation following a default) may be calculated in a manner that varies from those described above.
Additionally, certain Mortgage Loans may provide that in the event of the exercise of a purchase option by a tenant or the sale of real property or the release of a portion of the Mortgaged Property, that the related Mortgage Loans may be prepaid in part prior to the expiration of a prepayment/defeasance lockout provision. See “—Partial Releases” below.
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. See “Risk Factors—Risks Relating to the Mortgage Loans—Risks Relating to Enforceability of Yield Maintenance Charges, Prepayment Premiums or Defeasance Provisions” in this prospectus. 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 of the Mortgage Loans are secured in part by letters of credit and/or cash reserves that in each such case:
| · | 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 |
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| · | 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. |
See Annex A-1 and Annex A-3 for more information on reserves relating to the five largest tenants with respect to each Mortgage Loan.
Voluntary Prepayments.
Three (3) of the Mortgage Loans, representing approximately 9.4% of the Initial Pool Balance, permit the related borrower, after a lockout period of 12 to 25 payments following the origination date, to prepay the Mortgage Loan with the payment of the greater of a yield maintenance charge and a prepayment premium of 1% of the prepaid amount if such prepayment occurs prior to the related open prepayment period. In addition, two (2) of the Mortgage Loans, representing approximately 12.8% of the Initial Pool Balance, permit the related borrower, after a lockout period of 24 payments following the origination date, to prepay the Mortgage Loan with the payment of the greater of a yield maintenance charge and a prepayment premium of 0.5% to 1% of the prepaid amount if such prepayment occurs prior to the related open prepayment period;providedthat no earlier than following the second anniversary of the Closing Date the related borrower also has the option to defease the Mortgage Loan.
In addition, with respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to the prospectus as Westfield San Francisco Centre, representing approximately 8.5% of the Initial Pool Balance, the Mortgage Loan documents provide that the borrower may prepay a portion of principal to achieve a higher debt service coverage ratio. Any such prepayments, prior to the occurrence of an event of default under the Mortgage Loan documents, will be appliedpro rata andpari passu among all of the notes that evidence the Westfield San Francisco Centre Whole Loan, including related junior notes. See “Annex A-3—Description of Top Twenty Mortgage Loans and Additional Mortgage Loan Information”
The Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Vertex Pharmaceuticals HQ, securing a Mortgage Loan representing approximately 4.3% of the Initial Pool Balance, permits prepayment in whole with the payment of a yield maintenance premium on or after the related open prepayment date, provided that the related mezzanine loan is simultaneously prepaid in full. The Mortgage Loan also permits, at any time after the related lockout period, defeasance after the date that is the earlier to occur of (i) two years after the closing date of the securitization that includes the last relatedpari passu companion loan to be securitized and (ii) the date that is 42 months after the related origination date.
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The Mortgage Loans that permit voluntary prepayment with yield maintenance have the following lock-out period as calculated from the Cut-off Date and as indicated in the following table:
| Mortgage Loan | Cut-off Date Principal Balance | % of Initial Outstanding Pool Balance | Lock-Out Period (months from Cut-off Date) | |||
| Westfield San Francisco Centre | $60,000,000 | 8.5% | 24 | |||
| Gas Company Tower & World Trade Center Parking Garage | $40,000,000 | 5.7% | 12 | |||
| Vertex Pharmaceuticals HQ | $30,000,000 | 4.3% | 24 | |||
| 401 South State Street | $15,742,454 | 2.2% | 24 | |||
| Shoppes at Vickery Village | $10,675,464 | 1.5% | 24 |
The Mortgage Loans generally permit voluntary prepayment without payment of a yield maintenance charge or any prepayment premium during a limited “open period” immediately prior to and including the stated maturity date, as follows:
Prepayment Open Periods
Open Periods | Number of Mortgage | % of Initial Pool | ||||||||
| 3 | 1 | 1.7 | % | |||||||
| 4 | 21 | 47.0 | ||||||||
| 5 | 6 | 27.8 | ||||||||
| 6 | 2 | 13.1 | ||||||||
| 7 | 2 | 10.4 | ||||||||
| 32 | 100.0 | % | ||||||||
See “Risk Factors—Risks Relating to the Mortgage Loans—Risks Relating to Enforceability of Yield Maintenance Charges, Prepayment Premiums or Defeasance Provisions”.
“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 permits the holder of the Mortgage Loan to accelerate the maturity of the related Mortgage Loan if the related borrower sells or otherwise transfers or encumbers (subject to certain exceptions set forth in the Mortgage Loan documents) the related Mortgaged Property or a controlling interest in the borrower without the consent of the mortgagee (which, in some cases, may not be unreasonably withheld). Many of the Mortgage Loans place certain restrictions (subject to certain exceptions set forth in the Mortgage Loan documents) 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, affiliate, estate planning and family transfers, transfers at death, transfers of interest in a public company, the transfer or pledge of less than a controlling portion of the partnership, members’ or other equity interests in a borrower, the transfer or pledge of passive equity interests in a borrower (such as limited partnership interests and non-managing member interests in a limited liability company) and transfers to other existing equity holders or to specified persons or persons satisfying qualification criteria set forth in the related Mortgage Loan documents. 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. Generally, the Mortgage Loans do not prohibit transfers so long as no change of control results or, with respect to Mortgage Loans to tenant-in-common borrowers or borrowers that are Delaware statutory trusts, transfers to new tenant-in-common borrowers or new beneficiaries of the Delaware statutory trust, as applicable. 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.
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Additionally, 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:
| · | no event of default has occurred; |
| · | the proposed transferee is creditworthy and has sufficient experience in the ownership and management of properties similar to the Mortgaged Property and/or a Rating Agency Confirmation has been obtained from each of the Rating Agencies; |
| · | 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 |
| · | the assumption fee has been received (which assumption fee will be paid as described under “Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses”, but will in no event 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 (if any) will also result in a permitted transfer. See “—Additional Indebtedness” below.
Defeasance; Collateral Substitution
The terms of 29 of the Mortgage Loans (including 2 Mortgage Loans that permit the borrower to either defease or prepay with yield maintenance) (the “Defeasance Loans”), representing approximately 90.6% 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 Defeasance Loans (except for the Defeasance Loan identified on Annex A-1 as Prudential Plaza), the Defeasance Lock-Out Period ends at least two years after the Closing Date;provided that 2 such Mortgage Loans, representing approximately 12.8% of the Initial Pool Balance, permit the related borrower to prepay the Mortgage Loan with the payment of a yield maintenance premium or defeasance after the date that is the earlier to occur of (i) two years after the closing date of the securitization that includes the lastpari passu note to be securitized and (ii) the date that is, with respect to the Westfield San Francisco Centre Mortgage Loan, 36 months or, with respect to the Vertex Pharmaceuticals HQ Mortgage Loan, 42 months after the related origination date. With respect to Prudential Plaza, pursuant to a REMIC declaration dated July 26, 2016, the Prudential Plaza Mortgage Loan may be defeased commencing on any business day following July 26, 2018, which is less than two years after the Closing Date.
Exercise of a 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 on which such defeasance will occur (such date, the “Release Date”), and (b) the borrower (A) paying on any Release Date (i) all accrued and unpaid interest on the principal balance of the Mortgage Loan (or, the related Whole Loan) up to and including the Release Date, (ii) all other sums (excluding scheduled interest or principal payments due following the Release Date), due under the Mortgage Loan (or Whole Loan, if applicable) and under 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 of, or 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) or other instruments that otherwise satisfy REMIC requirements for defeasance collateral), that provide payments (1) on or prior to, but as close as possible to, all successive scheduled due dates occurring during the period from the Release Date to the related maturity date or anticipated repayment date (or to the first day of the open period for such Mortgage Loan) (or Whole Loan, if applicable) and (2) in amounts equal to the scheduled payments due on such due dates under the Mortgage Loan (or Whole Loan, if applicable), or under the defeased portion of the Mortgage Loan (or Whole Loan, if applicable) in the case
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of a partial defeasance, including or together with, as applicable, a balloon payment due at maturity or the principal balance outstanding at any related anticipated repayment date or at the open prepayment date, as applicable, 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 issuing entity 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.
For additional information on Mortgage Loans that permit partial defeasance, see “—Partial Releases” below.
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 (or Whole Loan, if applicable) 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.
Partial Releases
The Mortgage Loans described below permit the release of one or more of the Mortgaged Properties or a portion of a single Mortgaged Property in connection with a partial defeasance, a partial prepayment, a partial substitution, or for no consideration in the case of parcels that are vacant, non-income producing or were not taken into account in the underwriting of the Mortgage Loan, subject to the satisfaction of certain specified conditions, including the REMIC requirements. Additionally, certain Mortgage Loans permit the addition of real property to the Mortgage Loan collateral.
With respect to the Mortgaged Property identified on Annex A-1 as Birch Run Premium Outlets, which secures a Mortgage Loan representing approximately 6.1% of the Initial Pool Balance, the related borrower may, without lender consent, transfer immaterial or non-income producing portions of the Mortgaged Property (by sale, ground lease, sublease or other conveyance of any interest) to third parties or affiliates of the borrower, including owners of out parcels and department store pads, pads for office buildings, hotels or other properties.
With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as 465 Columbus Ave, which secures a Mortgage Loan representing approximately 1.6% of the Initial Pool Balance, the borrower may obtain the release of an unimproved release parcel after the expiration of the lockout period, provided, among other things, (i) the release parcel is a legally subdivided parcel from the Mortgaged Property and is a separate tax lot from the Mortgaged Property; (ii) the conveyance of the release parcel does not adversely affect the use or operation of, or access to or from, the portion of the Mortgaged Property and (iii) the LTV Ratio of such Mortgage Loan, after release of the release parcel, is not greater than 125%. The release parcel was not given any value in underwriting the Mortgage Loan.
With respect to each of the Mortgage Loans secured by the Mortgaged Properties identified on Annex A-1 to this prospectus as Shoppes at Vickery Village and Emporia Marketplace, representing approximately 1.5% and 0.6%, respectively, of the Initial Pool Balance, the related borrower may transfer an outparcel at the related Mortgaged Property to a third party and obtain the release of such outparcel, provided that, among other things: (i) the related borrower delivers to the lender evidence satisfactory to the lender that (x) after giving effect to the outparcel release, the remaining related Mortgaged Property would, among other things, constitute one or more separate tax lots from the released outparcel, comply with zoning and parking requirements and have available to it all necessary utility and other services for its development, use, occupancy and operation and (y) the owner of the released outparcel will comply with the anti-poaching restrictions that restrict solicitation of tenants at the related Mortgaged Property to relocate to the released outparcel; and (ii) if required or requested, as applicable, by the lender, the related borrower delivers to the lender (x) a rating agency confirmation and (y) a REMIC opinion with respect to the release. In addition, with respect to each of the subject Mortgage Loans, if at the time of such release the loan-to-value ratio of the remaining related Mortgaged Property would exceed 125% immediately after such release, then the related borrower is required to pay down the outstanding
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principal balance of the Mortgage Loan by a “qualified amount,” as that term is defined in the IRS Revenue Procedure 2010-30 (as the same may be amended or modified from time to time), unless the lender receives an opinion of counsel that, if the foregoing prepayment is not made, any applicable securitization trust will not fail to maintain its status as a REMIC as a result of such release.
See “Risk Factors—Risks Relating to the Mortgage Loans—Risks Relating to Enforceability of Yield Maintenance Charges, Prepayment Premiums or Defeasance Provisions”.
Addition of Real Property to the Mortgaged Property
With respect to the Mortgage Loan secured by the portfolio of Mortgaged Properties identified on Annex A-1 to this prospectus as U-Haul AREC Portfolio, representing approximately 6.9% of the Initial Pool Balance, the related borrowers may acquire properties adjacent to an existing Mortgaged Property for expansion purposes, provided that, among other conditions, the borrowers provide the lender with a clean environmental report, updated title and survey and evidence that the property to be acquired (i) is insured in accordance with the Mortgage Loan documents and (ii) was acquired for cash (i.e. without the incurrence of any debt). The borrower is also required to take all actions necessary to encumber the newly acquired property by the lien of the mortgage of the related Mortgaged Property. In addition, a related borrower may enter into operating leases with respect to storage facilities that may be acquired by an affiliate of the borrowers in the vicinity of an existing Mortgaged Property, provided that, among other conditions: (i) such facility is operated as a remote, unstaffed facility related to an existing Mortgaged Property, (ii) the borrowers deliver a clean environmental report, a current survey and evidence that the property is insured in accordance with the Mortgage Loan documents and (iii) the related borrower and affiliate enter into an operating lease which provides, among other things, that (a) in the event that the debt service coverage ratio for the Mortgage Loan is less than 1.20x, any rent, taxes and insurance due by the borrowers under the operating lease will be abated and (b) if the lender forecloses or accepts a deed-in-lieu of foreclosure on the related Mortgaged Property, the lender will have the option to terminate the operating lease.
Escrows
Twenty-six (26) of the Mortgage Loans, representing approximately 62.1% of the Initial Pool Balance, provide for monthly or upfront escrows to cover property taxes on the Mortgaged Properties.
Twenty-seven (27) of the Mortgage Loans, representing approximately 62.6% of the Initial Pool Balance, provide for monthly escrows for ongoing replacements or capital repairs.
Twelve (12) of the Mortgage Loans, representing approximately 42.2% of the Initial Pool Balance of Mortgage Loans that are secured by office, retail and mixed use properties, provide for upfront or monthly escrows (or 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 mixed use properties only.
Fifteen (15) of the Mortgage Loans, representing approximately 28.5% of the Initial Pool Balance, provide for monthly or upfront escrows to cover insurance premiums on the Mortgaged Properties.
Ten (10) of the Mortgage Loans, representing approximately 19.9% of the Initial Pool Balance, provide for upfront reserves for immediate repairs.
In addition, with respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Westfield San Francisco Centre, representing approximately 8.5% of the Initial Pool Balance, the borrowers were required to deposit $4,300,000 into a Zara Free Rent/TI Reserve. In lieu of depositing cash, the borrowers delivered two letters of credit in the aggregate amount of $4,300,000 from UBS AG bank to cover the related gap rent and tenant improvement obligations for Zara, a tenant at the Mortgaged Property. In addition, in the event the borrowers are required (on a later
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date) to make payments to any reserve accounts, the borrowers are permitted to deliver to the lender a letter of credit or guaranty with respect to any reserve.
Certain of the Mortgage Loans described above permit the related borrower to post a letter of credit or deliver a guaranty in lieu of maintaining cash reserves. In addition, in certain cases, the related borrower may not be required to maintain the escrows described above until the occurrence of a specified trigger.
Many of the Mortgage Loans provide for other escrows and reserves, including, in certain cases, reserves for debt service, operating expenses, vacancies at the related Mortgaged Property and other shortfalls or reserves to be released under circumstances described in the related Mortgage Loan documents.
Mortgaged Property Accounts
Lockbox Accounts. The Mortgage Loans documents prescribe the manner in which the related borrowers are permitted to collect rents from tenants at each Mortgaged Property. The following table sets forth the manner in which tenant rent is transferred to a lockbox account, in some cases, only upon the occurrence of a trigger event:
Lockbox Account Types
| Lockbox Type | Number of Mortgage Loans | Approx. % of Initial Pool Balance | ||||||
| Hard | 16 | 68.3 | % | |||||
| Springing Hard | 8 | 12.4 | ||||||
| Soft | 3 | 8.4 | ||||||
| Hard (Office); Soft (Parking Garage) | 1 | 5.7 | ||||||
| Springing Soft | 2 | 3.5 | ||||||
| NAP | 2 | 1.7 | ||||||
| Total | 32 | 100.0 | % | |||||
The lockbox accounts will not be assets of the issuing entity. See “Description of the Mortgage Pool—Certain Calculations and Definitions—Definitions” or Annex A-1 to this prospectus for a description of lockbox and cash management accounts.
Additional Indebtedness
General
The Mortgage Loans generally prohibit borrowers from incurring any additional debt secured by their Mortgaged Property without the consent of the lender. However:
| · | 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; |
| · | 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; |
| · | any borrower that is not required pursuant to the terms of the applicable Mortgage Loan documents to meet single purpose entity criteria may not be restricted from incurring unsecured debt or mezzanine debt; |
| · | 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; |
| · | 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 |
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| specific percentage or control limitations, the terms of the Mortgage Loan documents generally permit, subject to certain limitations, the pledge of passive equity interests (such as limited partnership or non-managing membership equity interests) in a borrower or less than a controlling interest of any other equity interests in a borrower; and |
| · | 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. |
Whole Loans
Certain Mortgage Loans are subject to the rights of a related Companion Loan holder, as further described in “—The Whole Loans” below.
Mezzanine Indebtedness
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 equity interests in a borrower or a pledge of passive equity interests (such as limited partnership or non-managing membership equity interests) in a borrower. Certain Mortgage Loans described below permit the incurrence of mezzanine debt subject to satisfaction of certain conditions including a certain maximum combined loan-to-value ratio and/or a minimum combined debt service coverage ratio, and in some cases mezzanine debt is already in place. Also, certain of the Mortgage Loans do not restrict the pledging of ownership interests in the related 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, a borrower (or its direct or indirect owners) 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 sponsor has informed us that it is aware of the following existing mezzanine indebtedness with respect to the Mortgage Loans it is selling to the depositor:
Mortgage Loan Name | Mortgage | Mezzanine | Companion | Cut-off Date | Cut-off | Cut-off | Cut-off | Cut-off Date Mortgage | Cut-off Date | ||||||||||||||||||
| 10 Hudson Yards | $65,000,000 | $300,000,000 | $835,000,000 | $1,200,000,000 | 3.40000 | % | 32.9 | % | 55.8 | % | 4.18 | x | 2.17 | x | |||||||||||||
| Gas Company Tower & World Trade Center Parking Garage | $40,000,000 | $131,000,000 | $279,000,000 | $450,000,000 | 4.35398 | % | 23.6 | % | 73.6 | % | 5.23 | x | 1.34 | x | |||||||||||||
| Vertex Pharmaceuticals HQ | $30,000,000 | $195,000,000 | $395,000,000 | $620,000,000 | 3.53000 | % | 35.5 | % | 51.8 | % | 6.28 | x | 3.42 | x | |||||||||||||
| 401 South State Street | $15,742,454 | $7,830,000 | (3) | $31,964,374 | $55,536,828 | (4) | 5.81511 | % | 62.4 | % | 72.6 | % | 1.59 | x | 1.21 | x | |||||||||||
| (1) | Calculated including the mezzanine debt and any related Companion Loan. With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Vertex Pharmaceuticals HQ, representing approximately 4.3% of the Initial Pool Balance, Cut-off Date Wtd. Avg. Total Debt Interest Rate is based on the interest rate of the Vertex Pharmaceuticals HQ Whole Loan and the related Mezzanine Loan as of the Cut-off Date, and debt service coverage ratios are calculated based on such initial interest rates. Both the Vertex Pharmaceuticals HQ Whole Loan and the related Mezzanine Loan bear interest at an increased rate, payable currently, after the related Anticipated Repayment Date. |
| (2) | Calculated including any related Pari Passu Companion Loan and excluding subordinate companion loan and any mezzanine debt. |
| (3) | The mezzanine debt may be increased to a maximum principal balance of $9,830,000 based on certain conditions being satisfied under the related mezzanine loan documents. See discussion below regarding Mortgage Loans with respect to which mezzanine debt is permitted in the future. |
| (4) | Excludes the $12,000,000 unsecured loan made to an affiliate of the related borrower at origination of the Mortgage Loan. |
In each case, the mezzanine indebtedness is coterminous with the related Mortgage Loan.
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The mezzanine loans related to the Mortgage Loans identified in the table above secured by the Mortgaged Properties identified on Annex A-1 as 10 Hudson Yards, Gas Company Tower & World Trade Center Parking Garage, Vertex Pharmaceuticals HQ and 401 South State Street, representing approximately 9.2%, 5.7%, 4.3% and 2.2%, respectively, of the Initial Pool Balance, are each subject to an intercreditor agreement between the holder of the related mezzanine loan and the related lender under the related Mortgage Loan that sets forth the relative priorities between the related Mortgage Loan and the related mezzanine loan. Each intercreditor agreement provides, among other things, generally that (a) all payments due under the related mezzanine loan are subordinate after an event of default under the related Mortgage Loan to any and all payments required to be made under the related Mortgage Loan (except for any payments from funds other than the Mortgaged Property or proceeds of any enforcement upon the mezzanine loan collateral and any mezzanine loan guarantees in respect of which the related mortgage lender does not own a corresponding claim or right), (b) so long as there is no event of default under the related Mortgage Loan (or, with respect to the Vertex Pharmaceuticals HQ Mortgage Loan, if an event of default exists but it is not susceptible of cure, if the mezzanine lender is diligently pursuing the foreclosure of its equity interests), the related mezzanine lender may accept payments on and prepayments of the related mezzanine loan prior to the prepayment in full of the Mortgage Loan, provided that such prepayment is from a source of funds other than the respective Mortgaged Property (unless such funds are derived from excess cash), (c) the related mezzanine lender will have certain rights to receive notice of and cure defaults under the related Mortgage Loan prior to any acceleration or enforcement of the related Mortgage Loan, (d) the related mezzanine lender may amend or modify the related mezzanine loan in certain respects without the consent of the related mortgage lender, and the mortgage lender must obtain the mezzanine lender’s consent to amend or modify the Mortgage Loan in certain respects, (e) upon the occurrence of an event of default under the related mezzanine loan documents, the related mezzanine lender may foreclose upon the pledged equity interests in the related Mortgage Loan borrower, which could result in a change of control with respect to the related Mortgage Loan borrower and a change in the management of the related Mortgaged Properties, (f) if the related Mortgage Loan is accelerated or, in some cases, becomes specially serviced or if a monetary default (or, in some cases, a material non-monetary default) occurs and continues for a specified period of time under the related Mortgage Loan or if the Mortgage Loan borrower becomes a debtor in a bankruptcy or if the related mortgage lender exercises any enforcement action under the related Mortgage Loan documents with respect to the related Mortgage Loan borrower or the related Mortgaged Properties, the related mezzanine lender has the right to purchase the related Mortgage Loan, in whole but not in part, for a price generally equal to the outstanding principal balance of the related Mortgage Loan, together with all accrued interest and other amounts due thereon, plus any advances made by the related mortgage lender or its servicer and any interest thereon plus, subject to certain limitations, any Liquidation Fees and Special Servicing Fees payable under the PSA, but generally excluding any late charges, default interest, exit fees, spread maintenance charges payable in connection with a prepayment or yield maintenance charges and prepayment premiums and (g) an event of default under the related Mortgage Loan will trigger an event of default under the related mezzanine loan.
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 as described under “—Certain Terms of the Mortgage Loans—“Due-On-Sale” and “Due-On-Encumbrance” Provisions” above. 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.
With respect to the Mortgage Loans listed in the following table, 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 Mortgage Loan documents, including, among other things, a combined maximum loan-to-value ratio, a combined minimum debt service coverage ratio and/or a combined minimum debt yield, as listed in the following table and determined in accordance with the related Mortgage Loan documents:
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Mortgage Loan Name | Mortgage Loan Cut-off Date Balance | Combined Maximum LTV Ratio | Combined Minimum UW NCF DSCR | Combined Minimum Debt Yield | Intercreditor Agreement Required | |||||
| Prudential Plaza | $50,000,000 | 64.6% | 1.40x | 9.0% | Yes | |||||
| 401 South State Street(1) | $15,742,454 | N/A | 1.45x | 9.5% | Yes | |||||
| Kahana Retail | $11,900,000 | 75.0% | 1.25x | 7.5% | Yes | |||||
| San Marin Shopping Center | $9,300,000 | 65.0% | 1.25x | 8.0% | Yes |
| (1) | A mezzanine loan in the amount of $7,830,000 currently exists with respect to the subject Mortgage Loan. However, the related mezzanine borrower may request one or more additional advances of principal under the mezzanine loan in which case the mezzanine loan may be increased to a maximum principal balance of $9,830,000. Each advance is subject to satisfaction by the related mezzanine borrower of certain conditions contained in the related mezzanine loan documents, including the debt service coverage ratio and debt yield requirements listed in the foregoing table. |
The specific rights of the related mezzanine lender with respect to any such future mezzanine loan will be specified in the related intercreditor agreement and may include rights substantially similar to the cure and repurchase rights described above. Other than the Mortgage Loan identified on Annex A-1 as 401 South State Street, representing approximately 2.2% of the Initial Pool Balance, the intercreditor agreement required to be entered into in connection with any future mezzanine loan or the incurrence of the future mezzanine loan will be subject to receipt of a Rating Agency Confirmation. In the case of the 401 South State Street Mortgaged Property, the related mezzanine loan documents do not require a Rating Agency Confirmation in connection with an advance of principal under the related mezzanine loan. The direct and/or indirect owners of a borrower under a Mortgage Loan are also generally permitted to pledge their interest in such borrower as security for a mezzanine loan in circumstances where the ultimate transfer of such interest to the mezzanine lender would be a permitted transfer under the related Mortgage Loan documents.
Generally, upon a default under a mezzanine loan, subject to the terms of any applicable intercreditor or subordination agreement, 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 debt. Although this transfer of equity may not trigger the due on sale clause under the related Mortgage Loan, it could cause a change in control of the borrower and/or cause the obligor under the mezzanine loan 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.
Some of the Mortgage Loans do not prohibit affiliates of the related borrower from pledging their indirect ownership interests in the borrower in connection with pledges to an institutional lender providing a corporate line of credit or corporate credit facility as collateral for such corporate line of credit or corporate credit facility. In connection with those pledges, the Mortgage Loan documents may: (i) contain limitations on the amounts that such collateral may secure and prohibit foreclosure of such pledges unless such foreclosure would represent a transfer otherwise permitted under the Mortgage Loan documents but do not prohibit a change in control in the event of a permitted foreclosure; or (ii) require that such financing be secured by at least a certain number of assets other than such ownership interests in the related borrower.
See “Risk Factors—Risks Relating to the Mortgage Loans—Other Financings or Ability to Incur Other Indebtedness Entails Risk”.
Preferred Equity
With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Emporia Marketplace, representing approximately 0.6% of the Initial Pool Balance, the related borrower, 95/58 Emporia Partners, LLC, is 70.0% owned by Class A members, with no individual Class A member owning more than 6.51% of the related borrower, and 30.0% owned by the related manager and Class B member, Market Drive Managing Company, LLC. The Class A members are preferred equity holders and receive an annual return of 8.0% on their unreturned capital contributions. No recourse is available to the Class A members if they do not receive their preferred return in a given
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year. Under an amendment to the related operating agreement, all distributions of preferred returns have been expressly subordinated to the related Mortgage Loan documents.
Because preferred equity often provides for a higher rate of return to be paid to the holders of such preferred equity, preferred equity in some respects functions like mezzanine indebtedness, and reduces a principal’s economic stake in the related Mortgaged Property, reduces cash flow on the borrower’s Mortgaged Property after the payment of debt service and payments on the preferred equity 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 greater risk that a borrower will default on the Mortgage Loan secured by a Mortgaged Property whose value or income is relatively weak.
Other Unsecured Indebtedness
Certain Mortgage Loans permit the borrower to incur certain other subordinate indebtedness as described below:
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Fiserv at 2900 Westside, which secures a Mortgage Loan representing approximately 9.2% of the Initial Pool Balance, the Mortgaged Property also secures approximately $55,750,000 of development bonds issued by the Development Authority of Alpharetta in return for the transfer of the Mortgaged Property to the Development Authority of Alpharetta as part of a tax abatement arrangement, which bonds are secured by a mortgage on the Development Authority of Alpharetta’s fee interest in the Mortgaged Property. Such bonds are owned by the related borrower, and the borrower is prohibited from transferring such bonds. Payments owed by the Development Authority of Alpharetta to the borrower under the bonds are netted against payments owed by the borrower under the Authority Lease, resulting in a complete offset. Upon the expiration of the tax abatement on December 31, 2025, the Development Authority of Alpharetta is required to sell, and the borrower is required to purchase, all of the Development Authority of Alpharetta’s fee interest in the Fiserv at 2900 Westside Property for the payment of certain nominal fees and expenses and satisfaction of the other terms under the Authority Lease, and the bonds are required to be cancelled. In addition, such bonds, and the related mortgage, have been subordinated to the Mortgage Loan and granted to the Mortgage Loan lender as additional collateral for the Mortgage Loan. |
| · | With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as Prudential Plaza, which secures a Mortgage Loan representing approximately 7.1% of the Initial Pool Balance, an indirect 100% owner of the borrower is the borrower under an unsecured loan (the “Unsecured Loan”) with an original principal balance of $60,000,000, which loan was originally structured as a mezzanine loan. The Unsecured Loan is subject to a subordination and standstill agreement which restricts the lender under the Unsecured Loan from (i) exercising remedies under the Unsecured Loan until the Mortgage Loan is fully satisfied and (ii) receiving any payments under the Unsecured Loan during any event of default or trigger period under the Mortgage Loan. For additional information, see “Description of the Mortgage Pool—Litigation and Other Considerations”. |
| · | With respect to the Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 401 South State Street, representing approximately 2.2% of the Initial Pool Balance, concurrently with the origination of the Mortgage Loan, the seller of the Mortgaged Property to the related borrower funded an unsecured credit facility in the amount of $12,000,000 to Rampante Realty Partners, LLC (the ”401 Subordinate Loan”), an affiliate and indirect owner of the related borrower. The 401 Subordinate Loan is not secured by a pledge of any direct or indirect interest in the related borrower. The rights and obligations of the respective holders of the related Mortgage Loan, the related mezzanine loan and the 401 Subordinate Loan are subject to a subordination and standstill agreement providing, among other things, that the lender under the 401 Subordinate Loan is only entitled to payments under the 401 Subordinate Loan so long as excess cash flow from the related Mortgaged Property is actually made available to the 401 |
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| Subordinate Loan borrower for such 401 Subordinate Loan payments and no trigger period under the Mortgage Loan or related mezzanine loan documents is continuing. In the event excess cash flow made available for a given payment is insufficient, the 401 Subordinate Loan lender may accrue the amount owed under the 401 Subordinate Loan but only to the maximum amount of the excess cash flow actually held by the lender of the Mortgage Loan under the Mortgage Loan documents and the lender of the related mezzanine loan under the related mezzanine loan documents, and any payments accrued by the 401 Subordinate Loan lender are deemed to be $0 during an event of default under the Mortgage Loan documents or the related mezzanine loan documents. |
Certain risks relating to additional debt are described in “Risk Factors—Risks Relating to the Mortgage Loans—Other Financings or Ability to Incur Other Indebtedness Entails Risk”.
The Whole Loans
General
Each of the Mortgage Loans secured by the Mortgaged Properties identified on Annex A-1 as 10 Hudson Yards, Westfield San Francisco Centre, Prudential Plaza, U-Haul AREC Portfolio, Birch Run Premium Outlets, Gas Company Tower & World Trade Center Parking Garage, Vertex Pharmaceuticals HQ and 401 South State Street is part of the related Whole Loan consisting of the Mortgage Loan and the related Pari Passu Companion Loan(s) and, in certain cases, the related Subordinate Companion Loan(s). In connection with each Whole Loan, the rights between the trustee on behalf of the issuing entity and the holder(s) of the related Companion Loan(s) (each, a “Companion Loan Holder”) are generally governed by an intercreditor agreement or co-lender agreement (each, an “Intercreditor Agreement”). With respect to each of the Whole Loans, the related Mortgage Loan and related Companion Loans are cross-collateralized and cross-defaulted.
“Controlling Companion Loan” means, with respect to the Birch Run Premium Outlets Whole Loan, the relatedPari Passu Companion Loan which, upon the securitization of suchPari Passu Companion Loan, servicing is expected to shift to the pooling and servicing agreement entered into in connection with such securitization. GACC is currently the holder of the “Controlling Companion Loan” with respect to the Birch Run Premium Outlets Whole Loan.
“Whole Loan” means each of the 10 Hudson Yards Whole Loan, the Westfield San Francisco Centre Whole Loan, the Prudential Plaza Whole Loan, the U-Haul AREC Portfolio Whole Loan, the Birch Run Premium Outlets Whole Loan, the Gas Company Tower & World Trade Center Parking Garage Whole Loan, the Vertex Pharmaceuticals HQ Whole Loan and the 401 South State Street Whole Loan, as the context may require and as applicable.
“Non-Serviced Certificate Administrator” means (i) with respect to the 10 Hudson Yards Whole Loan, the certificate administrator under the Hudson Yards 2016-10HY Trust and Servicing Agreement, (ii) with respect to the Westfield San Francisco Centre Whole Loan, the certificate administrator under the DBJPM 2016-SFC Trust and Servicing Agreement, (iii) with respect to the Prudential Plaza Whole Loan, the certificate administrator under the COMM 2015-CCRE26 Pooling and Servicing Agreement, (iv) with respect to the Birch Run Premium Outlets Whole Loan, the certificate administrator under the COMM 2016-DC2 Pooling and Servicing Agreement (and after the securitization of the Controlling Companion Loan, the certificate administrator under the related pooling and servicing agreement), (v) with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan, the certificate administrator under the COMM 2016-GCT Trust and Servicing Agreement, (vi) with respect to the Vertex Pharmaceuticals HQ Whole Loan, the certificate administrator under the WFCM 2016-BNK1 Pooling and Servicing Agreement and (vii) with respect to the 401 South State Street Whole Loan, the certificate administrator under the CGCMT 2016-P4 Pooling and Servicing Agreement.
“Non-Serviced Companion Loan” means, with respect to any Non-Serviced Whole Loan, any related mortgage note not included in the issuing entity that is not serviced under the PSA and that is generally payable on apari passu basis with a Non-Serviced Mortgage Loan included in the issuing entity to the
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extent set forth in the related Intercreditor Agreement. Each of the 10 Hudson Yards Companion Loans, the Westfield San Francisco Centre Companion Loans, the Prudential Plaza Companion Loans, the Birch Run Premium Outlets Companion Loans, the Gas Company Tower & World Trade Center Parking Garage Companion Loans, the Vertex Pharmaceuticals HQ Companion Loans and the 401 South State Street Companion Loan will be Non-Serviced Companion Loans related to the issuing entity.
“Non-Serviced Master Servicer” means Agreement (i) with respect to the 10 Hudson Yards Whole Loan, the master servicer under the Hudson Yards 2016-10HY Trust and Servicing Agreement, (ii) with respect to the Westfield San Francisco Centre Whole Loan, the master servicer under the DBJPM 2016-SFC Trust and Servicing, (iii) with respect to the Prudential Plaza Whole Loan, the master servicer under the COMM 2015-CCRE26 Pooling and Servicing Agreement, (iv) with respect to the Birch Run Premium Outlets Whole Loan, the master servicer under the COMM 2016-DC2 Pooling and Servicing Agreement (and after the securitization of the Controlling Companion Loan, the master servicer under the related pooling and servicing agreement), (v) with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan, the master servicer under the COMM 2016-GCT Trust and Servicing Agreement, (vi) with respect to the Vertex Pharmaceuticals HQ Whole Loan, the master servicer under the WFCM 2016-BNK1 Pooling and Servicing Agreement and (vii) with respect to the 401 South State Street Whole Loan, the master servicer under the CGCMT 2016-P4 Pooling and Servicing Agreement.
“Non-Serviced PSA” means (i) with respect to the 10 Hudson Yards Whole Loan, the Hudson Yards 2016-10HY Trust and Servicing Agreement, (ii) with respect to the Westfield San Francisco Centre Whole Loan, the DBJPM 2016-SFC Trust and Servicing Agreement, (iii) with respect to the Prudential Plaza Whole Loan, the COMM 2016-CCRE26 Pooling and Servicing Agreement, (iv) with respect to the Birch Run Premium Outlets Whole Loan, the COMM 2016-DC2 Pooling and Servicing Agreement (and after the securitization of the Controlling Companion Loan, the related pooling and servicing agreement for that securitization), (v) with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan, the COMM 2016-GCT Trust and Servicing Agreement, (vi) with respect to the Vertex Pharmaceuticals HQ Whole Loan, the WFCM 2016-BNK1 Pooling and Servicing Agreement and (vii) with respect to the 401 South State Street Whole Loan, the CGCMT 2016-P4 Pooling and Servicing Agreement.
“Non-Serviced Special Servicer” means (i) with respect to the 10 Hudson Yards Whole Loan, the special servicer under the Hudson Yards 2016-10HY Trust and Servicing Agreement, (ii) with respect to the Westfield San Francisco Centre Whole Loan, the special servicer under the DBJPM 2016-SFC Trust and Servicing Agreement, (iii) with respect to the Prudential Plaza Whole Loan, the special servicer under the COMM 2016-CCRE26 Pooling and Servicing Agreement, (iv) with respect to the Birch Run Premium Outlets Whole Loan, the special servicer under the COMM 2016-DC2 Pooling and Servicing Agreement (and after the securitization of the Controlling Companion Loan, the special servicer under the related pooling and servicing agreement), (v) with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan, the special servicer under the COMM 2016-GCT Trust and Servicing Agreement, (vi) with respect to the Vertex Pharmaceuticals HQ Whole Loan, the special servicer under the WFCM 2016-BNK1 Pooling and Servicing Agreement and (vii) with respect to the 401 South State Street Whole Loan, the special servicer under the CGCMT 2016-P4 Pooling and Servicing Agreement.
“Non-Serviced Trustee” means (i) with respect to the 10 Hudson Yards Whole Loan, the trustee under the Hudson Yards 2016-10HY Trust and Servicing Agreement, (ii) with respect to the Westfield San Francisco Centre Whole Loan, the trustee under the DBJPM 2016-SFC Trust and Servicing Agreement, (iii) with respect to the Prudential Plaza Whole Loan, the trustee under the COMM 2016-CCRE26 Pooling and Servicing Agreement, (iv) with respect to the Birch Run Premium Outlets Whole Loan, the trustee under the COMM 2016-DC2 Pooling and Servicing Agreement (and after the securitization of the Controlling Companion Loan, the trustee under the related pooling and servicing agreement), (v) with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan, the trustee under the COMM 2016-GCT Trust and Servicing Agreement, (vi) with respect to the Vertex Pharmaceuticals HQ Whole Loan, the trustee under the WFCM 2016-BNK1 Pooling and Servicing Agreement, and (vii) with respect to the 401 South State Street Whole Loan, the trustee under the CGCMT 2016-P4 Pooling and Servicing Agreement.
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“Non-Serviced Whole Loan” means any Whole Loan that is not serviced under the PSA that is divided into two or more notes, which includes a Mortgage Loan included in the issuing entity but serviced under another agreement and one or more mortgage notes not included in the issuing entity and serviced under another agreement. References in this prospectus to a Non-Serviced Whole Loan refer to the aggregate indebtedness under the related notes. Each of the 10 Hudson Yards Whole Loan, the Westfield San Francisco Centre Whole Loan, the Prudential Plaza Whole Loan, the Birch Run Premium Outlets Whole Loan, the Gas Company Tower & World Trade Center Parking Garage Whole Loan, the Vertex Pharmaceuticals HQ Whole Loan and the 401 South State Street Whole Loan will be Non-Serviced Whole Loans related to the issuing entity.
“Non-Serviced Mortgage Loan” means, with respect to any Non-Serviced Whole Loan, a Mortgage Loan included in the issuing entity but serviced under another agreement. Each of the 10 Hudson Yards Mortgage Loan, the Westfield San Francisco Centre Mortgage Loan, the Prudential Plaza Mortgage Loan, the Birch Run Premium Outlets Mortgage Loan, the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan, the Vertex Pharmaceuticals HQ Mortgage Loan and the 401 South State Street Mortgage Loan will be Non-Serviced Mortgage Loans related to the issuing entity.
“Non-Serviced Securitization Trust” means (i) with respect to the 10 Hudson Yards Whole Loan, the securitization trust formed pursuant to the Hudson Yards 2016-10HY Trust and Servicing Agreement, (ii) with respect to the Westfield San Francisco Centre Whole Loan, the securitization trust formed pursuant to the DBJPM 2016-SFC Trust and Servicing Agreement, (iii) with respect to the Prudential Plaza Whole Loan, the securitization trust formed pursuant to the COMM 2015-CCRE26 Pooling and Servicing Agreement, (iv) with respect to the Birch Run Premium Outlets Whole Loan, the securitization trust formed pursuant to the COMM 2016-DC2 Pooling and Servicing Agreement (and after the securitization of the Controlling Companion Loan, the trust formed pursuant to the applicable securitization), (v) with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan, the securitization trust formed pursuant to the COMM 2016-GCT Trust and Servicing Agreement, (vi) with respect to the Vertex Pharmaceuticals HQ Whole Loan, the securitization trust formed pursuant to the WFCM 2016-BNK1 Pooling and Servicing Agreement and (vii) with respect to the 401 South State Street Whole Loan, the securitization trust formed pursuant to the CGCMT 2016-P4 Pooling and Servicing Agreement.
“Serviced Companion Loan” means, with respect to any Serviced Whole Loan, any related mortgage note not included in the issuing entity that is serviced under the PSA and that is generally payable on apari passu basis with a Mortgage Loan included in the issuing entity to the extent set forth in the related Intercreditor Agreement. Each of the U-Haul AREC Portfolio Companion Loans will be Serviced Companion Loans related to the issuing entity.
“Serviced Whole Loan” means any Whole Loan serviced under the PSA, which includes a mortgage note that is included in the issuing entity and one or more Pari Passu Companion Loans not included in the issuing entity. References in this prospectus to a Serviced Whole Loan refer to the aggregate indebtedness under the related notes. The U-Haul AREC Portfolio Whole Loan will be a Serviced Whole Loan related to the issuing entity.
“Serviced Pari Passu Companion Loan” means, with respect to any Serviced Whole Loan, any related Pari Passu Companion Loan that is serviced under the PSA. Each of the U-Haul AREC Portfolio Companion Loans will be Serviced Pari Passu Companion Loans.
“Subordinate Companion Loan” means with respect to any Whole Loan, any related subordinated note not included in the issuing entity, which is generally subordinated in right of payment to the related Mortgage Loan to the extent set forth in the related Intercreditor Agreement. Each of the 10 Hudson Yards Subordinate Companion Loan, the Westfield San Francisco Centre Subordinate Companion Loan and the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan will be Subordinate Companion Loans.
The following table provides certain information with respect to each Mortgage Loan that has a corresponding Companion Loan:
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Whole Loan Summary
Mortgage Loan Name | Mortgage Loan Cut-off Date Balance | % of Initial Pool Balance | Pari Passu Companion Loan Cut-off Date Balance | Subordinate Companion Loan Cut-off Date Balance | Mortgage Loan LTV Ratio(1) | Mortgage Loan Underwritten NCF DSCR | Mortgage Loan Underwritten NOI Debt Yield(1) | |||||||
| 10 Hudson Yards(2) | $65,000,000 | 9.2% | $643,100,000 | $191,900,000 | 32.9% | 4.18x | 12.9% | |||||||
| Westfield San Francisco Centre | $60,000,000 | 8.5% | $373,077,000 | $124,923,000 | 35.5% | 3.68x | 13.1% | |||||||
| Prudential Plaza | $50,000,000 | 7.1% | $365,000,000 | N/A | 59.3% | 1.34x | 9.0% | |||||||
| U-Haul AREC Portfolio | $48,500,000 | 6.9% | $46,000,000 | N/A | 67.4% | 1.64x | 10.3% | |||||||
| Birch Run Premium Outlets | $43,000,000 | 6.1% | $80,000,000 | N/A | 59.4% | 2.90x | 13.2% | |||||||
| Gas Company Tower & World Trade Center Parking Garage(3) | $40,000,000 | 5.7% | $104,000,000 | $175,000,000 | 23.6% | 5.23x | 19.9% | |||||||
| Vertex Pharmaceuticals HQ(4) | $30,000,000 | 4.3% | $395,000,000 | N/A | 35.5% | 6.28x | 17.9% | |||||||
| 401 South State Street(5) | $15,742,454 | 2.2% | $31,964,374 | N/A | 62.4% | 1.59x | 11.5% |
| (1) | Calculated based on the balance of the related Whole Loan excluding any related Subordinate Companion Loans. With respect to the Mortgaged Property identified on Annex A-1 to this prospectus as 10 Hudson Yards, the Mortgage Loan LTV Ratio is calculated using a “hypothetical as-is” appraised value for the Mortgaged Property. See “Description of the Mortgage Pool—Appraised Value” for more information. |
| (2) | Information presented excludes $300,000,000 of mezzanine debt. |
| (3) | Information presented excludes $131,000,000 of mezzanine debt. |
| (4) | Information presented excludes $195,000,000 of mezzanine debt. |
| (5) | Information presented excludes $7,830,000 of mezzanine debt. |
10 Hudson Yards Whole Loan
General. The Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 10 Hudson Yards, representing approximately 9.2% of the Initial Pool Balance, with a Cut-off Date Balance of $65,000,000 (the “10 Hudson Yards Mortgage Loan” or “Note A-1-C1”), is part of a whole loan comprised of 13 promissory notes, each of which is secured by the same mortgage instrument on the same underlying Mortgaged Property (the “10 Hudson Yards Mortgaged Property”). The 10 Hudson Yards Whole Loan is evidenced by: (i) one seniorpari passu promissory Note A-1-C1 that evidences the 10 Hudson Yards Mortgage Loan; (ii) two seniorpari passu promissory notes designated as Note A-1-S and Note A-2-S, respectively, having an aggregate outstanding principal balance as of the Cut-off Date of $408,100,000 (the “10 Hudson Yards Standalone Pari Passu Companion Loans”), each of which is generallypari passu in right of payment with the 10 Hudson Yards Mortgage Loan and the 10 Hudson Yards Non-Standalone Pari Passu Companion Loans (as defined below); (iii) eight seniorpari passu promissory notes designated as Note A-1-C2, Note A-1-C3, Note A-1-C4, Note A-1-C5, Note A-1-C6, Note A-2-C1, Note A-2-C2 and Note A-2-C3 having an aggregate outstanding principal balance as of the Cut-off Date of $235,000,000 (the “10 Hudson Yards Non-Standalone Pari Passu Companion Loans” and, together with the 10 Hudson Yards Standalone Pari Passu Companion Loans, the “10 Hudson Yards Pari Passu Companion Loans”), which are generallypari passu in right of payment with the 10 Hudson Yards Mortgage Loan and the 10 Hudson Yards Standalone Pari Passu Companion Loans; and (iv) two junior promissory notes designated as Note B-1 and Note B-2, respectively, with an aggregate outstanding principal balance as of the Cut-off Date of $191,900,000 (the “10 Hudson Yards Subordinate Companion Loans” and, together with the 10 Hudson Yards Pari Passu Companion Loans, the “10 Hudson Yards Companion Loans”), which are subordinate in right of payment in respect of each of the 10 Hudson Yards Mortgage Loan and the 10 Hudson Yards Pari Passu Companion Loans. The 10 Hudson Yards Standalone Pari Passu Companion Loans and the 10 Hudson Yards Subordinate Companion Loans are collectively referred to as the “10 Hudson Yards Standalone Companion Loans”. In addition, the 10 Hudson Yards Mortgage Loan and the 10 Hudson Yards Non-Standalone Pari Passu Companion Loans are collectively referred to as the “10 Hudson Yards Non-Standalone Loans”.
The 10 Hudson Yards Subordinate Companion Loans, together with the 10 Hudson Yards Mortgage Loan and the 10 Hudson Yards Pari Passu Companion Loans, are referred to as the “10 Hudson Yards Whole Loan”. Only the 10 Hudson Yards Mortgage Loan is included in the Issuing Entity. Each of the 10
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Hudson Yards Standalone Companion Loans are included in the Hudson Yards 2016-10HY Mortgage Trust. The 10 Hudson Yards Non-Standalone Pari Passu Companion Loans represented by Note A-1-C2, Note A-1-C3, Note A-1-C4, Note A-1-C5 and Note A-1-C6 are currently being held by Deutsche Bank AG, New York Branch. The 10 Hudson Yards Non-Standalone Pari Passu Companion Loans represented by Note A-2-C1, Note A-2-C2 and Note A-2-C3 are currently being held by Goldman Sachs Mortgage Company.
The holders of the 10 Hudson Yards Whole Loan (the “10 Hudson Yards Noteholders”) have entered into a co-lender agreement that sets forth the respective rights of each 10 Hudson Yards Noteholder (the “10 Hudson Yards Co-Lender Agreement”).
Servicing. As of the Closing Date, it is anticipated that the 10 Hudson Yards Whole Loan will be serviced by Wells Fargo Bank, National Association, as master servicer (in such capacity, the “Hudson Yards 2016-10HY Master Servicer”), and specially serviced by AEGON USA Realty Advisors, LLC, as special servicer (in such capacity, the “Hudson Yards 2016-10HY Special Servicer”), pursuant to the trust and servicing agreement, dated as of August 6, 2016 (the “Hudson Yards 2016-10HY Trust and Servicing Agreement”), between the Depositor, the Hudson Yards 2016-10HY Master Servicer, the Hudson Yards 2016-10HY Special Servicer, Wilmington Trust, National Association, as trustee (in such capacity, the “Hudson Yards 2016-10HY Trustee”) and Wells Fargo Bank, National Association as certificate administrator and custodian (in such capacity, the “Hudson Yards 2016-10HY Certificate Administrator”), in connection with the Hudson Yards 2016-10HY Mortgage Trust (into which each of the 10 Hudson Yards Standalone Companion Loans have been deposited), and, subject to the terms of the 10 Hudson Yards Co-Lender Agreement, all decisions, consents, waivers, approvals and other actions on the part of any 10 Hudson Yards Noteholder will be effected in accordance with the Hudson Yards 2016-10HY Trust and Servicing Agreement and the 10 Hudson Yards Co-Lender Agreement.
Advancing. The master servicer or the trustee, as applicable, will be responsible for making P&I Advances on the 10 Hudson Yards Mortgage Loan (but not on the 10 Hudson Yards Companion Loans) pursuant to the PSA, in each case, unless the master servicer, the special servicer or the trustee, as applicable, determines that such an Advance would be a Nonrecoverable Advance.
The Hudson Yards 2016-10HY Master Servicer or Hudson Yards 2016-10HY Trustee, as applicable, will be obligated to make servicing advances with respect to the 10 Hudson Yards Whole Loan, in each case unless a similar determination of nonrecoverability is made under the Hudson Yards 2016-10HY Trust and Servicing Agreement.
Distributions. The 10 Hudson Yards Co-Lender Agreement sets forth the respective rights of the holders of the 10 Hudson Yards Mortgage Loan and the 10 Hudson Yards Companion Loans with respect to distributions of funds received in respect of the related 10 Hudson Yards Whole Loan, and provides, in general, that:
| · | the 10 Hudson Yards Subordinate Companion Loans are, at all times, junior, subject and subordinate to the 10 Hudson Yards Mortgage Loan and the 10 Hudson Yards Pari Passu Companion Loans, and the right of the holders of the 10 Hudson Yards Subordinate Companion Loans (the “10 Hudson Yards Subordinate Companion Loan Holder”) to receive payments with respect to the 10 Hudson Yards Subordinate Companion Loans are, to the extent set forth in the 10 Hudson Yards Co-Lender Agreement, at all times, junior, subject and subordinate to the rights of the holders of the 10 Hudson Yards Mortgage Loan and the 10 Hudson Yards Pari Passu Companion Loans to receive payments with respect to the 10 Hudson Yards Mortgage Loan and the 10 Hudson Yards Pari Passu Companion Loans. |
| · | prior to calculating any amounts of interest or principal due to the holders of the 10 Hudson Yards Mortgage Loan and the 10 Hudson Yards Pari Passu Companion Loans, the principal balance of the 10 Hudson Yards Subordinate Companion Loans will be reducedpro rata (based on their respective outstanding principal balances) (but not below zero) by any realized loss with respect to the 10 Hudson Yards Whole Loan, and after the principal balance of each 10 Hudson Yards Subordinate Companion Loan has been reduced to zero, the principal balances of the 10 Hudson |
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| Yards Mortgage Loan and the 10 Hudson Yards Pari Passu Companion Loans will be reducedpro rata (based on their respective outstanding principal balances) (in each case, not below zero) by any realized loss with respect to the 10 Hudson Yards Whole Loan. |
| · | if no (i) event of default with respect to an obligation of the borrower to pay money due under the 10 Hudson Yards Whole Loan or (ii) non-monetary event of default pursuant to which the 10 Hudson Yards Whole Loan becomes a specially serviced loan (a “10 Hudson Yards Triggering Event of Default”) has occurred and is continuing, then all amounts tendered by the borrower (net of certain amounts payable or reimbursable to the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Special Servicer, as applicable) will be distributed as follows: |
| (i) | first, (A) first, to each Note A holder (or the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee and, if applicable, the master servicers of any securitization of any 10 Hudson Yards Non-Standalone Loan), up to the amount of any nonrecoverable property advances (or, in the case of a master servicer of any securitization of any 10 Hudson Yards Non-Standalone Loan, if applicable, itspro rata share of any nonrecoverable property advances previously reimbursed to the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee from general collections of such applicable securitization) that remain unreimbursed (together with interest thereon at the applicable advance rate), (B) second, to each Note A Holder (or the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee and the master servicers or trustees of the securitizations of any 10 Hudson Yards Non-Standalone Loan), up to the amount of any nonrecoverable “p&i” advances” or P&I Advances, with respect to Note A, as applicable, on apro rata andpari passu basis (based on the outstanding principal balance of its respective Note A) that remain unreimbursed (together with interest thereon at the applicable advance rate or Reimbursement Rate), (C) third, to each Note B holder (or the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee), up to the amount of any nonrecoverable “p&i” advances” with respect to Note B, as applicable, on aprorata andparipassu basis (based on the total outstanding principal balance of its respective Note B) that remain unreimbursed (together with interest thereon at the applicable advance rate), and (D) fourth, to the holders of the 10 Hudson Yards Standalone Companion Loans (or the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee), up to the amount of any nonrecoverable administrative advances with respect to the 10 Hudson Yards Standalone Companion Loans that remain unreimbursed (together with interest thereon at the applicable advance rate); |
| (ii) | second, to each Note A holder (or the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee, as applicable), on apro rata andpari passu basis (based on the unreimbursed amount of costs paid or payable) and (B) second, to the extent Note B is included in the Hudson Yards 2016-10HY Mortgage Trust, to each Note B holder on apro rata andpari passu basis (or the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee, as applicable) (based on the unreimbursed amounts of costs paid or payable) in each case up to the amount of any unreimbursed costs paid or any costs currently payable or paid or advanced by Note A or Note B (or the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee), as applicable, with respect to the 10 Hudson Yards Whole Loan, including, without limitation, unreimbursed property advances and administrative advances and interest thereon at the applicable advance rate, to the extent such costs, property advances and administrative advances and interest thereon are then payable or reimbursable under the Hudson Yards 2016-10HY Trust and Servicing Agreement with respect to Note A or Note B, as applicable, to the extent reimbursements for such amounts are permitted under the Hudson Yards 2016-10HY Trust and Servicing Agreement; |
| (iii) | third, to each Note A holder and Note B holder (or the Hudson Yards 2016-10HY Master Servicer), the applicable accrued and unpaid servicing fee (without duplication of any portion of the servicing fee paid by the borrower), and then to each Note A holder and Note B holder |
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| (or the Hudson Yards 2016-10HY Special Servicer), any special servicing fees, (including, without limitation, workout fees and liquidation fees) earned by it with respect to the 10 Hudson Yards Whole Loan under the Hudson Yards 2016-10HY Trust and Servicing Agreement; |
| (iv) | fourth,pari passu to each Note A holder, up to an amount equal to the accrued and unpaid interest on the related principal balance at the related Note A interest rate on such Note, net of the servicing fee rate, on apro rata basis based on the amount of accrued and unpaid interest due to each such Note A holder; |
| (v) | fifth,pari passu, in respect of principal collections, with respect to all payments and prepayments of principal, to each Note A holder, on apro rata basis (based on the outstanding principal balance of its respective Note A), up to an amount equal to all such payments and prepayments of principal, until the related principal balance of each Note A has been reduced to zero; |
| (vi) | sixth, if the proceeds of any foreclosure sale or any liquidation of the 10 Hudson Yards Whole Loan or the 10 Hudson Yards Mortgaged Property exceed the amounts required to be applied in accordance with the foregoing clauses (i)-(v),pari passu to each Note A holder, an amount equal to the aggregate of unreimbursed realized losses previously allocated to the related Note A, plus interest thereon at the related Note A interest rate minus the servicing fee rate, on apro rata basis based on the amount of realized losses previously allocated to each such A Note; |
| (vii) | seventh, to the extent Note B is not included in the Hudson Yards 2016-10HY Mortgage Trust, to each Note B holder, up to the amount of any unreimbursed costs paid or any costs currently payable by such Note B holder with respect to the 10 Hudson Yards Whole Loan, including, without limitation, unreimbursed property advances and administrative advances made by such Note B holder and any cure payment made by such Note B holder, on aprorata basis based on the amount of any unreimbursed costs previously allocated to each such holder; |
| (viii) | eighth,pari passu to each Note B holder, up to an amount equal to the accrued and unpaid interest on the principal balance at the related Note B interest rate, net of the servicing fee rate, on apro rata basis based on the amount of accrued and unpaid interest due to each such Note B holder; |
| (ix) | ninth,pari passu, in respect of principal collections, with respect to all payments and prepayments of principal, to each Note B holder, on apro rata basis (based on the outstanding principal balance of its respective Note B), up to an amount equal to all such payments and prepayments of principal, until the principal balance of each Note B has been reduced to zero; |
| (x) | tenth, to each Note B holder, on apro rata andpari passu basis (based on the amount of realized losses previously allocated to each such Note B), an amount equal to the aggregate of unreimbursed realized losses previously allocated to such Note B, plus interest thereon at the related Note B interest rate minus the servicing fee rate, compounded monthly from the date the related realized loss was allocated to such Note B; |
| (xi) | eleventh, any interest accrued at the default rate on the stated principal balance of the 10 Hudson Yards Whole Loan to the extent such default interest amount is (i) actually paid by the borrower, (ii) in excess of interest accrued on the stated principal balance of the 10 Hudson Yards Whole Loan at the related interest rate and (iii) not required to be paid to the Hudson Yards 2016-10HY Master Servicer, the Hudson Yards 2016-10HY Trustee or the Hudson Yards 2016-10HY Special Servicer, or the master servicers or the trustees of any securitization of any 10 Hudson Yards Non-Standalone Loan,pro rata (based on the amounts described in each of the following clauses (A) through (D)) andpari passu, to (A) |
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| Note A-1 holder in an amount calculated on the Note A-1 principal balance at the excess of (x) the Note A-1 default rate over (y) the Note A-1 interest rate, (B) Note A-2 holder in an amount calculated on the Note A-2 principal balance at the excess of (x) the Note A-2 default rate over (y) the Note A-2 interest rate, (C) Note B-1 holder in an amount calculated on the Note B-1 principal balance at the excess of (x) the Note B-1 default rate over (y) the Note B-1 interest rate and (D) Note B-2 holder in an amount calculated on the Note B-2 principal balance at the excess of (x) the Note B-2 default rate over (y) the Note B-2 interest rate; |
| (xii) | twelfth, first,pro rata (based on the amounts described in each of the following clauses ((A) and (B)) andpari passu, to: (A) each Note A-1 holder, any prepayment charge allocable to any prepayment of the related Note A-1 and (B) each Note A-2 holder, any prepayment charge allocable to any prepayment of the related Note A-2, and thensecond,pro rata (based on the amounts described in each of the following clauses ((A) and (B)) andpari passu, to: (A) the Note B-1 holder, any prepayment charge allocable to any prepayment of Note B-1, and (ii) the Note B-2 holder, any prepayment charge allocable to any prepayment of Note B-2, in each case, to the extent actually paid by the borrower; |
| (xiii) | thirteenth,pro rata andpari passu (in the case of penalty charges, only to the extent not required to be paid to the Hudson Yards 2016-10HY Master Servicer, the Hudson Yards 2016-10HY Trustee or the Hudson Yards 2016-10HY Special Servicer, or the master servicers or the trustees of any securitization of any 10 Hudson Yards Non-Standalone Loan), to: (i) each Note A-1 holder its percentage interest of any assumption fees and penalty charges, (ii) each Note A-2 holder its percentage interest of any assumption fees and penalty charges, (iii) the Note B-1 holder its percentage interest of any assumption fees and penalty charges and (iv) the Note B-2 holder its percentage interest of any assumption fees and penalty charges; and |
| (xiv) | fourteenth, any excess amount not otherwise applied pursuant to the foregoing clauses (i) through (xiii) above will be distributed to the 10 Hudson Yards Noteholderspro rata andpari passu in accordance with their respective initial percentage interests. |
If any Note in the 10 Hudson Yards Whole Loan (or a portion thereof) has been defeased, the foregoing provisions regarding priority of payments will apply only to the non-defeased Notes (or portions thereof). Any Note (or portion thereof) that has been defeased will be repaid solely from the proceeds of the related defeasance collateral.
The Hudson Yards 2016-10HY Master Servicer and the Hudson Yards 2016-10HY Special Servicer, as applicable, will have no obligation to deposit any amounts that are additional servicing compensation into the collection account or REO account, as applicable, and are entitled to retain any such amount that such party is entitled to under the Hudson Yards 2016-10HY Trust and Servicing Agreement.
After the occurrence of and during the continuance of a 10 Hudson Yards Triggering Event of Default, all amounts tendered by the borrower (net of certain amounts payable or reimbursable to the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Special Servicer, as applicable) will be distributed as follows:
| (i) | first, (A) first, to each Note A holder (or the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee and, if applicable, the master servicers of any securitization of any 10 Hudson Yards Non-Standalone Loan), up to the amount of any nonrecoverable property advances (or, in the case of a master servicer of any securitization of any 10 Hudson Yards Non-Standalone Loan, if applicable, itspro rata share of any nonrecoverable property advances previously reimbursed to the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee from general collections of such applicable securitization) that remain unreimbursed (together with interest thereon at the applicable advance rate), (B) second, to each Note A Holder (or the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee and the master servicers or trustees of the securitizations of any 10 Hudson Yards Non-Standalone Loan), up to the |
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| amount of any nonrecoverable “p&i” advances” or P&I Advances, with respect to Note A, as applicable, on apro rata andpari passu basis (based on the outstanding principal balance of its respective Note A) that remain unreimbursed (together with interest thereon at the applicable advance rate or Reimbursement Rate), (C) third, to each Note B holder (or the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee), up to the amount of any nonrecoverable “p&i” advances” with respect to Note B, as applicable, on aprorata andparipassu basis (based on the total outstanding principal balance of its respective Note B) that remain unreimbursed (together with interest thereon at the applicable advance rate), and (D) fourth, to the holders of the 10 Hudson Yards Standalone Companion Loans (or the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee), up to the amount of any nonrecoverable administrative advances with respect to the 10 Hudson Yards Standalone Companion Loans that remain unreimbursed (together with interest thereon at the applicable advance rate); |
| (ii) | second, to each Note A holder (or the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee, as applicable), on apro rata andpari passu basis (based on the unreimbursed amount of costs paid or payable) and (B) second, to the extent Note B is included in the Hudson Yards 2016-10HY Mortgage Trust, to each Note B holder on apro rata andpari passu basis (or the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee, as applicable) (based on the unreimbursed amounts of costs paid or payable) in each case up to the amount of any unreimbursed costs paid or any costs currently payable or paid or advanced by Note A or Note B (or the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee), as applicable, with respect to the 10 Hudson Yards Whole Loan, including, without limitation, unreimbursed property advances and administrative advances and interest thereon at the applicable advance rate, to the extent such costs, property advances and administrative advances and interest thereon are then payable or reimbursable under the Hudson Yards 2016-10HY Trust and Servicing Agreement with respect to Note A or Note B, as applicable, to the extent reimbursements for such amounts are permitted under the Hudson Yards 2016-10HY Trust and Servicing Agreement; |
| (iii) | third, to each Note A holder and Note B holder (or the Hudson Yards 2016-10HY Master Servicer), the applicable accrued and unpaid servicing fee (without duplication of any portion of the servicing fee paid by the borrower), and then to each Note A holder and Note B holder (or the Hudson Yards 2016-10HY Special Servicer), any special servicing fees, (including, without limitation, workout fees and liquidation fees) earned by it with respect to the 10 Hudson Yards Whole Loan under the Hudson Yards 2016-10HY Trust and Servicing Agreement; |
| (iv) | fourth,pari passu to each Note A holder, up to an amount equal to the accrued and unpaid interest on the related principal balance at the related Note A interest rate on such Note, net of the servicing fee rate, on apro rata basis based on the amount of accrued and unpaid interest due to each such Note A holder; |
| (v) | fifth,pari passu to each Note B holder, up to an amount equal to the accrued and unpaid interest on the principal balance at the related Note B interest rate, net of the servicing fee rate, on apro rata basis based on the amount of accrued and unpaid interest due to each such Note B holder; |
| (vi) | sixth,pari passu, to each Note A holder, on apro rata basis (based on the outstanding principal balance of its respective Note A), up to an amount equal to all such payments and prepayments of principal, until the related principal balance of each Note A has been reduced to zero; |
| (vii) | seventh, if the proceeds of any foreclosure sale or any liquidation of the 10 Hudson Yards Whole Loan or the 10 Hudson Yards Mortgaged Property exceed the amounts required to be applied in accordance with the foregoing clauses (i)-(vi),pari passu to each Note A holder, |
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| an amount equal to the aggregate of unreimbursed realized losses previously allocated to the related Note A, plus interest thereon at the related Note A interest rate minus the servicing fee rate, on apro rata basis based on the amount of realized losses previously allocated to each such A Note; |
| (viii) | eighth, to the extent Note B is not included in the Hudson Yards 2016-10HY Mortgage Trust, to each Note B holder (based on the unreimbursed amount of costs paid or payable), up to the amount of any unreimbursed costs paid or any costs currently payable by such Note B holder, with respect to the 10 Hudson Yards Whole Loan, including, without limitation, unreimbursed property advances and administrative advances made by such Note B holder and any cure payment made by such Note B holder, on a pro rata basis on the amount of any unreimbursed costs previously allocated to each such holder; |
| (ix) | ninth,pari passu, to each Note B holder, on apro rata basis (based on the outstanding principal balance of its respective Note B), up to an amount equal to all such payments and prepayments of principal, until the principal balance of each Note B has been reduced to zero; |
| (x) | tenth, to each Note B holder, on apro rata andpari passu basis (based on the amount of realized losses previously allocated to each such Note B), an amount equal to the aggregate of unreimbursed realized losses previously allocated to such Note B, plus interest thereon at the related Note B interest rate minus the servicing fee rate, compounded monthly from the date the related realized loss was allocated to such Note B; |
| (xi) | eleventh, first,pro rata (based on the amounts described in each of the following clauses ((A) and (B)) andpari passu, to: (A) each Note A-1 holder, any prepayment charge allocable to any prepayment of the related Note A-1 and (B) each Note A-2 holder, any prepayment charge allocable to any prepayment of the related Note A-2, and thensecond,pro rata (based on the amounts described in each of the following clauses ((A) and (B)) andpari passu, to: (A) the Note B-1 holder, any prepayment charge allocable to any prepayment of Note B-1, and (ii) the Note B-2 holder, any prepayment charge allocable to any prepayment of Note B-2, in each case, to the extent actually paid by the borrower; |
| (xii) | twelfth, any interest accrued at the default rate on the stated principal balance of the 10 Hudson Yards Whole Loan to the extent such default interest amount is (i) actually paid by the borrower, (ii) in excess of interest accrued on the stated principal balance of the 10 Hudson Yards Whole Loan at the related interest rate and (iii) not required to be paid to the Hudson Yards 2016-10HY Master Servicer, the Hudson Yards 2016-10HY Trustee or the Hudson Yards 2016-10HY Special Servicer, or the master servicers or the trustees of any securitization of any 10 Hudson Yards Non-Standalone Loan,pro rata (based on the amounts described in each of the following clauses (A) through (D)) andpari passu, to (A) Note A-1 holder in an amount calculated on the Note A-1 principal balance at the excess of (x) the Note A-1 default rate over (y) the Note A-1 interest rate, (B) Note A-2 holder in an amount calculated on the Note A-2 principal balance at the excess of (x) the Note A-2 default rate over (y) the Note A-2 interest rate, (C) Note B-1 holder in an amount calculated on the Note B-1 principal balance at the excess of (x) the Note B-1 default rate over (y) the Note B-1 interest rate and (D) Note B-2 holder in an amount calculated on the Note B-2 principal balance at the excess of (x) the Note B-2 default rate over (y) the Note B-2 interest rate; |
| (xiii) | thirteenth,pro rata andpari passu (in the case of penalty charges, only to the extent not required to be paid to the Hudson Yards 2016-10HY Master Servicer, the Hudson Yards 2016-10HY Trustee or the Hudson Yards 2016-10HY Special Servicer, or the master servicers or the trustees of any securitization of any 10 Hudson Yards Non-Standalone Loan), to: (i) each Note A-1 holder its percentage interest of any assumption fees and penalty charges, (ii) each Note A-2 holder its percentage interest of any assumption fees and penalty charges, (iii) the Note B-1 holder its percentage interest of any assumption fees and penalty |
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| charges and (iv) the Note B-2 holder its percentage interest of any assumption fees and penalty charges; and |
| (xiv) | fourteenth, any excess amount not otherwise applied pursuant to the foregoing clauses (i) through (xiii) above will be distributed to the 10 Hudson Yards Noteholderspro rata in accordance with their respective initial percentage interests. |
If any Note in the 10 Hudson Yards Whole Loan (or a portion thereof) has been defeased, the foregoing provisions regarding priority of payments will apply only to the non-defeased Notes (or portions thereof). Any Note (or portion thereof) that has been defeased will be repaid solely from the proceeds of the related defeasance collateral.
For the purpose of this “—Distributions” section, with respect to the 10 Hudson Yards Mortgage Loan, the 10 Hudson Yards Pari Passu Companion Loans and the 10 Hudson Yards Subordinate Companion Loans, the term “percentage interest” means the percentage equivalent of a fraction, the numerator of which is equal to the principal balance of such loan, and the denominator of which is equal to the principal balance of the 10 Hudson Yards Whole Loan.
In addition, solely for the purpose of this “—Distributions” section, the following terms have the meaning below:
“Note A” means, individually or collectively, Note A-1 and Note A-2, as the context requires.
“Note A-1” means, individually or collectively, Note A-1-S, Note A-1-C1, Note A-1-C2, Note A-1-C3, Note A-1-C4, Note A-1-C5 and Note A-1-C6, as the context may require
“Note A-2” means, individually or collectively, Note A-2-S, Note A-2-C1, Note A-2-C2 and Note A-2-C3, as the context may require.
“Note B” means, individually or collectively, Note B-1 and Note B-2, as the context may require.
Control and Consultation. The controlling holder under the 10 Hudson Yards Co-Lender Agreement will be the Hudson Yards 2016-10HY Directing Holder. The “Hudson Yards 2016-10HY Directing Holder”, as of any date of determination, will be, during a Hudson Yards 2016-10HY Subordinate Control Period or a Hudson Yards 2016-10HY Subordinate Consultation Period, the majority of the Hudson Yards 2016-10HY Controlling Class or its designee who is not a borrower related party. As of the Closing Date, no person or entity is expected to be holding a majority of the Hudson Yards 2016-10HY Controlling Class and there is expected to be no Hudson Yards 2016-10HY Directing Holder.
During a Hudson Yards 2016-10HY Subordinate Control Period or a Hudson Yards 2016-10HY Subordinate Consultation Period, If no Hudson Yards 2016-10HY Directing Holder is appointed, then (i) during a Hudson Yards 2016-10HY Subordinate Control Period, each Hudson Yards 2016-10HY Initial Consulting Holder will have non-binding consultation rights with respect to any major decisions and other matters as to which the Hudson Yards 2016-10HY Directing Holder would have had consent rights or direction rights if a Hudson Yards 2016-10HY Directing Holder had been appointed at such time, and (ii) during any Hudson Yards 2016-10HY Subordinate Consultation Period, each Hudson Yards 2016-10HY Initial Consulting Holder will have the same non-binding consultation rights that a Hudson Yards 2016-10HY Directing Holder would have had if a Hudson Yards 2016-10HY Directing Holder had been appointed at such time. If a Hudson Yards 2016-10HY Initial Consulting Holder becomes a borrower related party, then such Hudson Yards 2016-10HY Initial Consulting Holder will not have any consultation rights during any Hudson Yards 2016-10HY Subordinate Control Period or Hudson Yards 2016-10HY Subordinate Consultation Period. As of the Closing Date, each of NYL Investors LLC and Prima Capital Advisors LLC, as agent for its managed account, or an affiliate thereof, if and for so long as it is a holder of certificates of the Hudson Yards 2016-10HY Controlling Class, will be a Hudson Yards 2016-10HY Initial Consulting Holder.
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A “Hudson Yards 2016-10HY Subordinate Control Period” means any period when the certificate balance of the Hudson Yards 2016-10HY Mortgage Trust Class D certificates (taking into account the application of any appraisal reduction amounts and collateral deficiency amounts to notionally reduce the certificate balance of such class of certificates) is at least 25% of the initial certificate balance of such class of certificates;provided, if at any time the certificate balances of all classes of certificates senior to such class of certificates have been reduced to zero as a result of the allocation of principal payments on the 10 Hudson Yards Standalone Companion Loans, then a Hudson Yards 2016-10HY Subordinate Control Period will be deemed to then be in effect. If the Hudson Yards 2016-10HY Directing Holder becomes a borrower related party, a Hudson Yards 2016-10HY Subordinate Control Period will be deemed to be terminated (except for the purposes of determining whether the Hudson Yards 2016-10HY Directing Holder has the right to appoint the successor special servicer to a Hudson Yards 2016-10HY Special Servicer that has become a borrower related party).
A “Hudson Yards 2016-10HY Subordinate Consultation Period” means any period when both (i) the certificate balance of the Hudson Yards 2016-10HY Mortgage Trust Class D certificates (taking into account the application of any appraisal reduction amounts and collateral deficiency amounts to notionally reduce the certificate balance of such class of certificates), is less than 25% of the initial certificate balance of such class of certificates and (ii) the certificate balance of such class of certificates (without regard to the application of any appraisal reduction amounts and collateral deficiency amounts allocated to such class of certificates) is at least 25% of the initial certificate balance of such class of certificates. If the Hudson Yards 2016-10HY Directing Holder becomes a borrower related party, a Hudson Yards 2016-10HY Subordinate Consultation Period will be deemed to be terminated (except for the purposes of determining whether the Hudson Yards 2016-10HY Directing Holder has the right to appoint the successor special servicer to a Hudson Yards 2016-10HY Special Servicer that has become a borrower related party).
When the certificate balance of the Hudson Yards 2016-10HY Mortgage Trust Class D Certificates (without regard to the application of any appraisal reduction amounts and collateral deficiency amounts to notionally reduce the certificate balance of such class of certificates) is less than 25% of the initial certificate balance of such class of certificates, the Hudson Yards 2016-10HY Directing Holder (if any) or the Hudson Yards 2016-10HY Initial Consulting Holder will have no consent or consultation rights under the Hudson Yards 2016-10HY Trust and Servicing Agreement except for such rights available to it as a certificateholder and such other rights that are available to it in accordance with the Hudson Yards 2016-10HY Trust and Servicing Agreement.
During a Hudson Yards 2016-10HY Subordinate Control Period, certain decisions to be made with respect to the 10 Hudson Yards Whole Loan, including certain major decisions and the implementation of any recommended actions outlined in an asset status report pursuant to the Hudson Yards 2016-10HY Trust and Servicing Agreement are expected to require the approval of the Hudson Yards 2016-10HY Directing Holder (if any) or the non-binding consultation of the Hudson Yards 2016-10HY Initial Consulting Holder.
The “Hudson Yards 2016-10HY Controlling Class” will be, as of any time of determination, the most subordinate of the Hudson Yards 2016-10HY Mortgage Trust Class D and Class E Certificates so long as such class has an outstanding certificate balance (as reduced by any principal payments and realized losses and as notionally reduced by any appraisal reduction amounts and collateral deficiency amounts allocable to such class) that is equal to or greater than 25% of the initial certificate balance of such class.If neither the Class D nor Class E certificates satisfy the foregoing requirements, the Class D certificates will be theHudson Yards 2016-10HYControlling Class so long as such class has an outstanding certificate balance (as reduced by any principal payments and realized losses allocable to such Class) that is equal to or greater than 25% of the initial certificate balance of such class. If the Class D certificates do not satisfy the preceding sentence, then there will be no controlling class. No other class of certificates will be eligible to act as the controlling class or appoint theHudson Yards 2016-10HYDirecting Holder or theHudson Yards 2016-10HY Initial Consulting Holder.
A “Hudson Yards 2016-10HY Controlling Class Certificateholder” will be each holder (or beneficial owner, if applicable) of a certificate of the Hudson Yards 2016-10HY Controlling Class.
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The “Hudson Yards 2016-10HY Directing Holder” is the representative appointed by the holder or holders of the certificates representing more than 50% of the Hudson Yards 2016-10HY Controlling Class (by certificate balance);provided,that (1) if no certificateholder holds certificate representing more than 50% of theHudson Yards 2016-10HY Controlling Class (by certificate balance), then the Hudson Yards 2016-10HY Directing Holder will be the representative appointed by the Hudson Yards 2016-10HY Controlling Class Certificateholder that owns, and is identified (with contact information) to the Hudson Yards 2016-10HY Master Servicer, the Hudson Yards 2016-10HY Special Servicer and the Hudson Yards 2016-10HY Certificate Administrator as owning, the largest aggregate certificate balance of certificates of the Hudson Yards 2016-10HY Controlling Class and (ii) if no representative is appointed as the Hudson Yards 2016-10HY Directing Holder, then there will be no Hudson Yards 2016-10HY Directing Holder. The Hudson Yards 2016-10HY Directing Holder cannot be a borrower related party. As of the Closing Date, there is expected to be no Hudson Yards 2016-10HY Directing Holder.
Neither the Hudson Yards 2016-10HY Master Servicer nor the Hudson Yards 2016-10HY Special Servicer will be permitted to follow any direction or objection provided by the Hudson Yards 2016-10HY Directing Holder or the Hudson Yards 2016-10HY Initial Consulting Holder that would require or cause the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Special Servicer to violate any provision of the related mortgage loan documents, the 10 Hudson Yards Co-Lender Agreement, applicable law or the Hudson Yards 2016-10HY Trust and Servicing Agreement, including without limitation the Hudson Yards 2016-10HY Master Servicer’s or the Hudson Yards 2016-10HY Special Servicer’s obligation to act in accordance with the servicing standard, or expose any certificateholder, the Hudson Yards 2016-10HY Master Servicer, the Hudson Yards 2016-10HY Special Servicer, the Hudson Yards 2016-10HY Certificate Administrator, the Hudson Yards 2016-10HY Trustee or the Hudson Yards 2016-10HY Mortgage Trust or their affiliates, officers, directors or agent to any claim, suit or liability, result in the imposition of a tax upon the Hudson Yards 2016-10HY Mortgage Trust or materially expand the scope of the Hudson Yards 2016-10HY Master Servicer’s or the Hudson Yards 2016-10HY Special Servicer’s responsibilities under the Hudson Yards 2016-10HY Trust and Servicing Agreement.
Cure Rights. If the 10 Hudson Yards Subordinate Companion Loans are no longer included in the Hudson Yards 2016-10HY Mortgage Trust and there is a monetary default or non-monetary default (in either case, beyond applicable notice and grace periods) with respect to the 10 Hudson Yards Whole Loan, then each 10 Hudson Yards Subordinate Companion Loan holder will have the right (and if all of the 10 Hudson Yards Subordinate Companion Loan Holders provide such notice, then all of the 10 Hudson Yards Subordinate Companion Loan Holders collectively, on apro rata basis will have such right), but not the obligation to: (A) cure such monetary default within 10 business days following the receipt of notice of such default and (B) cure such non-monetary default within 30 days following receipt of notice of such default,provided that under certain circumstances the cure period with respect to a non-monetary default may be extended by an additional 60 days (for a total of up to 90 days). If a 10 Hudson Yards Subordinate Companion Loan holder elects to cure a default by way of a payment of money (a “Cure Payment”), such 10 Hudson Yards Subordinate Companion Loan holder will be required to make such Cure Payment as directed by the Hudson Yards 2016-10HY Special Servicer and such Cure Payment will include all costs, expenses, losses, liabilities, obligations, damages, penalties and disbursements imposed on, incurred by or asserted against the issuing entity or the 10 Hudson Yards Pari Passu Companion Loan holders related to the default and incurred during the period of time from the expiration of the grace period for such default until such Cure Payment is made or other cure is effected. So long as a default exists that is being cured by a 10 Hudson Yards Subordinate Companion Loan holder and the applicable cure period has not expired and such 10 Hudson Yards Subordinate Companion Loan holder is permitted to cure under the terms of the 10 Hudson Yards Co-Lender Agreement, the default will not be treated as a default or a 10 Hudson Yards Triggering Event of Default (i) for purposes of “—Distributions” above, (ii) for purposes of triggering an acceleration of the 10 Hudson Yards Whole Loan, modifying, amending or waiving any provisions or the Mortgage Loan documents or commencing foreclosure proceedings or similar legal proceedings with respect to the 10 Hudson Yards Mortgaged Property, or (iii) for purposes of treating the 10 Hudson Yards Whole Loan as a specially serviced loan. Notwithstanding anything to the contrary, a 10 Hudson Yards Subordinate Companion Loan Holder’s right to cure a default will be limited to 6 Cure Events over the life of the 10 Hudson Yards
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Whole Loan and no single Cure Event may exceed 4 consecutive months. A “Cure Event” means a 10 Hudson Yards Subordinate Companion Loan Holder’s exercise of its cure rights whether for 1 month or for consecutive months in the aggregate.
Purchase Option. If the 10 Hudson Yards Subordinate Companion Loans are no longer included in the Hudson Yards 2016-10HY Mortgage Trust and a 10 Hudson Yards Triggering Event of Default has occurred and is continuing, then, upon written notice from the Hudson Yards 2016-10HY Special Servicer of such occurrence (a “Repurchase Option Notice”), any Note B holder will have the right (and if all of the 10 Hudson Yards Subordinate Companion Loan Holders provide such notice, then all of the 10 Hudson Yards Subordinate Companion Loan Holders collectively, on apro rata basis will have such right), prior to any other party, by written notice to the Hudson Yards 2016-10HY Special Servicer (the “Repurchase Election Notice”) after the occurrence of the 10 Hudson Yards Triggering Event of Default and prior to the earliest date to occur of (a) the cure of the 10 Hudson Yards Triggering Event of Default, (b) the consummation of a foreclosure sale, sale by power of sale or delivery of a deed-in-lieu of foreclosure with respect to the related Mortgaged Property, (c) the modification of the mortgage loan documents in accordance with the Hudson Yards 2016-10HY Trust and Servicing Agreement and the 10 Hudson Yards Co-Lender Agreement, and (d) the date that is 90 days after the related controlling noteholder’s receipt of the Repurchase Option Notice, to purchase the 10 Hudson Yards Mortgage Loan and 10 Hudson Yards Pari Passu Companion Loans for the applicable purchase price provided in the 10 Hudson Yards Co-Lender Agreement on a date not less than five (5) business days nor more than 15 business days after the date of the Repurchase Election Notice, except as described below with respect to a Repurchase Election Notice based on a Notice of Foreclosure/DIL.
The Hudson Yards 2016-10HY Special Servicer will be required to give the 10 Hudson Yards Subordinate Companion Loan Holders 5 business days’ prior written notice of its intent with respect to any consummation of a foreclosure sale, sale by power of sale or delivery of deed-in-lieu of foreclosure with respect to the related Mortgaged Property (a “Notice of Foreclosure/DIL”). If the Hudson Yards 2016-10HY Special Servicer intends to accept a deed-in-lieu of foreclosure, it will be required to deliver a Notice of Foreclosure/DIL stating its intent to the 10 Hudson Yards Subordinate Companion Loan Holders and the 10 Hudson Yards Subordinate Companion Loan Holders will have the option, within 10 business days from receipt of such Notice of Foreclosure/DIL, to deliver a Repurchase Election Notice to the Hudson Yards 2016-10HY Special Servicer and to consummate the purchase option on a date to occur no later than 30 days from the day it received the Notice of Foreclosure/DIL,provided that such 30 days may be extended at the option of the 10 Hudson Yards Subordinate Companion Loan Holders for an additional 30 days upon payment of a $5,000,000 non-refundable cash deposit and provision of evidence satisfactory to the Hudson Yards 2016-10HY Special Servicer that it is diligently and expeditiously proceeding to consummate its purchase of the 10 Hudson Yards Mortgage Loan and the 10 Hudson Yards Pari Passu Companion Loans.
Sale of Defaulted 10 Hudson Yards Whole Loan. Pursuant to the terms of the 10 Hudson Yards Co-Lender Agreement, if the 10 Hudson Yards Whole Loan becomes a defaulted mortgage loan, and if the Hudson Yards 2016-10HY Special Servicer determines to sell the 10 Hudson Yards Mortgage Loan and the 10 Hudson Yards Companion Loans in accordance with the Hudson Yards 2016-10HY Trust and Servicing Agreement, then the Hudson Yards 2016-10HY Special Servicer will have the right and the obligation to sell the 10 Hudson Yards Mortgage Loan and the 10 Hudson Yards Companion Loans as notes evidencing one whole loan in accordance with the terms of the Hudson Yards 2016-10HY Trust and Servicing Agreement. In connection with any such sale, the Hudson Yards 2016-10HY Special Servicer will be required to follow the procedures set forth in the Hudson Yards 2016-10HY Trust and Servicing Agreement.
Special Servicer Appointment Rights. Pursuant to the 10 Hudson Yards Co-Lender Agreement and the Hudson Yards 2016-10HY Trust and Servicing Agreement, the Hudson Yards 2016-10HY Directing Holder (if any) (during any Hudson Yards 2016-10HY Subordinate Control Period) or, at any time other than during a Hudson Yards 2016-10HY Subordinate Control Period, certificateholders with the requisite percentage of voting rights will have the right, with or without cause, to replace the Hudson Yards 2016-
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10HY Special Servicer then acting with respect to the 10 Hudson Yards Whole Loan and appoint a replacement special servicer in lieu thereof without the consent of the issuing entity (or its representative).
Westfield San Francisco Centre Whole Loan
General. The Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Westfield San Francisco Centre, representing approximately 8.5% of the Initial Pool Balance, with a Cut-off Date Balance of $60,000,000 (the “Westfield San Francisco Centre Mortgage Loan”), is part of a whole loan comprised of 28 promissory notes, each of which is secured by the same mortgage instrument on the same underlying Mortgaged Property (the “Westfield San Francisco Centre Mortgaged Property”). The Westfield San Francisco Centre Whole Loan is evidenced by: (i) fourpari passu promissory notes designated as Note A-1-EMP-C2, Note, A-1-EMP-C3, Note A-1-SFC-C2 and Note A-1-SFC-C3, that collectively evidence the Westfield San Francisco Centre Mortgage Loan and have an aggregate outstanding principal balance as of the Cut-off Date of $60,000,000, (ii) eightpari passu promissory notes designated as Note A-1-EMP-S1, Note A-1-EMP-S2, Note A-2-EMP-S1, Note A-2-EMP-S2, Note A-1-SFC-S1, Note A-1-SFC-S2, Note A-2-SFC-S1 and Note A-2-SFC-S2, respectively, having an aggregate outstanding principal balance as of the Cut-off Date of $182,019,000 (the “Westfield San Francisco Centre Standalone Pari Passu Companion Loans”), each of which is generallypari passu in right of payment with the Westfield San Francisco Centre Mortgage Loan and the Westfield San Francisco Centre Non-Standalone Pari Passu Companion Loan (as defined below); (iii) twelvepari passu promissory notes designated as Note A-1-EMP-C1, Note A-1-EMP-C4, Note A-1-SFC-C1, Note A-1-SFC-C4, Note A-2-EMP-C1, Note A-2-SFC-C1, Note A-2-EMP-C2, Note A-2-EMP-C3, Note A-2-EMP-C4, Note A-2-SFC-C2, Note A-2-SFC-C3 and Note A-2-SFC-C4, respectively, having an aggregate outstanding principal balance as of the Cut-off Date of $191,058,000 (the “Westfield San Francisco Centre Non-Standalone Pari Passu Companion Loan” and, together with the Westfield San Francisco Centre Standalone Pari Passu Companion Loans, the “Westfield San Francisco Centre Pari Passu Companion Loans”), which are generallypari passu in right of payment with the Westfield San Francisco Centre Mortgage Loan and the Westfield San Francisco Centre Standalone Pari Passu Companion Loans; and (iv) four promissory notes designated as Note B-1-EMP, Note B-1-SFC, Note B-2-EMP and Note B-2-SFC, respectively, with an aggregate outstanding principal balance as of the Cut-off Date of $124,923,000 (the “Westfield San Francisco Centre Subordinate Companion Loans” and, together with the Westfield San Francisco Centre Pari Passu Companion Loans, the “Westfield San Francisco Centre Companion Loans”), which are subordinate in right of payment in respect of each of the Westfield San Francisco Centre Mortgage Loan and the Westfield San Francisco Centre Pari Passu Companion Loans. The Westfield San Francisco Centre Standalone Pari Passu Companion Loans and the Westfield San Francisco Centre Subordinate Companion Loans are collectively referred to as the “Westfield San Francisco Centre Standalone Companion Loans”.
The Westfield San Francisco Centre Subordinate Companion Loans, together with the Westfield San Francisco Centre Mortgage Loan and the Westfield San Francisco Centre Pari Passu Companion Loans, are referred to as the “Westfield San Francisco Centre Whole Loan”. Only the Westfield San Francisco Centre Mortgage Loan is included in the Issuing Entity. Each of the Westfield San Francisco Centre Standalone Pari Passu Companion Loans and Westfield San Francisco Centre Subordinate Companion Loans are included in the DBJPM 2016-SFC Mortgage Trust. The Westfield San Francisco Centre Non-Standalone Pari Passu Companion Loans are currently being held by JPMorgan Chase Bank, National Association.
The holders of the Westfield San Francisco Centre Whole Loan (the “Westfield San Francisco Centre Noteholders”) have entered into a co-lender agreement that sets forth the respective rights of each Westfield San Francisco Centre Noteholder (the “Westfield San Francisco Centre Co-Lender Agreement”).
Servicing. The Westfield San Francisco Centre Whole Loan is being serviced by Wells Fargo Bank, National Association, as master servicer (in such capacity, the “DBJPM 2016-SFC Master Servicer”), and specially serviced by Pacific Life Insurance Company, as special servicer (in such capacity, the “DBJPM 2016-SFC Special Servicer”), pursuant to the trust and servicing agreement, dated as of August 1, 2016 (the “DBJPM 2016-SFC Trust and Servicing Agreement”), between the Depositor, the DBJPM 2016-SFC
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Master Servicer, the DBJPM 2016-SFC Special Servicer, Wilmington Trust, National Association, as trustee (the “DBJPM 2016-SFC Trustee”), and Deutsche Bank Trust Company Americas, as certificate administrator and custodian (the “DBJPM 2016-SFC Certificate Administrator”), in connection with the DBJPM 2016-SFC Mortgage Trust (into which each of the Westfield San Francisco Centre Standalone Pari Passu Companion Loans and the Westfield San Francisco Centre Subordinate Companion Loans have been deposited), and, subject to the terms of the Westfield San Francisco Centre Co-Lender Agreement, all decisions, consents, waivers, approvals and other actions on the part of any Westfield San Francisco Centre Noteholder will be effected in accordance with the DBJPM 2016-SFC Trust and Servicing Agreement and the Westfield San Francisco Centre Co-Lender Agreement.
Advancing. The master servicer or the trustee, as applicable, will be responsible for making P&I Advances on the Westfield San Francisco Centre Mortgage Loan (but not on the Westfield San Francisco Centre Companion Loans) pursuant to the PSA, in each case, unless the master servicer, the special servicer or the trustee, as applicable, determines that such an Advance would be a Nonrecoverable Advance.
The DBJPM 2016-SFC Master Servicer or DBJPM 2016-SFC Trustee, as applicable, will be obligated to make servicing advances with respect to the Westfield San Francisco Centre Whole Loan, in each case unless a similar determination of nonrecoverability is made under the DBJPM 2016-SFC Trust and Servicing Agreement.
Distributions. The Westfield San Francisco Centre Co-Lender Agreement sets forth the respective rights of the holders of the Westfield San Francisco Centre Mortgage Loan and the Westfield San Francisco Centre Companion Loans with respect to distributions of funds received in respect of the related Westfield San Francisco Centre Whole Loan, and provides, in general, that:
| · | each Westfield San Francisco Centre Subordinate Companion Loan is, at all times, junior, subject and subordinate to the Westfield San Francisco Centre Mortgage Loan and the Westfield San Francisco Centre Pari Passu Companion Loans, and the right of the holders of each Westfield San Francisco Centre Subordinate Companion Loan (the “Westfield San Francisco Centre Subordinate Companion Loan Holder”) to receive payments with respect to its respective Westfield San Francisco Centre Subordinate Companion Loan is, to the extent set forth in the Westfield San Francisco Centre Co-Lender Agreement, at all times, junior, subject and subordinate to the rights of the holders of the Westfield San Francisco Centre Mortgage Loan and the Westfield San Francisco Centre Pari Passu Companion Loans to receive payments with respect to the Westfield San Francisco Centre Mortgage Loan and the Westfield San Francisco Centre Pari Passu Companion Loans. |
| · | prior to calculating any amounts of interest or principal due to the holders of the Westfield San Francisco Centre Mortgage Loan and the Westfield San Francisco Centre Pari Passu Companion Loans, the principal balance of the Westfield San Francisco Centre Subordinate Companion Loans will be reducedpro rata (based on their respective outstanding principal balances) (but, in each case, not below zero) by any realized loss with respect to the Westfield San Francisco Centre Whole Loan, and after the principal balance of each Westfield San Francisco Centre Subordinate Companion Loan has been reduced to zero, the principal balances of the Westfield San Francisco Centre Mortgage Loan and the Westfield San Francisco Centre Pari Passu Companion Loans will be reducedpro rata (based on their respective outstanding principal balances) (in each case, not below zero) by any realized loss with respect to the Westfield San Francisco Centre Whole Loan. |
| · | If no (i) event of default with respect to an obligation of the borrowers to pay money due under the Westfield San Francisco Centre Whole Loan or (ii) non-monetary event of default pursuant to which the Westfield San Francisco Centre Whole Loan becomes a specially serviced loan (a “Westfield Triggering Event of Default”) has occurred and is continuing, then all amounts tendered by the borrowers (net of certain amounts payable or reimbursable to the DBJPM 2016- |
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| SFC Master Servicer or the DBJPM 2016-SFC Special Servicer, as applicable) will be distributed as follows: |
| (i) | first, (A) first, to each Note A (or the DBJPM 2016-SFC Master Servicer or the DBJPM 2016-SFC Trustee, or, if applicable, the master servicer, up to the amount of any nonrecoverable property advances (or in the case of a master servicer of any non-lead securitization, if applicable, itspro rata share of any nonrecoverable property advances previously reimbursed to the Master Servicer or the Trustee from general collections on the related non-lead securitization trust) that remain unreimbursed (together with interest thereon at the applicable advance rate), (B) second, to each Note A (or the DBJPM 2016-SFC Master Servicer or the DBJPM 2016-SFC Trustee, and the master servicer or trustee with respect to any Westfield San Francisco Centre Non-Standalone Pari Passu Companion Loan securitization), up to the amount of any nonrecoverable “p&i” advances or P&I Advances with respect to Note A, as applicable, on apro rata andpari passu basis (based on the total outstanding principal balance of Note A) that remain unreimbursed (together with interest thereon at the applicable advance rate or Reimbursement Rate), (C) third, to each Note B (or the DBJPM 2016-SFC Master Servicer or the DBJPM 2016-SFC Trustee), up to the amount of any nonrecoverable p&i advances with respect to Note B, as applicable, based on the outstanding principal balance of Note B, that remain unreimbursed (together with interest thereon at the applicable advance rate) and (D) fourth, to the Westfield San Francisco Centre Standalone Companion Loans (or the DBJPM 2016-SFC Master Servicer or the DBJPM 2016-SFC Trustee), up to the amount of any nonrecoverable administrative advances with respect to the Westfield San Francisco Centre Standalone Companion Loans, on apro rata andpari passu basis (based on the total outstanding principal balance of the Westfield San Francisco Centre Standalone Companion Loans) that remain unreimbursed (together with interest thereon at the applicable advance rate); |
| (ii) | second, (A) first, to each Note A, on apro rata andpari passu basis (based on the unreimbursed amount of costs paid or payable) and (B) second, to each Note B (based on the unreimbursed amounts of costs paid or payable) in each case up to the amount of any unreimbursed costs paid or any costs currently payable or paid or advanced by the Note A or the Note B (or the DBJPM 2016-SFC Master Servicer, the DBJPM 2016-SFC Special Servicer or the DBJPM 2016-SFC Trustee), as applicable, with respect to the Westfield San Francisco Centre Whole Loan, including, without limitation, unreimbursed property advances and administrative advances and interest thereon at the applicable advance rate, to the extent such costs, property advances and administrative advances and interest thereon are then payable or reimbursable under the DBJPM 2016-SFC Trust and Servicing Agreement with respect to Note A or Note B, as applicable, to the extent reimbursements for such amounts are permitted under the DBJPM 2016-SFC Trust and Servicing Agreement; |
| (iii) | third, to each Note A and Note B (or the DBJPM 2016-SFC Master Servicer), the applicable accrued and unpaid servicing fee (without duplication of any portion of the servicing fee paid by the borrower), and then to each Note A and each Note B (or the DBJPM 2016-SFC Special Servicer), any special servicing fees (including, without limitation, any workout fees and liquidation fees) earned by it with respect to the DBJPM 2016-SFC Whole Loan under the DBJPM 2016-SFC Trust and Servicing Agreement; |
| (iv) | fourth,pari passu to Note A, up to an amount equal to the accrued and unpaid interest on the related principal balance at the related interest rate on such Note, net of the servicing fee rate, on a pro rata basis based on the amount of accrued and unpaid interest due to each such Note; |
| (v) | fifth,pari passu, in respect of principal collections, with respect to all payments and prepayments of principal, to Note A, on apro rata basis, in an amount equal to all such payments and prepayments of principal, until the related principal balances have been reduced to zero; |
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| (vi) | sixth, if the proceeds of any foreclosure sale or any liquidation of the DBJPM 2016-SFC Whole Loan or the DBJPM 2016-SFC Mortgaged Property exceed the amounts required to be applied in accordance with the foregoing clauses (i)-(v),pari passu to Note A in an amount equal to the aggregate of unreimbursed realized losses previously allocated to Note A, plus interest thereon at the related Note interest rate minus the servicing fee, on a pro rata basis based on the amount of realized losses previously allocated to each such Note; |
| (vii) | seventh,pari passu to each Note B, up to an amount equal to the accrued and unpaid interest on the principal balance at the interest rate on Note B, net of the servicing fee rate, on apro rata basis based on the amount of accrued and unpaid interest due to such Note B; |
| (viii) | eighth,pari passu, in respect of principal collections, with respect to all payments and prepayments of principal, to each Note B, on aprorata basis (based on their respective outstanding principal balances), in an amount equal to all such payments and prepayments of principal, until the related principal balances have been reduced to zero; |
| (ix) | ninth,pari passu, to each Note B, an amount equal to the unreimbursed realized losses previously allocated to such Note B, plus interest thereon at the interest rate on Note B minus the servicing fee, compounded monthly from the date the related realized loss was allocated to each Note B, on apro rata basis based on the amount of realized losses previously allocated to each such Note B; |
| (x) | tenth, any interest accrued at the default rate on the principal balance to the extent such default interest amount is (i) actually paid by the borrower, (ii) in excess of interest accrued on the principal balance at the DBJPM 2016-SFC Whole Loan interest rate and (iii) not required to be paid to the DBJPM 2016-SFC Master Servicer, the DBJPM 2016-SFC Trustee or the DBJPM 2016-SFC Special Servicer, the master servicer or the trustee, or the master servicer or trustee under any pooling and servicing agreement relating to a DBJPM 2016-SFC Non-Standalone Pari Passu Companion Loan securitization,pro rata (based on the amounts described in each of the following clauses (A) and (B)) andpari passu, to (A) each Note A in an amount calculated on the related Note A principal balance at the excess of (x) the Note A default rate over (y) the Note A interest rate and (B) each Note B in an amount calculated on the related Note B principal balance at the excess of (x) the Note B default rate over (y) the Note B interest rate; |
| (xi) | eleventh,pro rata andpari passu, to each Note A, any prepayment premium allocable to any prepayment of the related Note A, and then to each Note B, any prepayment premium allocable to any prepayment of the related Note B, to the extent actually paid by the borrower; |
| (xii) | twelfth,pro rata andpari passu (in the case of penalty charges, only to the extent not required to be paid to the DBJPM 2016-SFC Master Servicer, the DBJPM 2016-SFC Trustee or the DBJPM 2016-SFC Special Servicer, the master servicer or the trustee, or the master servicer or trustee under any pooling and servicing agreement relating to a DBJPM 2016-SFC Non-Standalone Pari Passu Companion Loan securitization), to: (i) each Note A its percentage interest of any assumption fees and penalty charges and (ii) each Note B its percentage interest of any assumption fees and penalty charges, in each case, to the extent actually paid by the borrower; and |
| (xiii) | thirteenth, any excess amount not otherwise applied pursuant to the foregoing clauses (i) through (xiii) above will be distributed to the DBJPM 2016-SFC Noteholderspro rata andpari passu in accordance with their respective initial percentage interests. |
The DBJPM 2016-SFC Master Servicer and the DBJPM 2016-SFC Special Servicer, as applicable, will have no obligation to deposit any amounts that are additional servicing compensation into the collection account or REO account, as applicable, and are entitled to retain any such amount that such party is entitled to under the DBJPM 2016-SFC Trust and Servicing Agreement.
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After the occurrence of and during the continuance of a Westfield Triggering Event of Default, all amounts tendered by the borrowers (net of certain amounts payable or reimbursable to the DBJPM 2016-SFC Master Servicer or the DBJPM 2016-SFC Special Servicer, as applicable) will be distributed as follows:
| (i) | first, (A) first, to each Note A (or the DBJPM 2016-SFC Master Servicer or the DBJPM 2016-SFC Trustee, or, if applicable, the master servicer), up to the amount of any nonrecoverable property advances (or in the case of a master servicer of any non-lead securitization, if applicable, itspro rata share of any nonrecoverable property advances previously reimbursed to the Master Servicer or the Trustee from general collections on the related non-lead securitization trust) that remain unreimbursed (together with interest thereon at the applicable advance rate), (B) second, to each Note A (or the DBJPM 2016-SFC Master Servicer or the DBJPM 2016-SFC Trustee, and the master servicer or trustee of any pooling and servicing agreement relating to a DBJPM 2016-SFC Non-Standalone Pari Passu Companion Loan securitization), up to the amount of any nonrecoverable “p&i advances” or P&I Advances with respect to Note A, as applicable, on apro rata andpari passu basis (based on the total outstanding principal balance of Note A) that remain unreimbursed (together with interest thereon at the applicable advance rate or Reimbursement Rate), (C) third, to each Note B (or the DBJPM 2016-SFC Master Servicer or the DBJPM 2016-SFC Trustee), up to the amount of any nonrecoverable p&i advances with respect to Note B, as applicable, on apro rata andpari passu basis (based on the total outstanding principal balance of Note B), that remain unreimbursed (together with interest thereon at the applicable advance rate) and (D) fourth, to the Westfield San Francisco Centre Standalone Companion Loans (or the DBJPM 2016-SFC Master Servicer or the DBJPM 2016-SFC Trustee), up to the amount of any nonrecoverable administrative advances with respect to the Westfield San Francisco Centre Standalone Companion Loans, on apro rata andpari passu basis (based on the total outstanding principal balance of the Westfield San Francisco Centre Standalone Companion Loans) that remain unreimbursed (together with interest thereon at the applicable advance rate); |
| (ii) | second, (A) first, to each Note A, on apro rata andpari passu basis (based on the unreimbursed amount of costs paid or payable) and (B) second, to each Note B on apro rata andpari passu basis (based on the unreimbursed amounts of costs paid or payable), in each case up to the amount of any unreimbursed costs paid or any costs currently payable or paid or advanced by such Note A or Note B (or the DBJPM 2016-SFC Master Servicer, the DBJPM 2016-SFC Special Servicer or the DBJPM 2016-SFC Trustee), as applicable, with respect to the DBJPM 2016-SFC Whole Loan, including, without limitation, unreimbursed property advances and administrative advances and interest thereon at the applicable advance rate, to the extent such costs, property advances and administrative advances and interest thereon are then payable or reimbursable under the DBJPM 2016-SFC Trust and Servicing Agreement with respect to Note A or Note B, as applicable, to the extent reimbursements for such amounts are permitted under the DBJPM 2016-SFC Trust and Servicing Agreement; |
| (iii) | third, to each Note A and Note B (or the DBJPM 2016-SFC Master Servicer), the applicable accrued and unpaid servicing fee (without duplication of any portion of the servicing fee paid by the borrower), and then to each Note A and Note B (or the DBJPM 2016-SFC Special Servicer), any special servicing fees (including without limitation any workout fees and liquidation fees) earned by it with respect to the DBJPM 2016-SFC Whole Loan under the DBJPM 2016-SFC Trust and Servicing Agreement; |
| (iv) | fourth,pari passu to each Note A, up to an amount equal to the accrued and unpaid interest on the related principal balance at the related interest rate on such Note, net of the servicing fee rate, on apro rata basis based on the amount of accrued and unpaid interest due to each such Note; |
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| (v) | fifth,pari passu to each Note B, up to an amount equal to the accrued and unpaid interest on the principal balance at the interest rate on Note B, net of the servicing fee rate, on apro rata basis based on the amount of accrued and unpaid interest due to such Note B; |
| (vi) | sixth,pari passu to each Note A, on apro rata basis (based on their respective outstanding principal balances), in an amount equal to the outstanding principal balance of each such Note, until the related principal balances have been reduced to zero; |
| (vii) | seventh, if the proceeds of any foreclosure sale or any liquidation of the DBJPM 2016-SFC Whole Loan or the DBJPM 2016-SFC Mortgaged Property exceed the amounts required to be applied in accordance with the foregoing clauses (i)-(vi),pari passu to each Note A, in an amount equal to the aggregate of unreimbursed realized losses previously allocated to such Note A, plus interest thereon at the related Note interest rate minus the servicing fee, on apro rata basis based on the amount of realized losses previously allocated to each such Note; |
| (viii) | eighth,pari passuto each Note B, on apro ratabasis (based on their respective outstanding principal balances), in an amount equal to the outstanding principal balance of each Note B, until the related principal balances have been reduced to zero; |
| (ix) | ninth,pari passuto each Note B, an amount equal to the aggregate of unreimbursed realized losses previously allocated to such Note B, plus interest thereon at the interest rate on Note B minus the servicing fee, compounded monthly from the date the related realized loss was allocated to each Note B, on apro rata basis based on the amount of realized losses previously allocated to each such Note; |
| (x) | tenth, any interest accrued at the default rate on the stated principal balance to the extent such default interest amount is (i) actually paid by the borrower, (ii) in excess of interest accrued on the stated principal balance at the DBJPM 2016-SFC Whole Loan interest rate and (iii) not required to be paid to the DBJPM 2016-SFC Master Servicer, the DBJPM 2016-SFC Trustee or the DBJPM 2016-SFC Special Servicer, the master servicer or trustee, or the master servicer or trustee under any pooling and servicing agreement relating to a Westfield San Francisco Centre Non-Standalone Pari Passu Companion Loan securitization,pro rata (based on the amounts described in each of the following clauses (A) and (B)) andpari passu, to (A) each Note A in an amount calculated on the related Note A principal balance at the excess of (x) the Note A default rate over (y) the Note A interest rate and (B) each Note B in an amount calculated on the related Note B principal balance at the excess of (x) the Note B default rate over (y) the Note B interest rate; |
| (xi) | eleventh,pro rata andpari passu, to each Note A holder, any prepayment premium allocable to any prepayment of the related Note A, and then, to each Note B holder, any prepayment premium allocable to any prepayment of the related Note B, in each case, to the extent actually paid by the borrower; |
| (xii) | twelfth,pro rata andpari passu (in the case of penalty charges, only to the extent not required to be paid to the DBJPM 2016-SFC Master Servicer, the DBJPM 2016-SFC Trustee or the DBJPM 2016-SFC Special Servicer, the master servicer or trustee, or the master servicer or trustee under any pooling and servicing agreement relating to a Westfield San Francisco Centre Non-Standalone Pari Passu Companion Loan securitization), to: (i) each Note A its percentage interest of any assumption fees and penalty charges and (ii) each Note B its percentage interest of any assumption fees and penalty charges, in each case, to the extent actually paid by the borrower; and |
| (xiii) | thirteenth, any excess amount not otherwise applied pursuant to the foregoing clauses (i) through (xiii) will be distributedpro rata to the Notes in accordance with their respective initial percentage interests. |
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For the purpose of this “—Distributions” section, with respect to the Westfield San Francisco Centre Mortgage Loan, the Westfield San Francisco Centre Pari Passu Companion Loans and the Westfield San Francisco Centre Subordinate Companion Loan, the term “percentage interest” means the percentage equivalent of a fraction, the numerator of which is equal to the principal balance of such loan, and the denominator of which is equal to the principal balance of the Westfield San Francisco Centre Whole Loan.
In addition, solely for the purpose of this “—Distributions” section, the following terms have the meaning below:
“Note A” means, individually or collectively, Note A-1-EMP-C1, Note A-1-SFC-C1, Note A-1-EMP-C2, Note A-1-SFC-C2, Note A-1-EMP-C3, Note A-1-SFC-C3, Note A-1-EMP-C4, Note A-1-SFC-C4, Note A-2-EMP-C1, Note A-2-SFC-C1, Note A-2-EMP-C2, Note A-2-SFC-C2, Note A-2-EMP-C3, Note A-2-SFC-C3, Note A-2-EMP-C4, Note A-2-SFC-C4, Note A-1-EMP-S1, Note A-1-SFC-S1, Note A-1-EMP-S2, Note A-1-SFC-S2, Note A-2-EMP-S1, Note A-2-SFC-S2, Note A-2-EMP-S2 and Note A-2-SFC-S2, as the context requires.
“Note B” means, individually or collectively, Note B-1-EMP, Note B-1-SFC, Note B-2-EMP and Note B-2-SFC, as the context requires.
Control and Consultation. As of any date of determination, during a DBJPM 2016-SFC Subordinate Control Period, the DBJPM 2016-SFC Controlling Class Representative or its designee (such party, the “DBJPM 2016-SFC Directing Holder”) will be the controlling holder under the Westfield San Francisco Centre Co-Lender Agreement. The DBJPM 2016-SFC Directing Holder is Prima Capital Advisors LLC.
A “DBJPM 2016-SFC Subordinate Control Period” means any period when the certificate balance of the DBJPM 2016-SFC Mortgage Trust Class C certificates (taking into account the application of appraisal reduction amounts and collateral deficiency amounts to notionally reduce the certificate balance of such class of certificates) is at least 25% of the initial certificate balance of such class of certificates;provided, if at any time the certificate balances of all classes of certificates senior to such class of certificates have been reduced to zero as a result of the allocation of principal payments on the Westfield San Francisco Centre Standalone Companion Loans, then a DBJPM 2016-SFC Subordinate Control Period will be deemed to then be in effect. So long as the majority holder(s) of the controlling class (by aggregate certificate balance) is a borrower related party, a DBJPM 2016-SFC Subordinate Control Period will be deemed to be terminated (except for the purposes of determining whether the DBJPM 2016-SFC Directing Holder or a DBJPM 2016-SFC Controlling Class Certificateholder has the right to appoint the successor special servicer to a DBJPM 2016-SFC Special Servicer that is a borrower related party.
A “DBJPM 2016-SFC Subordinate Consultation Period” means any period when both (i) the certificate balance of the DBJPM 2016-SFC Mortgage Trust Class D certificates (taking into account the application of appraisal reduction amounts and collateral deficiency amounts to notionally reduce the certificate balance of such class of certificates), is less than 25% of the initial certificate balance of such class of certificates and (ii) the certificate balance of such class of certificates (without regard to the application of appraisal reduction amounts and collateral deficiency amounts allocated to such class of certificates) is at least 25% of the initial certificate balance of such class of certificates. So long as the majority holder(s) of the controlling class (by aggregate certificate balance) is a borrower related party, a DBJPM 2016-SFC Subordinate Consultation Period will be deemed to be terminated (except for the purposes of determining whether the DBJPM 2016-SFC Directing Holder or a DBJPM 2016-SFC Controlling Class Certificateholder has the right to appoint the successor special servicer to a DBJPM 2016-SFC Special Servicer that is a borrower related party.
When the certificate balance of the DBJPM 2016-SFC Mortgage Trust Class D Certificates (without regard to the application of appraisal reduction amounts to notionally reduce the certificate balance of such class of certificates) is less than 25% of the initial certificate balance of such class of certificates, the DBJPM 2016-SFC Directing Holder will have no consent or consultation rights under the DBJPM 2016-SFC Trust and Servicing Agreement except for such rights available to it as a certificateholder and such
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other rights that are available to it in accordance with the DBJPM 2016-SFC Trust and Servicing Agreement.
Certain decisions to be made with respect to the Westfield San Francisco Centre Whole Loan, including certain major decisions and the implementation of any recommended actions outlined in an asset status report pursuant to the DBJPM 2016-SFC Trust and Servicing Agreement are expected to require the approval of the DBJPM 2016-SFC Directing Holder.
The “DBJPM 2016-SFC Controlling Class” will be, as of any time of determination, the DBJPM 2016-SFC Mortgage Trust Class D Certificates so long as such class has an outstanding certificate balance (as reduced by any principal payments, realized losses, appraisal reduction amounts and collateral deficiency amounts allocable to such class) that is equal to or greater than 25% of the initial certificate balance of such class or, if such class does not meet the preceding requirement, there will be no DBJPM 2016-SFC Controlling Class.
A “DBJPM 2016-SFC Controlling Class Certificateholder” will be each holder (or beneficial owner, if applicable) of a certificate of the DBJPM 2016-SFC Controlling Class.
Neither the DBJPM 2016-SFC Master Servicer nor the DBJPM 2016-SFC Special Servicer will be permitted to follow any direction or objection provided by the DBJPM 2016-SFC Directing Holder that would require or cause the DBJPM 2016-SFC Master Servicer or the DBJPM 2016-SFC Special Servicer to violate any provision of the Mortgage Loan documents, the DBJPM 2016-SFC Intercreditor Agreement, applicable law or the DBJPM 2016-SFC Trust and Servicing Agreement, including without limitation the DBJPM 2016-SFC Master Servicer’s or the DBJPM 2016-SFC Special Servicer’s obligation to act in accordance with the servicing standard, or expose any certificateholder, the DBJPM 2016-SFC Master Servicer, the DBJPM 2016-SFC Special Servicer, the DBJPM 2016-SFC Certificate Administrator, the DBJPM 2016-SFC Trustee or the DBJPM 2016-SFC Mortgage Trust or their affiliates, officers, directors or agent to any claim, suit or liability, result in the imposition of a tax upon the DBJPM 2016-SFC Mortgage Trust or materially expand the scope of the DBJPM 2016-SFC Master Servicer’s or the DBJPM 2016-SFC Special Servicer’s responsibilities under the DBJPM 2016-SFC Trust and Servicing Agreement.
Cure Rights. If the Westfield San Francisco Centre Subordinate Companion Loan is no longer included in the DBJPM 2016-SFC Mortgage Trust and there is a monetary default or non-monetary default (in either case, beyond applicable notice and grace periods) with respect to the Westfield San Francisco Centre Whole Loan, then the Westfield San Francisco Centre Subordinate Companion Loan holder will have the right, but not the obligation to: (A) cure such monetary default within 10 business days following the receipt of notice of such default and (B) cure such non-monetary default within 30 days following receipt of notice of such default,provided that under certain circumstances the cure period with respect to a non-monetary default may be extended by an additional 60 days (for a total of up to 90 days). If the Westfield San Francisco Centre Subordinate Companion Loan holder elects to cure a default by way of a payment of money (a “Cure Payment”), the Westfield San Francisco Centre Subordinate Companion Loan holder will be required to make such Cure Payment as directed by the DBJPM 2016-SFC Special Servicer and such Cure Payment will include all costs, expenses, losses, liabilities, obligations, damages, penalties and disbursements imposed on, incurred by or asserted against the issuing entity or the Westfield San Francisco Centre Pari Passu Companion Loan holders related to the default and incurred during the period of time from the expiration of the grace period for such default until such Cure Payment is made or other cure is effected. So long as a default exists that is being cured by the Westfield San Francisco Centre Subordinate Companion Loan holder and the applicable cure period has not expired and the Westfield San Francisco Centre Subordinate Companion Loan holder is permitted to cure under the terms of the Westfield San Francisco Centre Co-Lender Agreement, the default will not be treated as a default or a Westfield Triggering Event of Default (i) for purposes of “—Distributions” above, (ii) for purposes of triggering an acceleration of the Westfield San Francisco Centre Whole Loan, modifying, amending or waiving any provisions or the Mortgage Loan documents or commencing foreclosure proceedings or similar legal proceedings with respect to the Westfield San Francisco Centre Mortgaged Property, or (iii) for purposes of treating the Westfield San Francisco Centre Whole Loan as a specially serviced loan. Notwithstanding anything to the contrary, the Westfield San
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Francisco Centre Subordinate Companion Loan Holders’ right to cure a default will be limited to 6 Cure Events over the life of the Westfield San Francisco Centre Whole Loan and no single Cure Event may exceed 4 consecutive months. A “Cure Event�� means the Westfield San Francisco Centre Subordinate Companion Loan Holders’ exercise of its cure rights whether for 1 month or for consecutive months in the aggregate.
Purchase Option. If the Westfield San Francisco Centre Subordinate Companion Loan is no longer included in the DBJPM 2016-SFC Mortgage Trust and a Westfield Triggering Event of Default has occurred and is continuing, then, upon written notice from the DBJPM 2016-SFC Special Servicer of such occurrence (a “Repurchase Option Notice”), the Note B holder will have the right (and if all of the Westfield San Francisco Centre Subordinate Companion Loan Holders provide such notice, then all of the Westfield San Francisco Centre Subordinate Companion Loan Holders collectively, on a pro rata basis will have such right), prior to any other party, by written notice to the DBJPM 2016-SFC Special Servicer (the “Repurchase Election Notice”) after the occurrence of the Westfield Triggering Event of Default and prior to the earliest date to occur of (a) the cure of the Westfield Triggering Event of Default, (b) the consummation of a foreclosure sale, sale by power of sale or delivery of a deed-in-lieu of foreclosure with respect to the related Mortgaged Property, (c) the modification of the mortgage loan documents in accordance with the DBJPM 2016-SFC Trust and Servicing Agreement and the Westfield San Francisco Centre Intercreditor Agreement, and (d) the date that is 90 days after the related controlling noteholder’s receipt of the Repurchase Option Notice, to purchase the Westfield San Francisco Centre Mortgage Loan and Westfield San Francisco Centre Pari Passu Companion Loans for the applicable purchase price provided in the Westfield San Francisco Centre Intercreditor Agreement on a date not less than five (5) business days nor more than 15 business days after the date of the Repurchase Election Notice, except as described below with respect to a Repurchase Election Notice based on a Notice of Foreclosure/DIL.
If the Westfield San Francisco Centre Subordinate Companion Loan is no longer included in the DBJPM 2016-SFC Mortgage Trust and a Westfield Triggering Event of Default has occurred and is continuing, the DBJPM 2016-SFC Special Servicer will be required to give the Westfield San Francisco Centre Subordinate Companion Loan Holders five (5) business days’ prior written notice of its intent with respect to any consummation of a foreclosure sale, sale by power of sale or delivery of deed-in-lieu of foreclosure with respect to the related Mortgaged Property (a “Notice of Foreclosure/DIL”). If the DBJPM 2016-SFC Special Servicer intends to accept a deed-in-lieu of foreclosure, it will be required to deliver a Notice of Foreclosure/DIL stating its intent to the Westfield San Francisco Centre Subordinate Companion Loan Holders and the Westfield San Francisco Centre Subordinate Companion Loan Holders will have the option, within 10 business days from receipt of such Notice of Foreclosure/DIL, to deliver a Repurchase Election Notice to the DBJPM 2016-SFC Special Servicer and to consummate the purchase option on a date to occur no later than 30 days from the day it received the Notice of Foreclosure/DIL,provided that such 30 days may be extended at the option of the Westfield San Francisco Centre Subordinate Companion Loan Holders for an additional 30 days upon payment of a $5,000,000 non-refundable cash deposit and provision of evidence satisfactory to the DBJPM 2016-SFC Special Servicer that it is diligently and expeditiously proceeding to consummate its purchase of the Westfield San Francisco Centre Mortgage Loan and the Westfield San Francisco Centre Pari Passu Companion Loans.
Sale of Defaulted Westfield San Francisco Centre Whole Loan. Pursuant to the terms of the Westfield San Francisco Centre Intercreditor Agreement, if the Westfield San Francisco Centre Whole Loan becomes a defaulted mortgage loan, and if the DBJPM 2016-SFC Special Servicer determines to sell the Westfield San Francisco Centre Mortgage Loan and the Westfield San Francisco Centre Companion Loans in accordance with the DBJPM 2016-SFC Trust and Servicing Agreement, then the DBJPM 2016-SFC Special Servicer will have the right and the obligation to sell the Westfield San Francisco Centre Mortgage Loan and the Westfield San Francisco Centre Companion Loans as notes evidencing one whole loan in accordance with the terms of the DBJPM 2016-SFC Trust and Servicing Agreement. In connection with any such sale, the DBJPM 2016-SFC Special Servicer will be required to follow the procedures set forth in the DBJPM 2016-SFC Trust and Servicing Agreement.
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Special Servicer Appointment Rights. Pursuant to the Westfield San Francisco Centre Intercreditor Agreement and the DBJPM 2016-SFC Trust and Servicing Agreement, the DBJPM 2016-SFC Directing Holder (prior to a control termination event) or certificateholders with the requisite percentage of voting rights will have the right, with or without cause, to replace the DBJPM 2016-SFC Special Servicer then acting with respect to the Westfield San Francisco Centre Whole Loan and appoint a replacement special servicer in lieu thereof without the consent of the Companion Loan Holders.
Prudential Plaza Whole Loan
General. The Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Prudential Plaza, representing approximately 7.1% of the Initial Pool Balance, with a Cut-off Date Balance of $50,000,000 (the “Prudential Plaza Mortgage Loan”), is part of a whole loan comprised of 5 promissory notes, each of which is secured by the same mortgage instrument on the same underlying Mortgaged Property (the “Prudential Plaza Mortgaged Property”). The Prudential Plaza Mortgage Loan is evidenced by promissory Note A-2-1. The portions of the Prudential Plaza Whole Loan (as defined below) evidenced by promissory Note A-1, with a Cut-off Date Balance of $115,000,000, which is included in the COMM 2015-CCRE26 Mortgage Trust and promissory Note A-2-2, Note A-3 and Note A-4, with an aggregate outstanding principal balance as of the Cut-off Date of $250,000,000, which (subject to any applicable financing arrangement) are currently being held by GACC or an affiliate, are currently referred to in this prospectus as the “Prudential Plaza Companion Loans” and ispari passuin right of payment with the Prudential Plaza Mortgage Loan. The Prudential Plaza Mortgage Loan and the Prudential Plaza Companion Loans are collectively referred to in this prospectus as the “Prudential Plaza Whole Loan.” The Prudential Plaza Companion Loans will not be transferred to the issuing entity and will not be part of the Mortgage Pool.
The holders of the Prudential Plaza Whole Loan (the “Prudential Plaza Noteholders”) have entered into a co-lender agreement that sets forth the respective rights of each Prudential Plaza Noteholder (the “Prudential Plaza Intercreditor Agreement”).
Servicing. The Prudential Plaza Whole Loan is being serviced by Wells Fargo Bank, National Association, as master servicer (the “COMM 2015-CCRE26 Master Servicer”) and specially serviced by CWCapital Asset Management LLC, as special servicer (the “COMM 2015-CCRE26 Special Servicer”), pursuant to the pooling and servicing agreement entered into between Deutsche Mortgage & Asset Receiving Corporation, as depositor, the COMM 2015-CCRE26 Master Servicer, the COMM 2015-CCRE26 Special Servicer, Wilmington Trust, National Association, as trustee (the “COMM 2015-CCRE26 Trustee”), Wells Fargo Bank, National Association, as certificate administrator and custodian (the “COMM 2015-CCRE26 Certificate Administrator”), and Park Bridge Lender Services LLC, as operating advisor (the “COMM 2015-CCRE26 Operating Advisor”), in connection with the COMM 2015-CCRE26 Mortgage Trust (into which the Prudential Plaza Companion Loan designated as Note A-1 has been deposited) (the “COMM 2015-CCRE26 Pooling and Servicing Agreement”), and, subject to the terms of the Prudential Plaza Intercreditor Agreement, all decisions, consents, waivers, approvals and other actions on the part of any Prudential Plaza Noteholder will be effected in accordance with the COMM 2015-CCRE26 Pooling and Servicing Agreement and the Prudential Plaza Intercreditor Agreement.
Advancing. The master servicer or the trustee, as applicable, will be responsible for making P&I Advances on the Prudential Plaza Mortgage Loan (but not on the Prudential Plaza Companion Loans) pursuant to the PSA, in each case, unless the master servicer, the special servicer or the trustee, as applicable, determines that such an Advance would be a Nonrecoverable Advance.
The COMM 2015-CCRE26 Master Servicer or the COMM 2015-CCRE26 Trustee, as applicable, will be obligated to make servicing advances with respect to the Prudential Plaza Whole Loan, in each case unless a similar determination of nonrecoverability is made under the COMM 2015-CCRE26 Pooling and Servicing Agreement.
Distributions. The Prudential Plaza Intercreditor Agreement sets forth the respective rights of each of the Prudential Plaza Noteholders and provides, in general, that all payments, proceeds and other recoveries on or in respect of the Prudential Plaza Whole Loan will be applied to the Prudential Plaza
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Mortgage Loan and the Prudential Plaza Companion Loans on apro rata andpari passu basis according to their respective outstanding principal balances (subject, in each case, to the payment and reimbursement rights of the applicable master servicer, special servicer, certificate administrator, trustee and operating advisor in accordance with the terms of the applicable pooling and servicing agreement).
Consultation and Control. The directing certificateholder under the Prudential Plaza Intercreditor Agreement with respect to the Prudential Plaza Whole Loan will be the controlling class representative or such other party specified in the COMM 2015-CCRE26 Pooling and Servicing Agreement (such party, the “COMM 2015-CCRE26 Directing Certificateholder”). Certain decisions to be made with respect to the Prudential Plaza Whole Loan, including certain major decisions and the implementation of any recommended actions outlined in an asset status report pursuant to the COMM 2015-CCRE26 Pooling and Servicing Agreement, will require the approval of the COMM 2015-CCRE26 Directing Certificateholder.
Pursuant to the terms of the Prudential Plaza Intercreditor Agreement, the controlling class representative (the “Prudential Plaza Non-Controlling Note Holder”) will have the right to (i) receive copies of all notices, information and reports that the COMM 2015-CCRE26 Special Servicer is required to provide to the COMM 2015-CCRE26 Directing Certificateholder within the same time frame it is required to provide such notices, information and reports to the COMM 2015-CCRE26 Directing Certificateholder (but without regard to whether or not the COMM 2015-CCRE26 Directing Certificateholder actually has lost any rights to receive such information as a result of a consultation termination event under the COMM 2015-CCRE26 Pooling and Servicing Agreement) and (ii) consult on a strictly non-binding basis with respect to certain major decisions as set forth in the Prudential Plaza Intercreditor Agreement and the implementation of any recommended actions outlined in an asset status report. The consultation right of the Prudential Plaza Non-Controlling Note Holder will expire 10 business days after the delivery by the COMM 2015-CCRE26 Special Servicer of notice and information relating to the matter subject to consultation, whether or not the Prudential Plaza Non-Controlling Note Holder has responded within such period;provided that if a new course of action is proposed that is materially different from the actions previously proposed, the 10 business-day consultation period will begin anew. Notwithstanding the Prudential Plaza Non-Controlling Note Holder’s consultation rights described above, the COMM 2015-CCRE26 Special Servicer is permitted to make any major decision or take any action set forth in an asset status report before the expiration of the aforementioned 10 business-day period if it determines that immediate action with respect to such decision is necessary to protect the interests of the holders of the Prudential Plaza Mortgage Loan and the Prudential Plaza Companion Loans.
In addition to the consultation rights of the Prudential Plaza Non-Controlling Note Holder described above, the Prudential Plaza Non-Controlling Note Holder will have the right to annual conference calls with the COMM 2015-CCRE26 Master Servicer or COMM 2015-CCRE26 Special Servicer, as applicable, upon reasonable notice and at times reasonably acceptable to the COMM 2015-CCRE26 Master Servicer or COMM 2015-CCRE26 Special Servicer, as applicable, in which servicing issues related to the Prudential Plaza Whole Loan are discussed.
Sale of Defaulted Prudential Plaza Whole Loan. Pursuant to the terms of the Prudential Plaza Intercreditor Agreement, if the Prudential Plaza Whole Loan becomes a defaulted mortgage loan pursuant to the terms of the COMM 2015-CCRE26 Pooling and Servicing Agreement, the COMM 2015-CCRE26 Special Servicer will be required to sell the Prudential Plaza Mortgage Loan together with the Prudential Plaza Companion Loans as a single whole loan in accordance with the provisions of the PSA and the Prudential Plaza Intercreditor Agreement;provided that the special servicer will not be permitted to sell the Prudential Plaza Whole Loan without the consent of each Prudential Plaza Non-Controlling Note Holder unless the special servicer has satisfied certain notice and information delivery requirements. The Prudential Plaza Whole Loan is required to be sold at a price established in accordance with the process described by the Prudential Plaza Intercreditor Agreement.
Appointment of Special Servicer. The COMM 2015-CCRE26 Directing Certificateholder (prior to a control termination event) or certificateholders with the requisite percentage of voting rights, pursuant to the COMM 2015-CCRE26 Pooling and Servicing Agreement, will have the right, only for cause, to replace the COMM 2015-CCRE26 Special Servicer for the Prudential Plaza Whole Loan and appoint a
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replacement special servicer in lieu thereof without the consent of the Prudential Plaza Non-Controlling Note Holders as long as such replacement special servicer is a “qualified servicer” (as described in the Prudential Plaza Intercreditor Agreement) and satisfies the other conditions set forth in the COMM 2015-CCRE26 Pooling and Servicing Agreement.
U-Haul AREC Portfolio Whole Loan
General. The Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as U-Haul AREC Portfolio, representing approximately 6.9% of the Initial Pool Balance, with a Cut-off Date Balance of $48,500,000 (the “U-Haul AREC Portfolio Mortgage Loan”), is part of a Whole Loan comprised of 2 promissory notes, each of which is secured by the same mortgage instrument on the same underlying Mortgaged Property (the “U-Haul AREC Portfolio Mortgaged Property”). The U-Haul AREC Portfolio Mortgage Loan is evidenced by promissory Note A-1. The portion of the U-Haul AREC Portfolio Whole Loan (as defined below) evidenced by promissory Note A-2, with an outstanding principal balance as of the Cut-off Date of $46,000,000, which is included in the DBJPM 2016-C3 Mortgage Trust (the “U-Haul AREC Portfolio Companion Loan”), ispari passuin right of payment with the U-Haul AREC Portfolio Mortgage Loan. The U-Haul AREC Portfolio Mortgage Loan and the U-Haul AREC Portfolio Companion Loan are collectively referred to as the “U-Haul AREC Portfolio Whole Loan” in this prospectus. The U-Haul AREC Portfolio Companion Loan will not be transferred to the issuing entity and will not be part of the Mortgage Pool.
The holders of the promissory notes evidencing the U-Haul AREC Portfolio Whole Loan (the “U-Haul AREC Portfolio Noteholders”) have entered into a co-lender agreement that sets forth the respective rights of each U-Haul AREC Portfolio Noteholder (the “U-Haul AREC Portfolio Intercreditor Agreement”).
Servicing. The U-Haul AREC Portfolio Whole Loan will be serviced by the master servicer and the special servicer pursuant to the terms of the PSA. Subject to the terms of the U-Haul AREC Portfolio Intercreditor Agreement, all decisions, consents, waivers, approvals and other actions on the part of any U-Haul AREC Portfolio Noteholder will be effected in accordance with the PSA.
Advancing. The master servicer or the trustee, as applicable, will be responsible for making: (i) P&I Advances on the U-Haul AREC Portfolio Mortgage Loan (but not on the U-Haul AREC Portfolio Companion Loan) pursuant to the PSA, in each case, unless the master servicer, the special servicer or the trustee, as applicable, determines that such an Advance would be a Nonrecoverable Advance; and (ii) Servicing Advances with respect to the U-Haul AREC Portfolio Whole Loan, in each case unless a similar determination of nonrecoverability is made under the PSA.
Distributions. The U-Haul AREC Portfolio Intercreditor Agreement sets forth the respective rights of each of the U-Haul AREC Portfolio Noteholders and provides, in general, that all payments, proceeds and other recoveries on or in respect of the U-Haul AREC Portfolio Whole Loan (other than escrow and reserve payments and any proceeds, awards or settlements to be otherwise applied or released in accordance with the related loan documents) will be applied to the U-Haul AREC Portfolio Mortgage Loan and the U-Haul AREC Portfolio Companion Loan on apro rata andpari passu basis according to their respective outstanding principal balances (subject, in each case, to the payment and reimbursement rights of the applicable master servicer, special servicer, certificate administrator, trustee and operating advisor in accordance with the terms of the applicable pooling and servicing agreement).
Consultation and Control. The directing certificateholder under the U-Haul AREC Portfolio Intercreditor Agreement with respect to the U-Haul AREC Portfolio Whole Loan will be the Directing Certificateholder. Certain decisions to be made with respect to the U-Haul AREC Portfolio Whole Loan, including certain major decisions and the implementation of any recommended actions outlined in an asset status report pursuant to the PSA, will require the approval of the Directing Certificateholder unless a Control Termination Event exists.
Pursuant to the terms of the U-Haul AREC Portfolio Intercreditor Agreement, the U-Haul AREC Portfolio Non-Controlling Note Holder will have the right to (i) receive copies of all notices, information and reports that the special servicer is required to provide to the Directing Certificateholder within the same
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time frame it is required to provide such notices, information and reports to the Directing Certificateholder (but without regard to whether or not the Directing Certificateholder actually has lost any rights to receive such information as a result of a Control Termination Event or a Consultation Termination Event) and (ii) consult on a strictly non-binding basis with respect to certain major decisions as set forth in the U-Haul AREC Portfolio Intercreditor Agreement and the implementation of any recommended actions outlined in an asset status report, and consider alternative actions recommended by the U-Haul AREC Portfolio Non-Controlling Note Holder. The consultation right of the U-Haul AREC Portfolio Non-Controlling Note Holder will expire 10 business days after the delivery by the special servicer of notice and information relating to the matter subject to consultation, whether or not such U-Haul AREC Portfolio Non-Controlling Note Holder has responded within such period; provided that if a new course of action is proposed that is materially different from the actions previously proposed, the 10 business-day consultation period will begin anew from the date of such proposal and delivery of all information relating thereto. Notwithstanding the U-Haul AREC Portfolio Non-Controlling Note Holder’s consultation rights described above, the special servicer is permitted to make any major decision or take any action set forth in an asset status report before the expiration of the aforementioned 10 business-day period if it determines that immediate action with respect to such decision is necessary to protect the interests of the holders of the U-Haul AREC Portfolio Mortgage Loan and the U-Haul AREC Portfolio Companion Loan. In no event will the master servicer or special servicer be obligated to follow or take any alternative actions recommended by the U-Haul AREC Portfolio Non-Controlling Note Holder.
Notwithstanding the foregoing consent or consultation rights, no direction or objection by the Directing Certificateholder or the U-Haul AREC Portfolio Non-Controlling Note Holder may require or cause the master servicer or the special servicer, as applicable, to violate any provision of any related mortgage loan documents, applicable law, the PSA, the U-Haul AREC Portfolio Intercreditor Agreement or the REMIC provisions of the Code, including, without limitation, the master servicer’s or special servicer’s obligation to act in accordance with the Servicing Standard or expose the master servicer, special servicer, paying agent, trust fund, certificate administrator, trustee, Depositor, any Mortgage Loan Seller, operating advisor, custodian, or any of their affiliates, officers, directors, employees or agents to liability, or materially expand the scope of the master servicer’s or the special servicer’s responsibilities under the PSA.
In addition to the consultation rights of the U-Haul AREC Portfolio Non-Controlling Note Holder described above, the U-Haul AREC Portfolio Non-Controlling Note Holder will have the right to attend annual meetings (either telephonically or in person, in the discretion of the master servicer or special servicer, as applicable) master servicer or special servicer, as applicable, upon reasonable notice and at times reasonably acceptable to the master servicer or special servicer, as applicable, in which servicing issues related to the U-Haul AREC Portfolio Whole Loan are discussed.
The “U-Haul AREC Portfolio Non-Controlling Note Holder” means, with respect to the U-Haul AREC Portfolio Companion Loan, (i) until the U-Haul AREC Portfolio Companion Loan is included in a securitization, the holders of the U-Haul AREC Portfolio Companion Loan and (ii) if the U-Haul AREC Portfolio Companion Loan is included in a securitization, the party entitled under such securitization to exercise the rights granted to the holders of the U-Haul AREC Portfolio Companion Loan under the U-Haul AREC Portfolio Intercreditor Agreement.
Sale of Defaulted U-Haul AREC Portfolio Whole Loan. Pursuant to the terms of the U-Haul AREC Portfolio Intercreditor Agreement, if the U-Haul AREC Portfolio Whole Loan becomes a Defaulted Mortgage Loan pursuant to the terms of the PSA and thereafter the special servicer determines pursuant to the PSA and the U-Haul AREC Portfolio Intercreditor Agreement to pursue a sale of the U-Haul AREC Portfolio Mortgage Loan, the special servicer will be required to sell the U-Haul AREC Portfolio Mortgage Loan together with the U-Haul AREC Portfolio Companion Loan as a single whole loan, in accordance with the provisions of the PSA and the U-Haul AREC Portfolio Intercreditor Agreement;provided that the special servicer will not be permitted to sell the U-Haul AREC Portfolio Whole Loan without the consent of each U-Haul AREC Portfolio Non-Controlling Note Holder unless the special servicer has satisfied certain notice and information delivery requirements. The U-Haul AREC Portfolio Whole Loan is required to be
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sold at a price established in accordance with the process described by the U-Haul AREC Portfolio Intercreditor Agreement.
Appointment of Special Servicer. The Directing Certificateholder (prior to a Control Termination Event) or Certificateholders with the requisite percentage of Voting Rights, as described under “Description of the Certificates—Voting Rights”(following a Control Termination Event), will have the right, with or without cause, to replace the special servicer and appoint a replacement special servicer in lieu thereof without the consent of the U-Haul AREC Portfolio Non-Controlling Note Holder as long as such replacement special servicer is a “qualified servicer” (as described in the U-Haul AREC Portfolio Intercreditor Agreement) and satisfies the other conditions set forth in the PSA.
Birch Run Premium Outlets Whole Loan
General. The Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Birch Run Premium Outlets, representing approximately 6.1% of the Initial Pool Balance, with a Cut-off Date Balance of $43,000,000 (the “Birch Run Premium Outlets Mortgage Loan”), is part of a whole loan comprised of 6 promissory notes, each of which is secured by the same mortgage instrument on the same underlying Mortgaged Property (the “Birch Run Premium Outlets Mortgaged Property”). The Birch Run Premium Outlets Mortgage Loan is evidenced by promissory Note A-2-A and Note A-4. The portions of the Birch Run Premium Outlets Whole Loan (as defined below) evidenced by promissory Note A-1-A, with a Cut-off Date Balance of $20,000,000, which is included in the COMM 2016-DC2 Mortgage Trust and promissory Note A-1-B, Note A-2-B and Note A-3, with an aggregate outstanding principal balance as of the Cut-off Date of $60,000,000, which (subject to any applicable financing arrangement) are currently being held by GACC or an affiliate, are collectively referred to in this prospectus as the “Birch Run Premium Outlets Companion Loans” and arepari passuin right of payment with the Birch Run Premium Outlets Mortgage Loan. The Birch Run Premium Outlets Mortgage Loan and the Birch Run Premium Outlets Companion Loans are collectively referred to in this prospectus as the “Birch Run Premium Outlets Whole Loan.” The Birch Run Premium Outlets Companion Loans will not be transferred to the issuing entity and will not be part of the Mortgage Pool.
The holders of the Birch Run Premium Outlets Whole Loan (the “Birch Run Premium Outlets Noteholders”) have entered into a co-lender agreement that sets forth the respective rights of each Birch Run Premium Outlets Noteholder (the “Birch Run Premium Outlets Intercreditor Agreement”).
Servicing. Pursuant to the terms of the Birch Run Premium Outlets Intercreditor Agreement, the Birch Run Premium Outlets Whole Loan will be initially serviced and administered by Wells Fargo Bank, National Association, as master servicer (the “COMM 2016-DC2 Master Servicer”) and specially serviced by CWCapital Asset Management LLC, as special servicer (the “COMM 2016-DC2 Special Servicer”), pursuant to the pooling and servicing agreement entered into between Deutsche Mortgage & Asset Receiving Corporation, as depositor, the COMM 2016-DC2 Master Servicer, the COMM 2016-DC2 Special Servicer, Wilmington Trust, National Association, as trustee (the “COMM 2016-DC2 Trustee”), Deutsche Bank Trust Company Americas, as certificate administrator and custodian (the “COMM 2016-DC2 Certificate Administrator”), and Park Bridge Lender Services LLC, as operating advisor (the “COMM 2016-DC2 Operating Advisor”) and as asset representations reviewer, in connection with the COMM 2016-DC2 Mortgage Trust (into which the Birch Run Premium Outlets Companion Loan designated as Note A-1-A has been deposited) (the “COMM 2016-DC2 Pooling and Servicing Agreement”), until the date on which the Birch Run Premium Outlets Companion Loan designated as Note A-3 is securitized (the “Birch Run Premium Outlets Control Note Securitization Date”), after which the Birch Run Premium Outlets Whole Loan will be serviced and administered pursuant to the pooling and servicing agreement (the “Birch Run Premium Outlets Pooling and Servicing Agreement”) entered into in connection with such other securitization and the Birch Run Premium Outlets Intercreditor Agreement.
Advancing. Until the Birch Run Premium Outlets Control Note Securitization Date, (i) the master servicer or the trustee, as applicable, will be responsible for making P&I Advances on the Birch Run Premium Outlets Mortgage Loan (but not on the Birch Run Premium Outlets Companion Loans) pursuant to the PSA, in each case, unless the master servicer, the special servicer or the trustee, as applicable, determines that such an Advance would be a Nonrecoverable Advance, and (ii) the COMM 2016-DC2
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Master Servicer or the COMM 2016-DC2 Trustee, as applicable, will be obligated to make servicing advances with respect to the Birch Run Premium Outlets Whole Loan, in each case unless a similar determination of nonrecoverability is made under the COMM 2016-DC2 Pooling and Servicing Agreement.
On and after the Birch Run Premium Outlets Control Note Securitization Date, (i) the master servicer or the trustee, as applicable, will be responsible for making any required P&I Advance on the Birch Run Premium Outlets Mortgage Loan (but not on the Birch Run Premium Outlets Companion Loans) pursuant to the PSA, unless the master servicer, the special servicer or the trustee, as applicable, determines that such an Advance would be a Nonrecoverable Advance, and (ii) the related Non-Serviced Master Servicer or Non-Serviced Trustee, as applicable, will be responsible for making (A) any required principal and interest advances on the Birch Run Premium Outlets Companion Loan designated as Note A-3 as required under the terms of the Birch Run Premium Outlets Pooling and Servicing Agreement (but not on the Birch Run Premium Outlets Mortgage Loan) and (B) any required servicing advances with respect to the Birch Run Premium Outlets Whole Loan, unless in the case of clause (A) or (B) above, a similar determination of nonrecoverability is made under the Birch Run Premium Outlets Pooling and Servicing Agreement.
Distributions. The Birch Run Premium Outlets Intercreditor Agreement sets forth the respective rights of each of the Birch Run Premium Outlets Noteholders and provides, in general, that all payments, proceeds and other recoveries on or in respect of the Birch Run Premium Outlets Whole Loan will be applied to the Birch Run Premium Outlets Mortgage Loan and the Birch Run Premium Outlets Companion Loans on apro rata andpari passu basis according to their respective outstanding principal balances (subject, in each case, to the payment and reimbursement rights of the applicable master servicer, special servicer, certificate administrator, trustee and operating advisor in accordance with the terms of the applicable pooling and servicing agreement).
Consultation and Control. The directing certificateholder under the Birch Run Premium Outlets Intercreditor Agreement with respect to the Birch Run Premium Outlets Whole Loan will initially be the holder of the Birch Run Premium Outlets Companion Loan designated as Note A-3, and from and after the Birch Run Premium Outlets Control Note Securitization Date, will be the controlling class representative or such other party specified in the Birch Run Premium Outlets Pooling and Servicing Agreement (such party, the “Birch Run Premium Outlets Directing Certificateholder”). Certain decisions to be made with respect to the Birch Run Premium Outlets Whole Loan, including certain major decisions and the implementation of any recommended actions outlined in an asset status report pursuant to the COMM 2016-DC2 Pooling and Servicing Agreement or the Birch Run Premium Outlets Pooling and Servicing Agreement, as applicable, will require the approval of the Birch Run Premium Outlets Directing Certificateholder.
Pursuant to the terms of the Birch Run Premium Outlets Intercreditor Agreement, the controlling class representative (the “Birch Run Premium Outlets Non-Controlling Note Holder”) will have the right to (i) receive copies of all notices, information and reports that the COMM 2016-DC2 Special Servicer or, from and after the Birch Run Premium Outlets Control Note Securitization Date, the special servicer under the Birch Run Premium Outlets Pooling and Servicing Agreement (the “Birch Run Premium Outlets Special Servicer”) is required to provide to the Birch Run Premium Outlets Directing Certificateholder within the same time frame it is required to provide such notices, information and reports to the COMM 2016-DC2 Directing Certificateholder (but without regard to whether or not the Birch Run Premium Outlets Directing Certificateholder actually has lost any rights to receive such information as a result of a consultation termination event under the COMM 2016-DC2 Pooling and Servicing Agreement) and (ii) consult on a strictly non-binding basis with respect to certain major decisions as set forth in the Birch Run Premium Outlets Intercreditor Agreement and the implementation of any recommended actions outlined in an asset status report. The consultation right of the Birch Run Premium Outlets Non-Controlling Note Holder will expire 10 business days after the delivery by such special servicer of notice and information relating to the matter subject to consultation, whether or not the Birch Run Premium Outlets Non-Controlling Note Holder has responded within such period;provided that if a new course of action is proposed that is materially different from the actions previously proposed, the 10 business-day
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consultation period will begin anew. Notwithstanding the Birch Run Premium Outlets Non-Controlling Note Holder’s consultation rights described above, the COMM 2016-DC2 Special Servicer or the Birch Run Premium Outlets Special Servicer, as applicable, is permitted to make any major decision or take any action set forth in an asset status report before the expiration of the aforementioned 10 business-day period if it determines that immediate action with respect to such decision is necessary to protect the interests of the holders of the Birch Run Premium Outlets Mortgage Loan and the Birch Run Premium Outlets Companion Loans.
In addition to the consultation rights of the Birch Run Premium Outlets Non-Controlling Note Holder described above, the Birch Run Premium Outlets Non-Controlling Note Holder will have the right to annual conference calls with the COMM 2016-DC2 Master Servicer or COMM 2016-DC2 Special Servicer or, from and after the Birch Run Premium Outlets Control Note Securitization Date, the Birch Run Premium Outlets Master Servicer or the Birch Run Premium Outlets Special Servicer, as applicable, upon reasonable notice and at times reasonably acceptable to the COMM 2016-DC2 Master Servicer or COMM 2016-DC2 Special Servicer, as applicable, in which servicing issues related to the Birch Run Premium Outlets Whole Loan are discussed.
Sale of Defaulted Birch Run Premium Outlets Whole Loan. Pursuant to the terms of the Birch Run Premium Outlets Intercreditor Agreement, if the Birch Run Premium Outlets Whole Loan becomes a defaulted mortgage loan pursuant to the terms of the Birch Run Premium Outlets Pooling and Servicing Agreement, the Birch Run Premium Outlets Special Servicer will be required to sell the Birch Run Premium Outlets Mortgage Loan together with the Birch Run Premium Outlets Companion Loan as a single whole loan in accordance with the provisions of the PSA and the Birch Run Premium Outlets Intercreditor Agreement;provided that the special servicer will not be permitted to sell the Birch Run Premium Outlets Whole Loan without the consent of each Birch Run Premium Outlets Non-Controlling Note Holder unless the special servicer has satisfied certain notice and information delivery requirements. The Birch Run Premium Outlets Whole Loan is required to be sold at a price established in accordance with the process described by the Birch Run Premium Outlets Intercreditor Agreement.
Appointment of Special Servicer. The Birch Run Premium Outlets Directing Certificateholder (prior to a control termination event) or certificateholders with the requisite percentage of voting rights, pursuant to the Birch Run Premium Outlets Pooling and Servicing Agreement, will have the right, only for cause, to replace the Birch Run Premium Outlets Special Servicer for the Birch Run Premium Outlets Whole Loan and appoint a replacement special servicer in lieu thereof without the consent of the Birch Run Premium Outlets Non-Controlling Note Holders as long as such replacement special servicer is a “qualified servicer” (as described in the Birch Run Premium Outlets Intercreditor Agreement) and satisfies the other conditions set forth in the Birch Run Premium Outlets Pooling and Servicing Agreement.
Gas Company Tower & World Trade Center Parking Garage Whole Loan
General. The Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Gas Company Tower & World Trade Center Parking Garage, representing approximately 5.7% of the Initial Pool Balance, with a Cut-off Date Balance of $40,000,000 (the “Gas Company Tower & World Trade Center Parking Garage Mortgage Loan” or “Note A-1-C”), is part of a whole loan comprised of 8 promissory notes, each of which is secured by the same mortgage instrument on the same underlying Mortgaged Property (the “Gas Company Tower & World Trade Center Parking Garage Mortgaged Property”). The Gas Company Tower & World Trade Center Parking Garage Whole Loan is evidenced by: (i) one seniorpari passupromissory Note A-1-C that evidences the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan; (ii) four seniorpari passu promissory notes designated as Note A-1-S1, Note A-1-S2, Note A-1-S3 and Note A-2-S, respectively, having an aggregate outstanding principal balance as of the Cut-off Date of $89,000,000 (the “Gas Company Tower & World Trade Center Parking Garage Standalone Pari Passu Companion Loans”), each of which is generallypari passu in right of payment with the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Non-Standalone Pari Passu Companion Loan (as defined below); (iii) one seniorpari passu promissory note designated as Note A-2-C having an outstanding principal balance as of the Cut-off Date of $15,000,000 (the “Gas Company Tower & World Trade Center Parking Garage Non-Standalone Pari Passu
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Companion Loan” and, together with the Gas Company Tower & World Trade Center Parking Garage Standalone Pari Passu Companion Loans, the “Gas Company Tower & World Trade Center Parking Garage Pari Passu Companion Loans”), which is generallypari passu in right of payment with the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Standalone Pari Passu Companion Loans; and (iv) two junior promissory notes designated as Note B-1 and Note B-2, respectively, with an aggregate outstanding principal balance as of the Cut-off Date of $175,000,000 (the “Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loans” and, together with the Gas Company Tower & World Trade Center Parking Garage Pari Passu Companion Loans, the “Gas Company Tower & World Trade Center Parking Garage Companion Loans”), which are subordinate in right of payment in respect of each of the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Pari Passu Companion Loans. The Gas Company Tower & World Trade Center Parking Garage Standalone Pari Passu Companion Loans and the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loans are collectively referred to as the “Gas Company Tower & World Trade Center Parking Garage Standalone Companion Loans”. In addition, the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Non-Standalone Pari Passu Companion Loan are collectively referred to as the “Gas Company Tower & World Trade Center Parking Garage Non-Standalone Loans”.
The Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loans, together with the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Pari Passu Companion Loans, are referred to as the “Gas Company Tower & World Trade Center Parking Garage Whole Loan”. Only the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan is included in the Issuing Entity. Each of the Gas Company Tower & World Trade Center Parking Garage Standalone Companion Loans are included in the COMM 2016-GCT Mortgage Trust. The Gas Company Tower & World Trade Center Parking Garage Non-Standalone Pari Passu Companion Loan is currently being held by Barclays Bank PLC.
The holders of the Gas Company Tower & World Trade Center Parking Garage Whole Loan (the “Gas Company Tower & World Trade Center Parking Garage Noteholders”) have entered into a co-lender agreement that sets forth the respective rights of each Gas Company Tower & World Trade Center Parking Garage Noteholder (the “Gas Company Tower & World Trade Center Parking Garage Co-Lender Agreement”).
Servicing. As of the Closing Date, it is anticipated that the Gas Company Tower & World Trade Center Parking Garage Whole Loan will be serviced by KeyBank National Association, as master servicer (in such capacity, the “COMM 2016-GCT Master Servicer”), and specially serviced by Strategic Asset Services LLC, as special servicer (in such capacity, the “COMM 2016-GCT Special Servicer”), pursuant to the trust and servicing agreement, dated as of August 6, 2016 (the “COMM 2016-GCT Trust and Servicing Agreement”), between the Depositor, the COMM 2016-GCT Master Servicer, the COMM 2016-GCT Special Servicer, Wells Fargo Bank, National Association, as trustee (in such capacity, the “COMM 2016-GCT Trustee”) and as certificate administrator and custodian (in such capacity, the “COMM 2016-GCT Certificate Administrator”), in connection with the COMM 2016-GCT Mortgage Trust (into which each of the Gas Company Tower & World Trade Center Parking Garage Standalone Companion Loans have been deposited), and, subject to the terms of the Gas Company Tower & World Trade Center Parking Garage Co-Lender Agreement, all decisions, consents, waivers, approvals and other actions on the part of any Gas Company Tower & World Trade Center Parking Garage Noteholder will be effected in accordance with the COMM 2016-GCT Trust and Servicing Agreement and the Gas Company Tower & World Trade Center Parking Garage Co-Lender Agreement.
Advancing. The master servicer or the trustee, as applicable, will be responsible for making P&I Advances on the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan (but not on the Gas Company Tower & World Trade Center Parking Garage Companion Loans) pursuant to the PSA,
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in each case, unless the master servicer, the special servicer or the trustee, as applicable, determines that such an Advance would be a Nonrecoverable Advance.
The COMM 2016-GCT Master Servicer or COMM 2016-GCT Trustee, as applicable, will be obligated to make servicing advances with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan, in each case unless a similar determination of nonrecoverability is made under the COMM 2016-GCT Trust and Servicing Agreement.
Distributions. The Gas Company Tower & World Trade Center Parking Garage Co-Lender Agreement sets forth the respective rights of the holders of the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Companion Loans with respect to distributions of funds received in respect of the related Gas Company Tower & World Trade Center Parking Garage Whole Loan, and provides, in general, that:
| · | the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loans are, at all times, junior, subject and subordinate to the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Pari Passu Companion Loans, and the right of the holders of the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loans (the “Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan Holder”) to receive payments with respect to the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loans are, to the extent set forth in the Gas Company Tower & World Trade Center Parking Garage Co-Lender Agreement, at all times, junior, subject and subordinate to the rights of the holders of the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Pari Passu Companion Loans to receive payments with respect to the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Pari Passu Companion Loans. |
| · | prior to calculating any amounts of interest or principal due to the holders of the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Pari Passu Companion Loans, the principal balance of the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loans will be reducedpro rata (based on their respective outstanding principal balances) (but not below zero) by any realized loss with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan, and after the principal balance of each Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan has been reduced to zero, the principal balances of the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Pari Passu Companion Loans will be reducedpro rata (based on their respective outstanding principal balances) (in each case, not below zero) by any realized loss with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan. |
| · | if no (i) event of default with respect to an obligation of the borrowers to pay money due under the Gas Company Tower & World Trade Center Parking Garage Whole Loan or (ii) non-monetary event of default pursuant to which the Gas Company Tower & World Trade Center Parking Garage Whole Loan becomes a specially serviced loan (a “Gas Company Triggering Event of Default”) has occurred and is continuing, then all amounts tendered by the borrowers (net of certain amounts payable or reimbursable to the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Special Servicer, as applicable) will be distributed as follows: |
| (i) | first, (A) first, to each Note A holder (or the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Trustee and, if applicable, the master servicers of any securitization of any Gas Company Tower & World Trade Center Parking Garage Non-Standalone Loan), on apro rata andpari passu basis (based on the outstanding principal balance of its respective Note A), up to the amount of any nonrecoverable property advances (or in the case of a master |
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| servicer of any securitization of any Gas Company Tower & World Trade Center Parking Garage Non-Standalone Loan, if applicable, itspro rata share of any nonrecoverable property advances previously reimbursed to the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Trustee from general collections of such securitization) that remain unreimbursed (together with interest thereon at the applicable advance rate), (B) second, on apro rata andpari passu basis (based on the total outstanding principal balance of the Gas Company Tower & World Trade Center Parking Garage Standalone Companion Loans, on the one hand, and the Gas Company Tower & World Trade Center Parking Garage Non-Standalone Loans, on the other hand), to the holders of the Gas Company Tower & World Trade Center Parking Garage Standalone Companion Loans (or the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Trustee) and the holders of the Gas Company Tower & World Trade Center Parking Garage Non-Standalone Loans (or the master servicers or trustees of the securitizations of any Gas Company Tower & World Trade Center Parking Garage Non-Standalone Loan), up to the amount of any nonrecoverable “p&i” advances” or P&I Advances, as applicable, that remain unreimbursed (together with interest thereon at the applicable advance rate or Reimbursement Rate) and (C) third, on aprorata andparipassu basis (based on the total outstanding principal balance of the Gas Company Tower & World Trade Center Parking Garage Standalone Companion Loans), to the holders of the Gas Company Tower & World Trade Center Parking Garage Standalone Companion Loans (or the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Trustee), up to the amount of any nonrecoverable administrative advances that remain unreimbursed (together with interest thereon at the applicable advance rate); |
| (ii) | second, to each Note A holder (or the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Trustee, as applicable), on apro rata andpari passu basis (based on the unreimbursed amount of costs paid or payable), up to the amount of any unreimbursed costs paid or any costs currently payable or paid or advanced by such Note A holder (or the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Trustee, as applicable), with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan, including, without limitation, unreimbursed property advances and administrative advances and interest thereon at the applicable advance rate, to the extent such costs, property advances and administrative advances and interest thereon are then payable or reimbursable under the COMM 2016-GCT Trust and Servicing Agreement; |
| (iii) | third, to the COMM 2016-GCT Master Servicer, the applicable accrued and unpaid servicing fee (without duplication of any portion of the servicing fee paid by the borrowers), and then to the COMM 2016-GCT Special Servicer, any special servicing fees, workout fees and liquidation fees earned by it with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan under the COMM 2016-GCT Trust and Servicing Agreement; |
| (iv) | fourth,pari passu to each Note A holder, up to an amount equal to the accrued and unpaid interest on the related principal balance at the related Note A interest rate on such Note, net of the servicing fee rate, on apro rata basis based on the amount of accrued and unpaid interest due to each such Note A holder; |
| (v) | fifth,pari passu, in respect of principal collections, with respect to all payments and prepayments of principal, to each Note A holder, on apro rata basis (based on the outstanding principal balance of its respective Note A), up to an amount equal to all such payments and prepayments of principal, until the related principal balance of each Note A has been reduced to zero; |
| (vi) | sixth, if the proceeds of any foreclosure sale or any liquidation of the Gas Company Tower & World Trade Center Parking Garage Whole Loan or the Gas Company Tower & World Trade Center Parking Garage Mortgaged Property exceed the amounts required to be applied in accordance with the foregoing clauses (i)-(v),pari passu to each Note A holder, an amount equal to the aggregate of unreimbursed realized losses previously allocated to the related Note A, plus interest thereon at the related Note A interest rate minus the servicing fee rate, |
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| on apro rata basis based on the amount of realized losses previously allocated to each such A Note; |
| (vii) | seventh, to each Note B holder (or the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Trustee, as applicable), on apro rata andpari passubasis (based on the unreimbursed amount of costs paid or payable), up to the amount of any unreimbursed costs paid or any costs currently payable or paid or advanced by such Note B holder (or the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Trustee, as applicable), with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan, including, without limitation, unreimbursed property advances and administrative advances and interest thereon at the applicable advance rate, to the extent such costs, property advances and administrative advances and interest thereon are then payable or reimbursable under the COMM 2016-GCT Trust and Servicing Agreement; |
| (viii) | eighth,pari passu to each Note B holder, up to an amount equal to the accrued and unpaid interest on the principal balance at the related Note B interest rate, net of the servicing fee rate, on apro rata basis based on the amount of accrued and unpaid interest due to each such Note B holder; |
| (ix) | ninth,pari passu, in respect of principal collections, with respect to all payments and prepayments of principal, to each Note B holder, on apro rata basis (based on the outstanding principal balance of its respective Note B), up to an amount equal to all such payments and prepayments of principal, until the principal balance of each Note B has been reduced to zero; |
| (x) | tenth, to each Note B holder, on apro rata andpari passu basis (based on the amount of realized losses previously allocated to each such Note B), an amount equal to the aggregate of unreimbursed realized losses previously allocated to such Note B, plus interest thereon at the related Note B interest rate minus the servicing fee rate, compounded monthly from the date the related realized loss was allocated to such Note B; |
| (xi) | eleventh, first,pro rata (based on the amounts described in each of the following clauses ((A) and (B)) andpari passu, to: (A) each Note A-1 holder, any prepayment charge allocable to any prepayment of the related Note A-1 and (B) each Note A-2 holder, any prepayment charge allocable to any prepayment of the related Note A-2, and thensecond,pro rata (based on the amounts described in each of the following clauses ((A) and (B)) andpari passu, to: (A) the Note B-1 holder, any prepayment charge allocable to any prepayment of Note B-1, and (ii) the Note B-2 holder, any prepayment charge allocable to any prepayment of Note B-2, in each case, to the extent actually paid by the borrowers; |
| (xii) | twelfth, any interest accrued at the default rate on the stated principal balance of the Gas Company Tower & World Trade Center Parking Garage Whole Loan to the extent such default interest amount is (i) actually paid by the borrowers, (ii) in excess of interest accrued on the stated principal balance of the Gas Company Tower & World Trade Center Parking Garage Whole Loan at the related interest rate and (iii) not required to be paid to the COMM 2016-GCT Master Servicer, the COMM 2016-GCT Trustee or the COMM 2016-GCT Special Servicer, or the master servicers or the trustees of any securitization of any Gas Company Tower & World Trade Center Parking Garage Non-Standalone Loan,pro rata (based on the amounts described in each of the following clauses (A) through (D)) andpari passu, to (A) Note A-1 holder in an amount calculated on the Note A-1 principal balance at the excess of (x) the Note A-1 default rate over (y) the Note A-1 interest rate, (B) Note A-2 holder in an amount calculated on the Note A-2 principal balance at the excess of (x) the Note A-2 default rate over (y) the Note A-2 interest rate, (C) Note B-1 holder in an amount calculated on the Note B-1 principal balance at the excess of (x) the Note B-1 default rate over (y) the Note B-1 interest rate and (D) Note B-2 holder in an amount calculated on the Note B-2 principal balance at the excess of (x) the Note B-2 default rate over (y) the Note B-2 interest rate; |
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| (xiii) | thirteenth,pro rata andpari passu (in the case of penalty charges, only to the extent not required to be paid to the COMM 2016-GCT Master Servicer, the COMM 2016-GCT Trustee or the COMM 2016-GCT Special Servicer, or the master servicers or the trustees of any securitization of any Gas Company Tower & World Trade Center Parking Garage Non-Standalone Loan), to: (i) each Note A-1 holder its percentage interest of any assumption fees and penalty charges, (ii) each Note A-2 holder its percentage interest of any assumption fees and penalty charges, (iii) the Note B-1 holder its percentage interest of any assumption fees and penalty charges and (iv) the Note B-2 holder its percentage interest of any assumption fees and penalty charges; and |
| (xiv) | fourteenth, any excess amount not otherwise applied pursuant to the foregoing clauses (i) through (xiii) above will be distributed to the Gas Company Tower & World Trade Center Parking Garage Noteholderspro rata andpari passu in accordance with their respective initial percentage interests. |
The COMM 2016-GCT Master Servicer and the COMM 2016-GCT Special Servicer, as applicable, will have no obligation to deposit any amounts that are additional servicing compensation into the collection account or REO account, as applicable, and are entitled to retain any such amount that such party is entitled to under the COMM 2016-GCT Trust and Servicing Agreement.
After the occurrence of and during the continuance of a Gas Company Triggering Event of Default, all amounts tendered by the borrowers (net of certain amounts payable or reimbursable to the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Special Servicer, as applicable) will be distributed as follows:
| (i) | first, (A) first, to each Note A holder (or the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Trustee and, if applicable, the master servicers of any securitization of any Gas Company Tower & World Trade Center Parking Garage Non-Standalone Loan), on apro rata andpari passu basis (based on the outstanding principal balance of its respective Note A), up to the amount of any nonrecoverable property advances (or in the case of a master servicer of any securitization of any Gas Company Tower & World Trade Center Parking Garage Non-Standalone Loan, if applicable, itspro rata share of any nonrecoverable property advances previously reimbursed to the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Trustee from general collections of such securitization) that remain unreimbursed (together with interest thereon at the applicable advance rate), (B) second, on apro rata andpari passu basis (based on the total outstanding principal balance of the Gas Company Tower & World Trade Center Parking Garage Standalone Companion Loans, on the one hand, and the Gas Company Tower & World Trade Center Parking Garage Non-Standalone Loans, on the other hand), to the holders of the Gas Company Tower & World Trade Center Parking Garage Standalone Companion Loans (or the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Trustee) and the holders of the Gas Company Tower & World Trade Center Parking Garage Non-Standalone Loans (or the master servicers or trustees of the securitizations of any Gas Company Tower & World Trade Center Parking Garage Non-Standalone Loan), up to the amount of any nonrecoverable “p&i” advances” or P&I Advances, as applicable, that remain unreimbursed (together with interest thereon at the applicable advance rate or Reimbursement Rate) and (C) third, on aprorata andparipassu basis (based on the total outstanding principal balance of the Gas Company Tower & World Trade Center Parking Garage Standalone Companion Loans), to the holders of the Gas Company Tower & World Trade Center Parking Garage Standalone Companion Loans (or the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Trustee), up to the amount of any nonrecoverable administrative advances that remain unreimbursed (together with interest thereon at the applicable advance rate); |
| (ii) | second, to each Note A holder (or the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Trustee, as applicable), on apro rata andpari passu basis (based on the unreimbursed amount of costs paid or payable), up to the amount of any unreimbursed costs paid or any costs currently payable or paid or advanced by such Note A holder (or the COMM |
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| 2016-GCT Master Servicer or the COMM 2016-GCT Trustee, as applicable), with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan, including, without limitation, unreimbursed property advances and administrative advances and interest thereon at the applicable advance rate, to the extent such costs, property advances and administrative advances and interest thereon are then payable or reimbursable under the COMM 2016-GCT Trust and Servicing Agreement; |
| (iii) | third, to the COMM 2016-GCT Master Servicer, the applicable accrued and unpaid servicing fee (without duplication of any portion of the servicing fee paid by the borrowers), and then to the COMM 2016-GCT Special Servicer, any special servicing fees, workout fees and liquidation fees earned by it with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan under the COMM 2016-GCT Trust and Servicing Agreement; |
| (iv) | fourth,pari passu to each Note A holder, up to an amount equal to the accrued and unpaid interest on the related principal balance at the related Note A interest rate on such Note, net of the servicing fee rate, on apro rata basis based on the amount of accrued and unpaid interest due to each such Note A holder; |
| (v) | fifth,pari passu to each Note B holder, up to an amount equal to the accrued and unpaid interest on the principal balance at the related Note B interest rate, net of the servicing fee rate, on apro rata basis based on the amount of accrued and unpaid interest due to each such Note B holder; |
| (vi) | sixth,pari passu, to each Note A holder, on apro rata basis (based on the outstanding principal balance of its respective Note A), up to an amount equal to all such payments and prepayments of principal, until the related principal balance of each Note A has been reduced to zero; |
| (vii) | seventh, if the proceeds of any foreclosure sale or any liquidation of the Gas Company Tower & World Trade Center Parking Garage Whole Loan or the Gas Company Tower & World Trade Center Parking Garage Mortgaged Property exceed the amounts required to be applied in accordance with the foregoing clauses (i)-(vi),pari passu to each Note A holder, an amount equal to the aggregate of unreimbursed realized losses previously allocated to the related Note A, plus interest thereon at the related Note A interest rate minus the servicing fee rate, on apro rata basis based on the amount of realized losses previously allocated to each such A Note; |
| (viii) | eighth, to each Note B holder (or the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Trustee, as applicable), on apro rata andpari passubasis (based on the unreimbursed amount of costs paid or payable), up to the amount of any unreimbursed costs paid or any costs currently payable or paid or advanced by such Note B holder (or the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Trustee, as applicable), with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan, including, without limitation, unreimbursed property advances and administrative advances and interest thereon at the applicable advance rate, to the extent such costs, property advances and administrative advances and interest thereon are then payable or reimbursable under the COMM 2016-GCT Trust and Servicing Agreement and any cure payment made by such Note B holder pursuant to the Gas Company Tower & World Trade Center Parking Garage Co-Lender Agreement; |
| (ix) | ninth,pari passu, to each Note B holder, on apro rata basis (based on the outstanding principal balance of its respective Note B), up to an amount equal to all such payments and prepayments of principal, until the principal balance of each Note B has been reduced to zero; |
| (x) | tenth, to each Note B holder, on apro rata andpari passu basis (based on the amount of realized losses previously allocated to each such Note B), an amount equal to the aggregate |
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| of unreimbursed realized losses previously allocated to such Note B, plus interest thereon at the related Note B interest rate minus the servicing fee rate, compounded monthly from the date the related realized loss was allocated to such Note B; |
| (xi) | eleventh, first,pro rata (based on the amounts described in each of the following clauses ((A) and (B)) andpari passu, to: (A) each Note A-1 holder, any prepayment charge allocable to any prepayment of the related Note A-1 and (B) each Note A-2 holder, any prepayment charge allocable to any prepayment of the related Note A-2, and thensecond,pro rata (based on the amounts described in each of the following clauses ((A) and (B)) andpari passu, to: (A) the Note B-1 holder, any prepayment charge allocable to any prepayment of Note B-1, and (ii) the Note B-2 holder, any prepayment charge allocable to any prepayment of Note B-2, in each case, to the extent actually paid by the borrowers; |
| (xii) | twelfth, any interest accrued at the default rate on the stated principal balance of the Gas Company Tower & World Trade Center Parking Garage Whole Loan to the extent such default interest amount is (i) actually paid by the borrowers, (ii) in excess of interest accrued on the stated principal balance of the Gas Company Tower & World Trade Center Parking Garage Whole Loan at the related interest rate and (iii) not required to be paid to the COMM 2016-GCT Master Servicer, the COMM 2016-GCT Trustee or the COMM 2016-GCT Special Servicer, or the master servicers or the trustees of any securitization of any Gas Company Tower & World Trade Center Parking Garage Non-Standalone Loan,pro rata (based on the amounts described in each of the following clauses (A) through (D)) andpari passu, to (A) Note A-1 holder in an amount calculated on the Note A-1 principal balance at the excess of (x) the Note A-1 default rate over (y) the Note A-1 interest rate, (B) Note A-2 holder in an amount calculated on the Note A-2 principal balance at the excess of (x) the Note A-2 default rate over (y) the Note A-2 interest rate, (C) Note B-1 holder in an amount calculated on the Note B-1 principal balance at the excess of (x) the Note B-1 default rate over (y) the Note B-1 interest rate and (D) Note B-2 holder in an amount calculated on the Note B-2 principal balance at the excess of (x) the Note B-2 default rate over (y) the Note B-2 interest rate; |
| (xiii) | thirteenth,pro rata andpari passu (in the case of penalty charges, only to the extent not required to be paid to the COMM 2016-GCT Master Servicer, the COMM 2016-GCT Trustee or the COMM 2016-GCT Special Servicer, or the master servicers or the trustees of any securitization of any Gas Company Tower & World Trade Center Parking Garage Non-Standalone Loan), to: (i) each Note A-1 holder its percentage interest of any assumption fees and penalty charges, (ii) each Note A-2 holder its percentage interest of any assumption fees and penalty charges, (iii) the Note B-1 holder its percentage interest of any assumption fees and penalty charges and (iv) the Note B-2 holder its percentage interest of any assumption fees and penalty charges; and |
| (xiv) | fourteenth, any excess amount not otherwise applied pursuant to the foregoing clauses (i) through (xiii) above will be distributed to the Gas Company Tower & World Trade Center Parking Garage Noteholderspro rata in accordance with their respective initial percentage interests. |
For the purpose of this “—Distributions” section, with respect to the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan, the Gas Company Tower & World Trade Center Parking Garage Pari Passu Companion Loans and the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loans, the term “percentage interest” means the percentage equivalent of a fraction, the numerator of which is equal to the principal balance of such loan, and the denominator of which is equal to the principal balance of the Gas Company Tower & World Trade Center Parking Garage Whole Loan.
In addition, solely for the purpose of this “—Distributions” section, the following terms have the meaning below:
“Note A” means, individually or collectively, Note A-1 and Note A-2, as the context requires.
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“Note A-1” means, individually or collectively, Note A-1-S1, Note A-1-S2, Note A-1-S3 and Note A-1-C, as the context may require
“Note A-2” means, individually or collectively, Note A-2-S and Note A-2-C, as the context may require.
“Note B” means, individually or collectively, Note B-1 and Note B-2, as the context may require.
Control and Consultation. The controlling holder under the Gas Company Tower & World Trade Center Parking Garage Co-Lender Agreement is currently the COMM 2016-GCT Directing Holder. The “COMM 2016-GCT Directing Holder”, as of any date of determination, will be, during a COMM 2016-GCT Subordinate Control Period or a COMM 2016-GCT Subordinate Consultation Period, the majority of the holders of the COMM 2016-GCT Controlling Class or its designee. As of the Closing Date, the COMM 2016-GCT Directing Holder is expected to be an affiliate of H/2/ Capital Partners
A “COMM 2016-GCT Subordinate Control Period” means any period when the certificate balance of the COMM 2016-GCT Mortgage Trust Class E certificates (taking into account the application of any appraisal reduction amounts and collateral deficiency amounts to notionally reduce the certificate balance of such class of certificates) is at least 25% of the initial certificate balance of such class of certificates;provided, if at any time the certificate balances of all classes of certificates senior to such class of certificates have been reduced to zero as a result of the allocation of principal payments on the Gas Company Tower & World Trade Center Parking Garage Standalone Companion Loans, then a COMM 2016-GCT Subordinate Control Period will be deemed to then be in effect. If the COMM 2016-GCT Directing Holder becomes a borrower related party, a COMM 2016-GCT Subordinate Control Period will be deemed to be terminated (except for the purposes of determining whether the COMM 2016-GCT Directing Holder or a COMM 2016-GCT Controlling Class Certificateholder has the right to appoint the successor special servicer to a COMM 2016-GCT Special Servicer that has become a borrower related party).
A “COMM 2016-GCT Subordinate Consultation Period” means any period when both (i) the certificate balance of the COMM 2016-GCT Mortgage Trust Class E certificates (taking into account the application of any appraisal reduction amounts and collateral deficiency amounts to notionally reduce the certificate balance of such class of certificates), is less than 25% of the initial certificate balance of such class of certificates and (ii) the certificate balance of such class of certificates (without regard to the application of any appraisal reduction amounts and collateral deficiency amounts allocated to such class of certificates) is at least 25% of the initial certificate balance of such class of certificates. If the COMM 2016-GCT Directing Holder becomes a borrower related party, a COMM 2016-GCT Subordinate Consultation Period will be deemed to be terminated (except for the purposes of determining whether the COMM 2016-GCT Directing Holder or a COMM 2016-GCT Controlling Class Certificateholder has the right to appoint the successor special servicer to a COMM 2016-GCT Special Servicer that has become a borrower related party).
When the certificate balance of the COMM 2016-GCT Mortgage Trust Class E Certificates (without regard to the application of any appraisal reduction amounts and collateral deficiency amounts to notionally reduce the certificate balance of such class of certificates) is less than 25% of the initial certificate balance of such class of certificates, the COMM 2016-GCT Directing Holder will have no consent or consultation rights under the COMM 2016-GCT Trust and Servicing Agreement except for such rights available to it as a certificateholder and such other rights that are available to it in accordance with the COMM 2016-GCT Trust and Servicing Agreement.
Certain decisions to be made with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan, including certain major decisions and the implementation of any recommended actions outlined in an asset status report pursuant to the COMM 2016-GCT Trust and Servicing Agreement are expected to require the approval of the COMM 2016-GCT Directing Holder.
The “COMM 2016-GCT Controlling Class” will be, as of any time of determination, the most subordinate of the COMM 2016-GCT Mortgage Trust Class E and Class F Certificates so long as such class has an outstanding certificate balance (as reduced by any principal payments and realized losses
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and as notionally reduced by any appraisal reduction amounts and collateral deficiency amounts allocable to such class) that is equal to or greater than 25% of the initial certificate balance of such class.If neither the Class E nor Class F certificates satisfy the foregoing requirements, the Class E certificates will be theCOMM 2016-GCTControlling Class so long as such class has an outstanding certificate balance (as reduced by any principal payments and realized losses allocable to such Class) that is equal to or greater than 25% of the initial certificate balance of such class. If the Class E certificates do not satisfy the preceding sentence, then there will be no controlling class. No other class of certificates will be eligible to act as the controlling class or appoint theCOMM 2016-GCTDirecting Holder.
A “COMM 2016-GCT Controlling Class Certificateholder” will be each holder (or beneficial owner, if applicable) of a certificate of the COMM 2016-GCT Controlling Class.
The “COMM 2016-GCT Directing Holder” is the representative appointed by the holder or holders of the certificates representing more than 50% of the COMM 2016-GCT Controlling Class (by certificate balance);provided,that (1) if noCOMM 2016-GCTDirecting Holder has been selected, (2) upon receipt by theCOMM 2016-GCTMaster Servicer, theCOMM 2016-GCTSpecial Servicer and theCOMM 2016-GCTCertificate Administrator of notice from a majority of the holders of theCOMM 2016-GCTControlling Class, by certificate balance, that aCOMM 2016-GCTDirecting Holder is no longer designated, or (3) if theCOMM 2016-GCTDirecting Holder is required to resign due to becoming a borrower related party, theCOMM 2016-GCTControlling Class Certificateholder that owns, and is identified (with contact information) to theCOMM 2016-GCTMaster Servicer, theCOMM 2016-GCTSpecial Servicer and theCOMM 2016-GCTCertificate Administrator as owning, the largest aggregate certificate balance of certificates of theCOMM 2016-GCTControlling Class (or the designee of suchCOMM 2016-GCTControlling Class Certificateholder) will be theCOMM 2016-GCTDirecting Holder. TheCOMM 2016-GCTDirecting Holder cannot be a borrower related party.
Neither the COMM 2016-GCT Master Servicer nor the COMM 2016-GCT Special Servicer will be permitted to follow any direction or objection provided by the COMM 2016-GCT Directing Holder that would require or cause the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Special Servicer to violate any provision of the related mortgage loan documents, the Gas Company Tower & World Trade Center Parking Garage Co-Lender Agreement, applicable law or the COMM 2016-GCT Trust and Servicing Agreement, including without limitation the COMM 2016-GCT Master Servicer’s or the COMM 2016-GCT Special Servicer’s obligation to act in accordance with the servicing standard, or expose any certificateholder, the COMM 2016-GCT Master Servicer, the COMM 2016-GCT Special Servicer, the COMM 2016-GCT Certificate Administrator, the COMM 2016-GCT Trustee or the COMM 2016-GCT Mortgage Trust or their affiliates, officers, directors or agent to any claim, suit or liability, result in the imposition of a tax upon the COMM 2016-GCT Mortgage Trust or materially expand the scope of the COMM 2016-GCT Master Servicer’s or the COMM 2016-GCT Special Servicer’s responsibilities under the COMM 2016-GCT Trust and Servicing Agreement.
Cure Rights. If the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loans are no longer included in the COMM 2016-GCT Mortgage Trust and there is a monetary default or non-monetary default (in either case, beyond applicable notice and grace periods) with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan, then each Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan holder will have the right (and if all of the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan Holders provide such notice, then all of the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan Holders collectively, on apro rata basis will have such right), but not the obligation to: (A) cure such monetary default within 10 business days following the receipt of notice of such default and (B) cure such non-monetary default within 30 days following receipt of notice of such default,provided that under certain circumstances the cure period with respect to a non-monetary default may be extended by an additional 60 days (for a total of up to 90 days). If a Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan holder elects to cure a default by way of a payment of money (a “Cure Payment”), such Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan holder will be required to make such Cure Payment as directed by the COMM 2016-GCT Special Servicer and such Cure Payment will include all
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costs, expenses, losses, liabilities, obligations, damages, penalties and disbursements imposed on, incurred by or asserted against the issuing entity or the Gas Company Tower & World Trade Center Parking Garage Pari Passu Companion Loan holders related to the default and incurred during the period of time from the expiration of the grace period for such default until such Cure Payment is made or other cure is effected. So long as a default exists that is being cured by a Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan holder and the applicable cure period has not expired and such Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan holder is permitted to cure under the terms of the Gas Company Tower & World Trade Center Parking Garage Co-Lender Agreement, the default will not be treated as a default or a Gas Company Triggering Event of Default (i) for purposes of “—Distributions” above, (ii) for purposes of triggering an acceleration of the Gas Company Tower & World Trade Center Parking Garage Whole Loan, modifying, amending or waiving any provisions or the mortgage loan documents or commencing foreclosure proceedings or similar legal proceedings with respect to the Gas Company Tower & World Trade Center Parking Garage Mortgaged Property, or (iii) for purposes of treating the Gas Company Tower & World Trade Center Parking Garage Whole Loan as a specially serviced loan. Notwithstanding anything to the contrary, a Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan Holder’s right to cure a default will be limited to 6 Cure Events over the life of the Gas Company Tower & World Trade Center Parking Garage Whole Loan and no single Cure Event may exceed 4 consecutive months. A “Cure Event” means a Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan Holder’s exercise of its cure rights whether for 1 month or for consecutive months in the aggregate.
Purchase Option. If the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loans are no longer included in the COMM 2016-GCT Mortgage Trust and a Gas Company Triggering Event of Default has occurred and is continuing, then, upon written notice from the COMM 2016-GCT Special Servicer of such occurrence (a “Repurchase Option Notice”), any Note B holder will have the right (and if all of the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan Holders provide such notice, then all of the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan Holders collectively, on apro rata basis will have such right), prior to any other party, by written notice to the COMM 2016-GCT Special Servicer (the “Repurchase Election Notice”) after the occurrence of the Gas Company Triggering Event of Default and prior to the earliest date to occur of (a) the cure of the Gas Company Triggering Event of Default, (b) the consummation of a foreclosure sale, sale by power of sale or delivery of a deed-in-lieu of foreclosure with respect to the related Mortgaged Property, (c) the modification of the mortgage loan documents in accordance with the COMM 2016-GCT Trust and Servicing Agreement and the Gas Company Tower & World Trade Center Parking Garage Co-Lender Agreement, and (d) the date that is 90 days after the related controlling noteholder’s receipt of the Repurchase Option Notice, to purchase the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and Gas Company Tower & World Trade Center Parking Garage Pari Passu Companion Loans for the applicable purchase price provided in the Gas Company Tower & World Trade Center Parking Garage Co-Lender Agreement on a date not less than five (5) business days nor more than 15 business days after the date of the Repurchase Election Notice, except as described below with respect to a Repurchase Election Notice based on a Notice of Foreclosure/DIL.
The COMM 2016-GCT Special Servicer will be required to give the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan Holders 5 business days’ prior written notice of its intent with respect to any consummation of a foreclosure sale, sale by power of sale or delivery of deed-in-lieu of foreclosure with respect to the related Mortgaged Property (a “Notice of Foreclosure/DIL”). If the COMM 2016-GCT Special Servicer intends to accept a deed-in-lieu of foreclosure, it will be required to deliver a Notice of Foreclosure/DIL stating its intent to the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan Holders and the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan Holders will have the option, within 10 business days from receipt of such Notice of Foreclosure/DIL, to deliver a Repurchase Election Notice to the COMM 2016-GCT Special Servicer and to consummate the purchase option on a date to occur no later than 30 days from the day it received the Notice of Foreclosure/DIL,provided that such 30 days may be extended at the option of the Gas Company Tower & World Trade Center Parking Garage Subordinate
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Companion Loan Holders for an additional 30 days upon payment of a $5,000,000 non-refundable cash deposit and provision of evidence satisfactory to the COMM 2016-GCT Special Servicer that it is diligently and expeditiously proceeding to consummate its purchase of the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Pari Passu Companion Loans.
Sale of Defaulted Gas Company Tower & World Trade Center Parking Garage Whole Loan. Pursuant to the terms of the Gas Company Tower & World Trade Center Parking Garage Co-Lender Agreement, if the Gas Company Tower & World Trade Center Parking Garage Whole Loan becomes a defaulted mortgage loan, and if the COMM 2016-GCT Special Servicer determines to sell the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Companion Loans in accordance with the COMM 2016-GCT Trust and Servicing Agreement, then the COMM 2016-GCT Special Servicer will have the right and the obligation to sell the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Companion Loans as notes evidencing one whole loan in accordance with the terms of the COMM 2016-GCT Trust and Servicing Agreement. In connection with any such sale, the COMM 2016-GCT Special Servicer will be required to follow the procedures set forth in the COMM 2016-GCT Trust and Servicing Agreement.
Special Servicer Appointment Rights. Pursuant to the Gas Company Tower & World Trade Center Parking Garage Co-Lender Agreement and the COMM 2016-GCT Trust and Servicing Agreement, the COMM 2016-GCT Directing Holder (during any COMM 2016-GCT Subordinate Control Period) or, at any time other than during a COMM 2016-GCT Subordinate Control Period, certificateholders with the requisite percentage of voting rights will have the right, with or without cause, to replace the COMM 2016-GCT Special Servicer then acting with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan and appoint a replacement special servicer in lieu thereof without the consent of the issuing entity (or its representative).
Vertex Pharmaceuticals HQ Whole Loan
General. The Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as Vertex Pharmaceuticals HQ, representing approximately 4.3% of the Initial Pool Balance, with a Cut-off Date Balance of $30,000,000 (the “Vertex Pharmaceuticals HQ Mortgage Loan”), is part of a whole loan comprised of ten (10) promissory notes, each of which is secured by the same mortgage instrument on the same underlying Mortgaged Property (the “Vertex Pharmaceuticals HQ Mortgaged Property”). The Vertex Pharmaceuticals HQ Mortgage Loan is evidenced by promissory note A-5. The portions of the Vertex Pharmaceuticals HQ Whole Loan (as defined below) evidenced by promissory notes A-1, A-2-1, A-2-2, A-2-3, A-3, A-4, A-6-1, A-6-2 and A-7, with an aggregate Cut-off Date Balance of $395,000,000, are referred to in this prospectus as the “Vertex Pharmaceuticals HQ Companion Loans” and arepari passuin right of payment with the Vertex Pharmaceuticals HQ Mortgage Loan. The Vertex Pharmaceuticals HQ Mortgage Loan and the Vertex Pharmaceuticals HQ Companion Loans are collectively referred to in this prospectus as the “Vertex Pharmaceuticals HQ Whole Loan.” The Vertex Pharmaceuticals HQ Companion Loans will not be transferred to the issuing entity and will not be part of the Mortgage Pool. There can be no assurance that any particular Vertex Pharmaceuticals HQ promissory note will not be further split.
The holders of the Vertex Pharmaceuticals HQ Whole Loan (the “Vertex Pharmaceuticals HQ Noteholders”) have entered into an intercreditor agreement that sets forth the respective rights of each Vertex Pharmaceuticals HQ Noteholder (the “Vertex Pharmaceuticals HQ Intercreditor Agreement”).
Servicing. As of the date of this prospectus, the Vertex Pharmaceuticals HQ Whole Loan is expected to be serviced by Wells Fargo Bank, National Association, as master servicer (in such capacity, the “WFCM 2016-BNK1 Master Servicer”) and, if applicable, is expected to be specially serviced by Rialto Capital Advisors, LLC, as special servicer (in such capacity, the “WFCM 2016-BNK1 Special Servicer”), pursuant to a pooling and servicing agreement expected to be entered into between Wells Fargo Commercial Mortgage Securities, Inc., as depositor (in such capacity, the “WFCM 2016-BNK1 Depositor”), the WFCM 2016-BNK1 Master Servicer, the WFCM 2016-BNK1 Special Servicer, Wilmington
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Trust, National Association, as trustee (in such capacity, the “WFCM 2016-BNK1 Trustee”), Wells Fargo Bank, National Association, as certificate administrator (in such capacity, the “WFCM 2016-BNK1 Certificate Administrator”) and as custodian, and Park Bridge Lender Services LLC, as operating advisor (in such capacity, the “WFCM 2016-BNK1 Operating Advisor”) and as asset representations reviewer, in connection with Wells Fargo Commercial Mortgage Trust 2016-BNK1, Commercial Mortgage Pass-Through Certificates, Series 2016-BNK1 (the “WFCM 2016-BNK1 Mortgage Trust”) (into which the Vertex Pharmaceuticals HQ Companion Loan designated as note A-1 (the “Vertex Pharmaceuticals HQ Controlling Companion Loan”) has been deposited) (the “WFCM 2016-BNK1 Pooling and Servicing Agreement”), and, subject to the terms of the Vertex Pharmaceuticals HQ Intercreditor Agreement, all decisions, consents, waivers, approvals and other actions on the part of any Vertex Pharmaceuticals HQ Noteholder will be effected in accordance with the WFCM 2016-BNK1 Pooling and Servicing Agreement and the Vertex Pharmaceuticals HQ Intercreditor Agreement.
Advancing. The master servicer or the trustee, as applicable, will be responsible for making P&I Advances on the Vertex Pharmaceuticals HQ Mortgage Loan (but not on the Vertex Pharmaceuticals HQ Companion Loans) pursuant to the PSA, in each case, unless the master servicer, the special servicer or the trustee, as applicable, determines that such an Advance would be a Nonrecoverable Advance.
It is expected that the WFCM 2016-BNK1 Master Servicer or the WFCM 2016-BNK1 Trustee, as applicable, will be obligated to make servicing advances with respect to the Vertex Pharmaceuticals HQ Whole Loan, in each case unless a similar determination of nonrecoverability is made under the WFCM 2016-BNK1 Pooling and Servicing Agreement.
Distributions. The Vertex Pharmaceuticals HQ Intercreditor Agreement sets forth the respective rights of each of the Vertex Pharmaceuticals HQ Noteholders and provides, in general, that all payments, proceeds and other recoveries on or in respect of the Vertex Pharmaceuticals HQ Whole Loan will be applied to the Vertex Pharmaceuticals HQ Mortgage Loan and the Vertex Pharmaceuticals HQ Companion Loans on apro rata andpari passu basis according to their respective outstanding principal balances (subject, in each case, to the payment and reimbursement rights of the applicable master servicer, special servicer and other service providers in accordance with the terms of the applicable pooling and servicing agreement).
Reimbursement of Advances; Indemnification. Pursuant to the Vertex Pharmaceuticals HQ Intercreditor Agreement, with respect to a servicing advance on the Vertex Pharmaceuticals HQ Whole Loan, the WFCM 2016-BNK1 Master Servicer, the WFCM 2016-BNK1 Special Servicer or the WFCM 2016-BNK1 Trustee, as applicable, will be entitled to reimbursement from collections on, and proceeds of, the Vertex Pharmaceuticals HQ Mortgage Loan and the Vertex Pharmaceuticals HQ Companion Loans, on apro rata basis (based on each such loan’s outstanding principal balance). However, pursuant to the Vertex Pharmaceuticals HQ Intercreditor Agreement, the issuing entity will be responsible for reimbursing the WFCM 2016-BNK1 Mortgage Trust and/or various parties to the WFCM 2016-BNK1 Pooling and Servicing Agreement for the issuing entity’spro rata share of: (i) any servicing advances made with respect to the Vertex Pharmaceuticals HQ Whole Loan or interest thereon paid out of general collections on the mortgage loans in the WFCM 2016-BNK1 Mortgage Trust; and (ii) various other fees, costs and expenses incurred in connection with the servicing and administration of the Vertex Pharmaceuticals HQ Whole Loan.
Further, pursuant to the Vertex Pharmaceuticals HQ Intercreditor Agreement, each pooling and servicing agreement pursuant to which the Vertex Pharmaceuticals HQ Mortgage Loan or each Vertex Pharmaceuticals HQ Companion Loan other than the Vertex Pharmaceuticals HQ Controlling Companion Loan is being securitized is required to provide that the WFCM 2016-BNK1 Depositor, the WFCM 2016-BNK1 Master Servicer, the WFCM 2016-BNK1 Special Servicer, the WFCM 2016-BNK1 Certificate Administrator, the WFCM 2016-BNK1 Trustee and the WFCM 2016-BNK1 Operating Advisor (and any director, officer, employee or agent of any of them) will be entitled to indemnification by the holders of the Vertex Pharmaceuticals HQ Mortgage Loan (which is the issuing entity) and the Vertex Pharmaceuticals HQ Companion Loans and held harmless against each such holder’spro rata share of any and all claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments and any other costs, liabilities, fees and expenses incurred in connection with the servicing and administration of (or, in the case of the
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WFCM 2016-BNK1 Operating Advisor, the provision of services for) the Vertex Pharmaceuticals HQ Whole Loan.
Consultation and Control. The controlling note holder under the Vertex Pharmaceuticals HQ Intercreditor Agreement will be the controlling class representative (or similar person) or such other party specified in the WFCM 2016-BNK1 Pooling and Servicing Agreement (such party, the “WFCM 2016-BNK1 Directing Certificateholder”). Certain decisions to be made with respect to the Vertex Pharmaceuticals HQ Whole Loan, including certain major decisions and the implementation of any recommended actions outlined in an asset status report pursuant to the WFCM 2016-BNK1 Pooling and Servicing Agreement, will require the approval of the WFCM 2016-BNK1 Directing Certificateholder.
Pursuant to the terms of the Vertex Pharmaceuticals HQ Intercreditor Agreement, the controlling class representative (in such capacity, and with each other holder of a Vertex Pharmaceuticals HQ Companion Loan other than the Vertex Pharmaceuticals HQ Controlling Companion Loan, a “Vertex Pharmaceuticals HQ Non-Controlling Note Holder”) will have the right to (i) receive copies of all notices, information and reports that the WFCM 2016-BNK1 Special Servicer is required to provide to the WFCM 2016-BNK1 Directing Certificateholder within the same time frame it is required to provide such notices, information and reports to the WFCM 2016-BNK1 Directing Certificateholder (but without regard to whether or not the WFCM 2016-BNK1 Directing Certificateholder actually has lost any rights to receive such information as a result of a control termination event or a consultation termination event under the WFCM 2016-BNK1 Pooling and Servicing Agreement) and (ii) consult on a strictly non-binding basis with respect to certain major decisions as provided in the Vertex Pharmaceuticals HQ Intercreditor Agreement and the implementation of any recommended actions outlined in an asset status report. The consultation right of a Vertex Pharmaceuticals HQ Non-Controlling Note Holder will expire 10 business days after the delivery by the WFCM 2016-BNK1 Special Servicer of notice and information relating to the matter subject to consultation, whether or not the Vertex Pharmaceuticals HQ Non-Controlling Note Holder has responded within such period;provided that if a new course of action is proposed that is materially different from the actions previously proposed, the 10 business-day consultation period will begin anew. Notwithstanding a Vertex Pharmaceuticals HQ Non-Controlling Note Holder’s consultation rights described above, the WFCM 2016-BNK1 Master Servicer or the WFCM 2016-BNK1 Special Servicer is permitted to make any major decision or take any action set forth in an asset status report before the expiration of the aforementioned 10 business-day period if it determines that immediate action with respect to such decision is necessary to protect the interests of the holders of the Vertex Pharmaceuticals HQ Mortgage Loan and the Vertex Pharmaceuticals HQ Companion Loans.
In addition to the consultation rights of the Vertex Pharmaceuticals HQ Non-Controlling Note Holders described above, each Vertex Pharmaceuticals HQ Non-Controlling Note Holder will have the right to annual conference calls with the WFCM 2016-BNK1 Master Servicer or WFCM 2016-BNK1 Special Servicer, as applicable, upon reasonable notice and at times reasonably acceptable to the WFCM 2016-BNK1 Master Servicer or WFCM 2016-BNK1 Special Servicer, as applicable, in which servicing issues related to the Vertex Pharmaceuticals HQ Whole Loan are discussed.
Sale of Defaulted Vertex Pharmaceuticals HQ Whole Loan. Pursuant to the terms of the Vertex Pharmaceuticals HQ Intercreditor Agreement, if the Vertex Pharmaceuticals HQ Whole Loan becomes a defaulted mortgage loan pursuant to the terms of the WFCM 2016-BNK1 Pooling and Servicing Agreement, and if the WFCM 2016-BNK1 Special Servicer decides to sell the Vertex Pharmaceuticals HQ Companion Loan in the WFCM 2016-BNK1 Mortgage Trust, the WFCM 2016-BNK1 Special Servicer will be required to sell the Vertex Pharmaceuticals HQ Mortgage Loan together with the Vertex Pharmaceuticals HQ Companion Loans as a single whole loan. Notwithstanding the foregoing, the WFCM 2016-BNK1 Special Servicer will not be permitted to sell the Vertex Pharmaceuticals HQ Whole Loan if it becomes a defaulted whole loan without the written consent of the holder of the Vertex Pharmaceuticals HQ Mortgage Loan and the holders of the Vertex Pharmaceuticals HQ Companion Loans not included in the WFCM 2016-BNK1 Mortgage Trust, provided that such consent is not required if the WFCM 2016-BNK1 Special Servicer has complied with certain notice and information requirements set forth in the Vertex Pharmaceuticals HQ Intercreditor Agreement.
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Appointment of Special Servicer. The WFCM 2016-BNK1 Directing Certificateholder (prior to a control termination event) or certificateholders with the requisite percentage of voting rights, pursuant to the WFCM 2016-BNK1 Pooling and Servicing Agreement, will have the right, with or without cause, to replace the WFCM 2016-BNK1 Special Servicer for the Vertex Pharmaceuticals HQ Whole Loan and appoint a replacement special servicer in lieu thereof without the consent of the Vertex Pharmaceuticals HQ Non-Controlling Note Holders as long as such replacement special servicer satisfies the conditions set forth in the WFCM 2016-BNK1 Pooling and Servicing Agreement.
401 South State Street Whole Loan
General. The Mortgage Loan secured by the Mortgaged Property identified on Annex A-1 to this prospectus as 401 South State Street, representing approximately 2.2% of the Initial Pool Balance, with a Cut-off Date Balance of $15,742,454 (the “401 South State Street Mortgage Loan”), is part of a whole loan comprised of two (2) promissory notes, each of which is secured by the same mortgage instrument on the same underlying Mortgaged Property (the “401 South State Street Mortgaged Property”). The 401 South State Street Mortgage Loan is evidenced by promissory note A-2. The portion of the 401 South State Street Whole Loan (as defined below) evidenced by promissory note A-1, with a Cut-off Date Balance of $31,964,374, which is included in Citigroup Commercial Mortgage Trust 2016-P4, Commercial Mortgage Pass-Through Certificates, Series 2016-P4 (the “CGCMT 2016-P4 Mortgage Trust”) is referred to in this prospectus as the “401 South State Street Companion Loan” and ispari passuin right of payment with the 401 South State Street Mortgage Loan. The 401 South State Street Mortgage Loan and the 401 South State Street Companion Loan are collectively referred to in this prospectus as the “401 South State Street Whole Loan.” The 401 South State Street Companion Loan will not be transferred to the issuing entity and will not be part of the Mortgage Pool.
The holders of the 401 South State Street Whole Loan (the “401 South State Street Noteholders”) have entered into a co-lender agreement that sets forth the respective rights of each 401 South State Street Noteholder (the “401 South State Street Co-Lender Agreement”).
Servicing. The 401 South State Street Whole Loan is being serviced by Wells Fargo Bank, National Association, as master servicer (in such capacity, the “CGCMT 2016-P4 Master Servicer”) and, if applicable, will be specially serviced by CWCapital Asset Management LLC, as special servicer (in such capacity, the “CGCMT 2016-P4 Special Servicer”), pursuant to the pooling and servicing agreement entered into between Citigroup Commercial Mortgage Securities Inc., as depositor (the “CGCMT 2016-P4 Depositor”), the CGCMT 2016-P4 Master Servicer, the CGCMT 2016-P4 Special Servicer, Deutsche Bank Trust Company Americas, as trustee (in such capacity, the “CGCMT 2016-P4 Trustee”), Citibank, N.A., as certificate administrator (in such capacity, the “CGCMT 2016-P4 Certificate Administrator”), and Park Bridge Lender Services LLC, as operating advisor (in such capacity, the “CGCMT 2016-P4 Operating Advisor”) and as asset representations reviewer, in connection with the CGCMT 2016-P4 Mortgage Trust (into which the 401 South State Street Companion Loan designated as note A-1 has been deposited) (the “CGCMT 2016-P4 Pooling and Servicing Agreement”), and, subject to the terms of the 401 South State Street Co-Lender Agreement, all decisions, consents, waivers, approvals and other actions on the part of any 401 South State Street Noteholder will be effected in accordance with the CGCMT 2016-P4 Pooling and Servicing Agreement and the 401 South State Street Co-Lender Agreement.
Advancing. The master servicer or the trustee, as applicable, will be responsible for making P&I Advances on the 401 South State Street Mortgage Loan (but not on the 401 South State Street Companion Loan) pursuant to the PSA, in each case, unless the master servicer, the special servicer or the trustee, as applicable, determines that such an Advance would be a Nonrecoverable Advance.
The CGCMT 2016-P4 Master Servicer or the CGCMT 2016-P4 Trustee, as applicable, will be obligated to make servicing advances with respect to the 401 South State Street Whole Loan, in each case unless a similar determination of nonrecoverability is made under the CGCMT 2016-P4 Pooling and Servicing Agreement.
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Distributions. The 401 South State Street Co-Lender Agreement sets forth the respective rights of each of the 401 South State Street Noteholders and provides, in general, that all payments, proceeds and other recoveries on or in respect of the 401 South State Street Whole Loan will be applied to the 401 South State Street Mortgage Loan and the 401 South State Street Companion Loan on apro rata andpari passu basis according to their respective outstanding principal balances (subject, in each case, to the payment and reimbursement rights of the applicable master servicer, special servicer and other service providers in accordance with the terms of the applicable pooling and servicing agreement).
Reimbursement of Advances; Indemnification. Pursuant to the 401 South State Street Co-Lender Agreement, with respect to a servicing advance on the 401 South State Street Whole Loan, the CGCMT 2016-P4 Master Servicer, the CGCMT 2016-P4 Special Servicer or the CGCMT 2016-P4 Trustee, as applicable, will be entitled to reimbursement first from collections on, and proceeds of, the 401 South State Street Mortgage Loan and the 401 South State Street Companion Loan, on apro rata basis (based on each such loan’s outstanding principal balance). However, pursuant to the 401 South State Street Co-Lender Agreement, the issuing entity will be responsible for reimbursing the CGCMT 2016-P4 Mortgage Trust and/or various parties to the CGCMT 2016-P4 Pooling and Servicing Agreement for the issuing entity’spro rata share of: (i) any servicing advances made with respect to the 401 South State Street Whole Loan or interest thereon paid out of general collections on the mortgage loans in the CGCMT 2016-P4 Mortgage Trust; and (ii) various other fees, costs and expenses incurred in connection with the servicing and administration of the 401 South State Street Whole Loan.
Further, pursuant to the 401 South State Street Co-Lender Agreement, each pooling and servicing agreement pursuant to which the 401 South State Street Mortgage Loan or the 401 South State Street Companion Loan is being securitized is required to provide that the CGCMT 2016-P4 Depositor, the CGCMT 2016-P4 Master Servicer, the CGCMT 2016-P4 Special Servicer, the CGCMT 2016-P4 Certificate Administrator, the CGCMT 2016-P4 Trustee and the CGCMT 2016-P4 Operating Advisor (and any director, officer, employee or agent of any of them) will be entitled to indemnification by the holders of the 401 South State Street Mortgage Loan (which is the issuing entity) and the 401 South State Street Companion Loan and held harmless against each such holder’spro rata share of any and all claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments and any other costs, liabilities, fees and expenses incurred in connection with the servicing and administration of (or, in the case of the CGCMT 2016-P4 Operating Advisor, the provision of services for) the 401 South State Street Whole Loan.
Consultation and Control. The controlling note holder under the 401 South State Street Co-Lender Agreement with respect to the 401 South State Street Whole Loan will be the controlling class representative (or similar person) or such other party specified in the CGCMT 2016-P4 Pooling and Servicing Agreement (such party, the “CGCMT 2016-P4 Directing Certificateholder”). Certain decisions to be made with respect to the 401 South State Street Whole Loan, including certain major decisions and the implementation of any recommended actions outlined in an asset status report pursuant to the CGCMT 2016-P4 Pooling and Servicing Agreement, will require the approval of the CGCMT 2016-P4 Directing Certificateholder.
Pursuant to the terms of the 401 South State Street Co-Lender Agreement, the controlling class representative (the “401 South State Street Non-Controlling Note Holder”) will have the right to (i) receive copies of all notices, information and reports that the CGCMT 2016-P4 Special Servicer is required to provide to the CGCMT 2016-P4 Directing Certificateholder within the same time frame it is required to provide such notices, information and reports to the CGCMT 2016-P4 Directing Certificateholder (but without regard to whether or not the CGCMT 2016-P4 Directing Certificateholder actually has lost any rights to receive such information as a result of a control termination event or a consultation termination event under the CGCMT 2016-P4 Pooling and Servicing Agreement) and (ii) consult on a strictly non-binding basis with respect to certain major decisions as provided in the 401 South State Street Co-Lender Agreement and the implementation of any recommended actions outlined in an asset status report. The consultation right of the 401 South State Street Non-Controlling Note Holder will expire 10 business days after the delivery by the CGCMT 2016-P4 Special Servicer of notice and information relating to the matter subject to consultation, whether or not the 401 South State Street
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Non-Controlling Note Holder has responded within such period;provided that if a new course of action is proposed that is materially different from the actions previously proposed, the 10 business-day consultation period will begin anew. Notwithstanding the 401 South State Street Non-Controlling Note Holder’s consultation rights described above, the CGCMT 2016-P4 Master Servicer or the CGCMT 2016-P4 Special Servicer is permitted to make any major decision or take any action set forth in an asset status report before the expiration of the aforementioned 10 business-day period if it determines that immediate action with respect to such decision is necessary to protect the interests of the holders of the 401 South State Street Mortgage Loan and the 401 South State Street Companion Loan.
In addition to the consultation rights of the 401 South State Street Non-Controlling Note Holder described above, the 401 South State Street Non-Controlling Note Holder will have the right to attend annual meetings (which may be held by telephone or in person at the discretion of the CGCMT 2016-P4 Master Servicer or CGCMT 2016-P4 Special Servicer, as applicable), upon reasonable notice and at times reasonably acceptable to the CGCMT 2016-P4 Master Servicer or CGCMT 2016-P4 Special Servicer, as applicable, in which servicing issues related to the 401 South State Street Whole Loan are discussed.
Sale of Defaulted 401 South State Street Whole Loan. Pursuant to the terms of the 401 South State Street Co-Lender Agreement, if the 401 South State Street Whole Loan becomes a defaulted mortgage loan pursuant to the terms of the CGCMT 2016-P4 Pooling and Servicing Agreement, and if the CGCMT 2016-P4 Special Servicer decides to sell the 401 South State Street Companion Loan in the CGCMT 2016-P4 Mortgage Trust, the CGCMT 2016-P4 Special Servicer will be required to sell the 401 South State Street Mortgage Loan together with the 401 South State Street Companion Loan as a single whole loan. Notwithstanding the foregoing, the CGCMT 2016-P4 Special Servicer will not be permitted to sell the 401 South State Street Whole Loan if it becomes a defaulted whole loan without the written consent of the holder of the 401 South State Street Mortgage Loan, provided that such consent is not required if the CGCMT 2016-P4 Special Servicer has complied with certain notice and information requirements set forth in the 401 South State Street Co-Lender Agreement.
Appointment of Special Servicer. The CGCMT 2016-P4 Directing Certificateholder (prior to a control termination event) or certificateholders with the requisite percentage of voting rights, pursuant to the CGCMT 2016-P4 Pooling and Servicing Agreement, will have the right, with or without cause, to replace the CGCMT 2016-P4 Special Servicer for the 401 South State Street Whole Loan and appoint a replacement special servicer in lieu thereof without the consent of the 401 South State Street Non-Controlling Note Holder as long as such replacement special servicer satisfies the conditions set forth in the CGCMT 2016-P4 Pooling and Servicing Agreement.
Additional Information
Each of the tables presented in Annex A-2 sets forth selected characteristics of the pool of Mortgage Loans as of the Cut-off Date, if applicable. For a detailed presentation of certain additional characteristics of the Mortgage Loans and the Mortgaged Properties on an individual basis, see Annex A-1.For a brief summary of the 20 largest Mortgage Loans in the pool of Mortgage Loans, seeAnnex A-3.
The description in this prospectus, including Annex A-1, A-2 and A-3, of the Mortgage Pool and the Mortgaged Properties is based upon the Mortgage Pool as expected to be constituted at the close of business on the Cut-off Date, as adjusted for the scheduled principal payments due on the Mortgage Loans on or before the Cut-off Date. Prior to the issuance of the Offered Certificates, a Mortgage Loan may be removed from the Mortgage Pool if the depositor deems such removal necessary or appropriate or if it is prepaid. This may cause the range of Mortgage Rates and maturities as well as the other characteristics of the Mortgage Loans to vary from those described in this prospectus.
A Current Report on Form 8-K containing detailed information regarding the Mortgage Loans will be available to persons (including beneficial owners of the Offered Certificates) who receive this prospectus and will be filed pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), together with the PSA, with the United States Securities and Exchange Commission (the “SEC”) on or prior to the date of the filing of this prospectus.
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Transaction Parties
The Sponsors and Mortgage Loan Sellers
German American Capital Corporation
General.German American Capital Corporation, a Maryland corporation (“GACC”), is a sponsor and a mortgage loan seller in this securitization transaction (in such capacity, “Sponsor” or “Mortgage Loan Seller”). Except with respect to (i) the Westfield San Francisco Centre Whole Loan, which was co-originated by Deutsche Bank AG, New York Branch (an affiliate of GACC) and JPMorgan Chase Bank, National Association, (ii) the Gas Company Tower & World Trade Center Parking Garage Whole Loan, which was co-originated by Deutsche Bank AG, new York Branch (an affiliate of GACC) and Barclays Bank PLC and (iii) the Pillar Mortgage Loans, GACC or an affiliate of GACC originated (either directly or, in some cases, through table funding arrangements) all of the GACC Mortgage Loans in this transaction. GACC contributed a portion of the Westfield San Francisco Centre Whole Loan and a portion of the Gas Company Tower & World Trade Center Parking Garage originated by Deutsche Bank AG, New York Branch. GACC is a wholly-owned subsidiary of Deutsche Bank Americas Holding Corp., which in turn is a wholly-owned subsidiary of Deutsche Bank AG, a German corporation and GACC is an affiliate of the Depositor and Deutsche Bank Securities Inc., an Underwriter. The principal offices of GACC are located at 60 Wall Street, New York, New York 10005. In addition, it is expected that Deutsche Bank AG, New York Branch will, as of the date of the initial issuance of the certificates, hold the Westfield San Francisco Centre Companion Loans designated as Note A-1-EMP-C1, Note A-1-SFC-C1, Note A-2-EMP-C1 and Note A-2-SFC-C1 and GACC will, as of the date of the initial issuance of the certificates, hold the 10 Hudson Yards Companion Loans designated as Note A-1-C2, Note A-1-C3, Note A-1-C4, Note A-1-C5 and Note A-1-C6, the Prudential Plaza Companion Loans designated as Note A-2-2, Note A-3 and Note A-4, the U-Haul AREC Portfolio Companion Loan designated as Note A-2 and the Birch Run Premium Outlets Companion Loans designated as Note A-1-B, Note A-2-B and Note A-3.
The GACC Mortgage Loans secured by the Mortgaged Properties identified on Annex A-1 to this prospectus as Embassy Suites Columbus, Altmonte Apartments and Shady Haven MHC (collectively, the “Pillar Mortgage Loans”), representing in the aggregate approximately 4.9% of the Initial Pool Balance, were originated by Pillar Funding LLC and acquired by GACC. The Pillar Mortgage Loans were reunderwritten by GACC in accordance with the underwriting criteria described under “—Exceptions” below.
GACC is engaged in the origination of commercial mortgage loans with the primary intent to sell the loans within a short period of time subsequent to origination into a commercial mortgage backed securities primary issuance securitization or through a sale of whole loan interests to third party investors. GACC originates loans primarily for securitization; however, GACC also originates subordinate mortgage loans or subordinate participation interests in mortgage loans, and mezzanine loans (loans secured by equity interests in entities that own commercial real estate), for sale to third party investors.
GACC originates loans and aggregates and warehouses the loans pending sale via a commercial mortgage backed securities (“CMBS”) securitization.
Pursuant to certain interim servicing agreements between GACC and/or certain of its affiliates, on the one hand, and Wells Fargo Bank, National Association, on the other hand, Wells Fargo Bank, National Association acts as interim servicer with respect to certain mortgage loans, including, prior to their inclusion in the issuing entity, 11 of the Mortgage Loans to be contributed to this securitization by GACC, representing approximately 48.3% of the Initial Pool Balance.
Pursuant to certain interim servicing agreements between GACC and/or certain of its affiliates, on the one hand, and Midland Loan Services, a Division of PNC Bank, National Association, on the other hand, Midland Loan Services, a Division of PNC Bank, National Association acts as interim servicer with respect to certain mortgage loans, including, prior to their inclusion in the issuing entity, 4 of the Mortgage Loans to be contributed to this securitization by GACC, representing approximately 5.5% of the Initial Pool Balance.
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GACC’s Securitization Program. GACC has been engaged as an originator and seller/contributor of loans into CMBS securitizations for more than ten years.
GACC has been a seller of loans into securitization programs including (i) the “COMM” program, in which its affiliate Deutsche Mortgage & Asset Receiving Corporation (“DMARC”) is the depositor, (ii) the “CD” program in which DMARC was the depositor on a rotating basis with Citigroup Commercial Mortgage Securities Inc., and (iii) programs where third party entities, including affiliates of General Electric Capital Corporation, Capmark Finance Inc. (formerly GMAC Commercial Mortgage Corporation) and others, have acted as depositors.
Under the COMM name, GACC has had two primary securitization programs, the “COMM FL” program, into which large floating rate commercial mortgage loans were securitized, and the “COMM Conduit/Fusion” program, into which both fixed rate conduit loans and large loans were securitized.
GACC originates both fixed rate and floating rate commercial mortgage loans backed by a range of commercial real estate properties including office buildings, apartments, shopping malls, hotels, and industrial/warehouse properties. The total amount of loans securitized by GACC from October 1, 2010 through July 15, 2016 is approximately $47.499 billion.
GACC has purchased loans for securitization in the past and it may elect to purchase loans for securitization in the future. In the event GACC purchases loans for securitization, GACC will either reunderwrite the mortgage loans it purchases, or perform other procedures to ascertain the quality of such loans, which procedures will be subject to approval by credit risk management officers.
In coordination with Deutsche Bank Securities Inc. and other underwriters or initial purchasers, GACC works with NRSROs, other loan sellers, servicers and investors in structuring a securitization transaction to maximize the overall value and capital structure, taking into account numerous factors, including without limitation geographic and property type diversity and NRSRO criteria.
For the most part, GACC relies on independent rated third parties to service loans held pending sale or securitization. It maintains interim servicing agreements with large, institutional commercial mortgage loan servicers who are highly rated by the NRSROs. Periodic financial review and analysis, including monitoring of ratings, of each of the servicers with which GACC has servicing arrangements is conducted under the purview of loan underwriting personnel.
Pursuant to a Mortgage Loan Purchase Agreement, GACC will make certain representations and warranties, subject to certain exceptions set forth therein (and in Annex D-2 to this prospectus), to the Depositor and will covenant to provide certain documents regarding the Mortgage Loans it is selling to the Depositor (the “GACC Mortgage Loans”) and, in connection with certain breaches of such representations and warranties or certain defects with respect to such documents, which breaches or defects are determined to have a material adverse effect on the value of the subject GACC Mortgage Loans or such other standard as is described in the related Mortgage Loan Purchase Agreement, may have an obligation to repurchase such Mortgage Loan, cure the subject defect or breach, replace the subject Mortgage Loan with a Qualified Substitute Mortgage Loan or make a Loss of Value Payment, as the case may be. The Depositor will assign certain of its rights under each Mortgage Loan Purchase Agreement to the issuing entity. In addition, GACC has agreed to indemnify the Depositor, the Underwriters and certain of their respective affiliates with respect to certain liabilities arising in connection with the issuance and sale of the certificates. See “Pooling and Servicing Agreement—Assignment of the Mortgage Loans”.
Review of GACC Mortgage Loans.
Overview.GACC, in its capacity as the Sponsor of the GACC Mortgage Loans, has conducted a review of the GACC Mortgage Loans in connection with the securitization described in this prospectus. GACC determined the nature, extent and timing of the review and the level of assistance provided by any third parties. The review of the GACC Mortgage Loans was performed by a deal team comprised of real estate and securitization professionals who are employees of one or more of GACC’s affiliates (the “GACC Deal Team”). The review procedures described below were employed with respect to all of the
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GACC Mortgage Loans, except that certain review procedures only were relevant to the large loan disclosures in this prospectus, as further described below. No sampling procedures were used in the review process.
Data Tape.To prepare for securitization, members of the GACC Deal Team created a data tape (the “GACC Data Tape”) containing detailed loan-level and property-level information regarding each GACC Mortgage Loan. The GACC Data Tape was compiled from, among other sources, the related Mortgage Loan documents, appraisals, environmental reports, seismic reports, property condition reports, zoning reports, insurance policies, borrower supplied information (including, but not limited to, rent rolls, leases, operating statements and budgets) and information collected by the DB Originators during the underwriting process. After origination of each GACC Mortgage Loan, the GACC Deal Team updated the information in the GACC Data Tape with respect to the GACC Mortgage Loan based on updates provided by the related loan servicer relating to loan payment status and escrows, updated operating statements, rent rolls and leasing activity, and information otherwise brought to the attention of the GACC Deal Team. The GACC Data Tape was used by the GACC Deal Team to provide the numerical information regarding the GACC Mortgage Loans in this prospectus.
Data Comparison and Recalculation. The Depositor, on behalf of GACC, engaged a third party accounting firm to perform certain data comparison and recalculation procedures designed by GACC relating to information in this prospectus regarding the GACC Mortgage Loans. These procedures included:
| · | comparing the information in the GACC Data Tape against various source documents provided by GACC that are described above under “—Data Tape”; |
| · | comparing numerical information regarding the GACC Mortgage Loans and the related Mortgaged Properties disclosed in this prospectus against the GACC Data Tape; and |
| · | recalculating certain percentages, ratios and other formulae relating to the GACC Mortgage Loans disclosed in this prospectus. |
Legal Review. GACC engaged various law firms to conduct certain legal reviews of the GACC Mortgage Loans for disclosure in this prospectus. In anticipation of securitization of each GACC Mortgage Loan originated by GACC, origination counsel prepared a loan summary that sets forth salient loan terms and summarizes material deviations from GACC’s standard form loan documents. In addition, origination counsel for each GACC Mortgage Loan reviewed GACC’s representations and warranties set forth on Annex D-1 to this prospectus and, if applicable, identified exceptions to those representations and warranties.
Securitization counsel was also engaged to assist in the review of the GACC Mortgage Loans. Such assistance included, among other things, (i) a review of sections of the loan documents with respect to certain of the GACC Mortgage Loans that deviate materially from GACC’s standard form document, (ii) a review of the loan summaries referred to above relating to the GACC Mortgage Loans prepared by origination counsel, and (iii) a review of a due diligence questionnaire completed by the origination counsel. Securitization counsel also reviewed the property release provisions (other than the partial defeasance provisions), if any, for each GACC Mortgage Loan with multiple Mortgaged Properties or, to the extent identified by origination counsel, for each GACC Mortgage Loan with permitted outparcel releases or similar releases for compliance with the REMIC provisions of the Code.
GACC prepared, and reviewed with originating counsel and/or securitization counsel, the loan summaries for those of the GACC Mortgage Loans included in the 10 largest Mortgage Loans in the mortgage pool, and the abbreviated loan summaries for those of the GACC Mortgage Loans included in the next 10 largest Mortgage Loans in the mortgage pool, which loan summaries and abbreviated loan summaries are incorporated in Annex C.
Other Review Procedures.With respect to any pending litigation that existed at the origination of any GACC Mortgage Loan, GACC requested updates from the related borrower, origination counsel and/or
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borrower’s litigation counsel. In connection with the origination of each GACC Mortgage Loan, GACC, together with origination counsel, conducted a search with respect to each borrower under the related GACC Mortgage Loan to determine whether it filed for bankruptcy. If GACC became aware of a significant natural disaster in the vicinity of any Mortgaged Property securing a GACC Mortgage Loan, GACC obtained information on the status of the Mortgaged Property from the related borrower to confirm no material damage to the Mortgaged Property.
With respect to the GACC Mortgage Loans originated by a DB Originator, the GACC Deal Team also consulted with the applicable GACC Mortgage Loan origination team to confirm that the GACC Mortgage Loans were originated in compliance with the origination and underwriting criteria described below under “—DB Originator’s Underwriting Guidelines and Processes”, as well as to identify any material deviations from those origination and underwriting criteria. See “—Exceptions” below.
Findings and Conclusions. Based on the foregoing review procedures, GACC determined that the disclosure regarding the GACC Mortgage Loans in this prospectus is accurate in all material respects. GACC also determined that the GACC Mortgage Loans were originated (or acquired and reunderwritten) in accordance with GACC’s origination procedures and underwriting criteria, except as described below under “—Exceptions”.GACC attributes to itself all findings and conclusions resulting from the foregoing review procedures.
DB Originator’s Underwriting Guidelines and Processes.
General. GACC and Deutsche Bank AG, New York Branch are each an originator and are affiliated with each other and with Deutsche Bank Securities Inc., one of the underwriters, and the Depositor. GACC and Deutsche Bank AG, New York Branch are referred to as the “DB Originators” in this prospectus. Each DB Originator originates loans located in the United States that are secured by retail, multifamily, office, hotel and industrial/warehouse properties. All of the mortgage loans originated by a DB Originator generally are originated in accordance with the underwriting criteria described below. The Pillar Mortgage Loans, while originated by Pillar, were reunderwritten by GACC in accordance with the underwriting criteria described under this section, subject to any exceptions, if any identified under “—Exceptions”.However, each lending situation is unique, and the facts and circumstance surrounding the mortgage loan, such as the quality and location of the real estate, the sponsorship of the borrower and the tenancy of the property, will impact the extent to which the general guidelines below are applied to a specific loan. This underwriting criteria is general, and there is no assurance that every mortgage loan will conform in all respects with the guidelines.
Loan Analysis. In connection with the origination of mortgage loans, the applicable DB Originator conducts an extensive review of the related mortgaged property, including an analysis of the appraisal, environmental report, property operating statements, financial data, rent rolls, sales where applicable and related information or statements of occupancy rates provided by the borrower and, with respect to the mortgage loans secured by retail and office properties, certain major tenant leases and the tenant’s credit. Generally, borrowers are required to be single purpose entities which do not have a credit history; therefore, the financial strength and character of certain of the borrower’s key principals are examined prior to approval of the mortgage loan through a review of available financial statements and public records searches. A member of the applicable DB Originator underwriting or due diligence team, or a consultant or other designee, visits the mortgaged property for a site inspection to confirm the occupancy rates of the mortgaged property, and analyzes the mortgaged property’s sub-market and the utility of the mortgaged property within the sub-market. Unless otherwise specified in this prospectus, all financial, occupancy and other information contained in this prospectus is based on such information and there can be no assurance that such financial, occupancy and other information remains accurate.
Cash Flow Analysis. The applicable DB Originator reviews, among other things, historical operating statements, rent rolls, tenant leases and/or budgeted income and expense statements provided by the borrower and makes adjustments in order to determine a debt service coverage ratio, including taking into account the benefits of any governmental assistance programs. See “Description of the Mortgage Pool—Additional Information” in this prospectus.
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Debt Service Coverage Ratio and Loan-to-Value Ratio. The underwriting includes a calculation of the debt service coverage ratio and the loan-to-value ratio in connection with the origination of each loan.
The debt service coverage ratio will generally be calculated based on the ratio of the underwritten net cash flow from the property in question as determined by the applicable DB Originator and payments on the loan based on actual principal and/or interest due on the loan. However, underwritten net cash flow is often a highly subjective number based on a variety of assumptions regarding, and adjustments to, revenues and expenses with respect to the related real property collateral. For example, when calculating the debt service coverage ratio for a multifamily or commercial mortgage loan, annual net cash flow that was calculated based on assumptions regarding projected future rental income, expenses and/or occupancy may be utilized. We cannot assure you that the foregoing assumptions made with respect to any prospective multifamily or commercial mortgage loan will, in fact, be consistent with actual property performance. For specific discussions on the particular assumptions and adjustments, see “Description of the Mortgage Pool—Exceptions to Underwriting Guidelines”and Annex A-1 and Annex A-3 to this prospectus.The loan-to-value ratio, in general, is the ratio, expressed as a percentage, of the then-outstanding principal balance of the mortgage loan divided by the estimated value of the related property based on an appraisal obtained in accordance with the guidelines described under “—Appraisal and Loan-to-Value Ratio” below. In addition, with respect to certain mortgage loans, there may exist subordinate mortgage debt or mezzanine debt. Such mortgage loans will have a lower combined debt service coverage ratio and/or a higher combined loan-to-value ratio when such subordinate or mezzanine debt is taken into account. Additionally, certain mortgage loans may provide for interest only payments prior to maturity, or for an interest-only period during a portion of the term of the mortgage loan.
Appraisal and Loan-to-Value Ratio. For each Mortgaged Property, the applicable DB Originator obtains (or, in connection with GACC’s acquisition and reunderwriting of a mortgage loan, the related originator obtains and GACC relies upon) a current (within 6 months of the origination date of the mortgage loan) comprehensive narrative appraisal conforming to the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) and Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation. The appraisal is based on the “as-is” market value of the Mortgaged Property as of the date of value in its then-current condition, and in accordance with the Mortgaged Property’s highest and best use as determined within the appraisal. In certain cases, the applicable DB Originator may also obtain prospective or hypothetical values on an “as-stabilized”, “as complete” and/or “hypothetical as-is” basis, reflecting stipulated assumptions including, but not limited to, leasing, occupancy, income normalization, construction, renovation, restoration and/or repairs at the Mortgaged Property. The applicable DB Originator then determines the loan-to-value ratio of the mortgage loan for origination or, if applicable, in connection with its acquisition of the mortgage loan, in each case based on the value and effective value dates set forth in the appraisal. In connection with GACC’s acquisition and reunderwriting of a mortgage loan, GACC relies upon the appraisal(s) obtained by the related originator. Such appraisal(s) may reflect a value for a particular Mortgaged Property that varies from a GACC opinion of value. The information in this prospectus regarding such acquired mortgage loans, including, but not limited to, appraised values and loan-to-value ratios, reflects the information contained in such originator’s appraisal. We cannot assure you that the information set forth in this prospectus regarding the appraised values or loan-to-value ratios of such acquired mortgage loans would not be different if a DB Originator had originated such mortgage loans. See “Risk Factors—Risks Relating to the Mortgage Loans—Appraisals May Not Reflect Current or Future Market Value of Each Property” in this prospectus.
Evaluation of Borrower. The applicable DB Originator evaluates the borrower and its principals with respect to credit history and prior experience as an owner and operator of commercial real estate properties. The evaluation will generally include obtaining and reviewing a credit report or other reliable indication of the borrower’s financial capacity; obtaining and verifying credit references and/or business and trade references; and obtaining and reviewing certifications provided by the borrower as to prior real estate experience and current contingent liabilities. Finally, although the mortgage loans generally are non-recourse in nature, in the case of certain mortgage loans, the borrower and certain principals of the borrower may be required to assume legal responsibility for liabilities as a result of, among other things, fraud, misrepresentation, misappropriation or conversion of funds and breach of environmental or
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hazardous materials requirements. The applicable DB Originator evaluates the financial capacity of the borrower and such principals to meet any obligations that may arise with respect to such liabilities.
Environmental Site Assessment. Prior to origination, the applicable DB Originator either (i) obtains or updates (or, in connection with GACC’s acquisition and reunderwriting of a mortgage loan, the related originator obtains or updates and GACC relies upon) an environmental site assessment (“ESA”) for a Mortgaged Property prepared by a qualified environmental firm or (ii) obtains (or, in connection with GACC’s acquisition and reunderwriting of a mortgage loan, the related originator obtains and GACC relies upon) an environmental insurance policy for a Mortgaged Property. If an ESA is obtained or updated, the applicable DB Originator reviews the ESA to verify the absence of reported violations of applicable laws and regulations relating to environmental protection and hazardous materials or other material adverse environmental condition or circumstance. In cases in which the ESA identifies conditions that would require cleanup, remedial action or any other response estimated to cost in excess of 5% of the outstanding principal balance of the mortgage loan, the applicable DB Originator either (i) determines that another party with sufficient assets is responsible for taking remedial actions directed by an applicable regulatory authority or (ii) requires the borrower to do one of the following: (A) carry out satisfactory remediation activities or other responses prior to the origination of the mortgage loan, (B) establish an operations and maintenance plan, (C) place sufficient funds in escrow or establish a letter of credit at the time of origination of the mortgage loan to complete such remediation within a specified period of time, (D) obtain an environmental insurance policy for the Mortgaged Property, (E) provide or obtain an indemnity agreement or a guaranty with respect to such condition or circumstance, or (F) receive appropriate assurances that significant remediation activities or other significant responses are not necessary or required.
Certain of the mortgage loans may also have environmental insurance policies. See “Description of the Mortgage Pool—Insurance Considerations”.
Physical Assessment Report. Prior to origination, the applicable DB Originator obtains (or, in connection with GACC’s acquisition and reunderwriting of a mortgage loan, the related originator obtains and GACC relies upon) a physical assessment report (“PAR”) for each Mortgaged Property prepared by a qualified structural engineering firm. The applicable DB Originator reviews the PAR to verify that the property is reported to be in satisfactory physical condition, and to determine the anticipated costs of necessary repair, replacement and major maintenance or capital expenditure needs over the term of the mortgage loan. In cases in which the PAR identifies material repairs or replacements needed immediately, the applicable DB Originator generally requires the borrower to carry out such repairs or replacements prior to the origination of the mortgage loan, or, in many cases, requires the borrower to place sufficient funds in escrow at the time of origination of the mortgage loan to complete such repairs or replacements within not more than twelve months. In certain instances, the applicable DB Originator may waive such escrows but require the related borrower to complete such repairs within a stated period of time in the related mortgage loan documents.
Title Insurance Policy. The borrower is required to provide, and the applicable DB Originator reviews, a title insurance policy for each Mortgaged Property. The title insurance policy must meet the following requirements: (a) the policy must be written by a title insurer licensed to do business in the jurisdiction where the Mortgaged Property is located; (b) the policy must be in an amount equal to the original principal balance of the mortgage loan; (c) the protection and benefits must run to the mortgagee and its successors and assigns; (d) the policy should be written on a standard policy form of the American Land Title Association or equivalent policy promulgated in the jurisdiction where the Mortgaged Property is located; and (e) the legal description of the Mortgaged Property in the title policy must conform to that shown on the survey of the Mortgaged Property, where a survey has been required.
Property Insurance. The borrower is required to provide, and the applicable DB Originator reviews, certificates of required insurance with respect to the Mortgaged Property. Such insurance may include: (1) commercial general liability insurance for bodily injury or death and property damage; (2) a fire and extended perils insurance policy providing “special” form coverage including coverage against loss or damage by fire, lightning, explosion, smoke, windstorm and hail, riot or strike and civil commotion; (3) if applicable, boiler and machinery coverage; (4) if the Mortgaged Property is located in a flood hazard
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area, flood insurance; and (5) such other coverage as the applicable DB Originator may require based on the specific characteristics of the Mortgaged Property.
Seismic Report. A seismic report is required for all properties located in seismic zones 3 or 4.
Zoning and Building Code Compliance. In connection with the origination of a multifamily or commercial mortgage loan, the originator will examine whether the use and occupancy of the related real property collateral is in material compliance with zoning, land-use, building rules, regulations and orders then applicable to that property. Evidence of this compliance may be in the form of one or more of the following: a zoning report, legal opinions, surveys, recorded documents, temporary or permanent certificates of occupancy, letters from government officials or agencies, title insurance endorsements, engineering or consulting reports and/or representations by the related borrower.
Escrow Requirements. The applicable DB Originator may require borrowers to fund various escrows for taxes, insurance, capital expenses and replacement reserves, which reserves in many instances will be limited to certain capped amounts. In addition, the applicable DB Originator may identify certain risks that warrant additional escrows or holdbacks for items such as leasing-related matters, deferred maintenance, environmental remediation or unfunded obligations, which escrows or holdbacks would be released upon satisfaction of the applicable conditions. 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. Escrows are evaluated on a case-by-case basis and are not required for all commercial mortgage loans originated by a DB Originator. The typical required escrows for mortgage loans originated by a DB Originator are as follows:
| · | Taxes – An initial deposit and monthly escrow deposits equal to approximately 1/12th of the estimated annual property taxes (based on the most recent property assessment and the current millage rate) are required to provide the applicable DB Originator with sufficient funds to satisfy all taxes and assessments. The applicable DB Originator may waive this escrow requirement in certain circumstances, including, but not limited to: (i) the Mortgaged Property is a single tenant property (or substantially leased to single tenant) and the tenant pays taxes directly (or the applicable DB Originator may waive the escrow for a portion of the Mortgaged Property which is leased to a tenant that pays taxes for its portion of the Mortgaged Property directly); or (ii) any Escrow/Reserve Mitigating Circumstances. |
| · | Insurance – An initial deposit and monthly escrow deposits equal to approximately 1/12th of the estimated annual property insurance premium are required to provide the applicable DB Originator with sufficient funds to pay all insurance premiums. The applicable DB Originator may waive this escrow requirement in certain circumstances, including, but not limited to: (i) the borrower maintains a blanket insurance policy; (ii) the Mortgaged Property is a single tenant property (or substantially leased to single tenant) and the tenant maintains the property insurance or self-insures (or may waive the escrow for a portion of the Mortgaged Property which is leased to a tenant that maintains property insurance for its portion of the Mortgaged Property or self-insures); or (iii) any Escrow/Reserve Mitigating Circumstances. |
| · | 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. Annual replacement reserves are generally underwritten to the suggested replacement reserve amount from an independent, third-party property condition or engineering report, or to certain minimum requirements by property type. The applicable DB Originator may waive this escrow requirement in certain circumstances, including, but not limited to: (i) the Mortgaged Property is a single tenant property (or substantially leased to single tenant) and the tenant repairs and maintains the Mortgaged Property (or may waive the escrow for a portion of the Mortgaged Property which is leased to a tenant that repairs and maintains its portion of the Mortgaged Property); or (ii) any Escrow/Reserve Mitigating Circumstances. |
| · | Tenant Improvement/Lease Commissions – A tenant improvement/leasing commission reserve may be required to be funded either at loan origination and/or during the related mortgage loan |
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| term and/or springing upon certain tenant events to cover certain anticipated leasing commissions, free rent periods or tenant improvement costs which might be associated with re-leasing the space occupied by such tenants. The applicable DB Originator may waive this escrow requirement in certain circumstances, including, but not limited to: (i) the Mortgaged Property is a single tenant property (or substantially leased to single tenant), with a lease that extends beyond the loan term; or (ii) any Escrow/Reserve Mitigating Circumstances. |
| · | Deferred Maintenance – A deferred maintenance reserve may be required to be funded at loan origination in an amount equal to 100% to 125% of the estimated cost of material immediate repairs or replacements identified in the property condition or engineering report. The applicable DB Originator may waive this escrow requirement in certain circumstances, including, but not limited to: (i) the sponsor of the borrower delivers a guarantee to complete the immediate repairs; (ii) the deferred maintenance items do not materially impact the function, performance or value of the property; (iii) the deferred maintenance cost does not exceed $50,000; (iv) the Mortgaged Property is a single tenant property (or substantially leased to single tenant), and the tenant is responsible for the repairs; or (v) any Escrow/Reserve Mitigating Circumstances. |
| · | Environmental Remediation – An environmental remediation reserve may be required at loan origination in an amount equal to 100% to 125% of the estimated remediation cost identified in the environmental report. The applicable DB Originator may waive this escrow requirement in certain circumstances, including, but not limited to: (i) the sponsor of the borrower delivers a guarantee agreeing to complete the remediation; (ii) environmental insurance is in place or obtained; or (iii) any Escrow/Reserve Mitigating Circumstances. |
The applicable DB Originator may determine that establishing any of the foregoing escrows or reserves is not warranted in one or more of the following instances (collectively, the “Escrow/Reserve Mitigating Circumstances”): (i) the amounts involved arede minimis, (ii) the applicable DB Originator’s evaluation of the ability of the Mortgaged Property, the borrower or a holder of direct or indirect ownership interests in the borrower to bear the subject expense or cost absent creation of an escrow or reserve, (iii) based on the Mortgaged Property maintaining a specified debt service coverage ratio, (iv) the applicable DB Originator has structured springing escrows that arise for identified risks, (v) the applicable DB Originator has an alternative to a cash escrow or reserve, such as a letter of credit or a guarantee from the borrower or an affiliate of the borrower; (vi) the applicable DB Originator believes there are credit positive characteristics of the borrower, the sponsor of the borrower and/or the Mortgaged Property that would offset the need for the escrow or reserve; or (vii) the reserves are being collected and held by a third party, such as a management company, a franchisor, or an association.
Notwithstanding the foregoing discussion under this caption “—DB Originator’s Underwriting Guidelines and Processes”, one or more of the mortgage loans contributed to this securitization by GACC may vary from, or may not comply with, the applicable DB Originator’s underwriting guidelines described above. In addition, in the case of one or more of the mortgage loans contributed to this securitization by GACC, the applicable DB Originator may not have strictly applied these underwriting guidelines as the result of a case-by-case permitted exception based upon other compensating or mitigating factors.
Exceptions. The GACC Mortgage Loans were originated in accordance with the underwriting standards set forth above.
Compliance with Rule 15Ga-1 under the Exchange Act. GACC most recently filed a Form ABS-15G with the Securities and Exchange Commission (the “SEC”) pursuant to Rule 15Ga-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on February 11, 2016. GACC’s “Central Index Key” number is 0001541294. With respect to the period from and including April 1, 2013 to and including March 31, 2016, GACC did not have any activity to report as required by Rule 15Ga-1 under the Exchange Act with respect to repurchase or replacement requests in connection with breaches of representations and warranties made by it as a sponsor of commercial mortgage securitizations.
Retained Interests in This Securitization. Neither GACC nor any of its affiliates will retain any certificates issued by the issuing entity or any other economic interest in this securitization. However,
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GACC and/or its affiliates may own in the future certain classes of certificates. Any such party will have the right to dispose of any such certificates at any time.
Citigroup Global Markets Realty Corp.
General.Citigroup Global Markets Realty Corp. (“CGMRC”) is a sponsor and a mortgage loan seller in this securitization transaction (in such capacity, “Sponsor” or “Mortgage Loan Seller”). Except with respect to the Vertex Pharmaceuticals HQ Whole Loan, which was co-originated by CGMRC and Morgan Stanley Bank, N.A., CGMRC originated all of the Mortgage Loans it is selling to the Depositor (the “CGMRC Mortgage Loans”) in this transaction. CGMRC is a New York corporation organized in 1979 and is a wholly-owned subsidiary of Citicorp Banking Corporation, a Delaware corporation, which is in turn a wholly-owned subsidiary of Citigroup Inc., a Delaware corporation. CGMRC maintains its principal office at 388 Greenwich Street, New York, New York 10013, Attention: Mortgage Finance Group. Its facsimile number is (212) 723-8604. CGMRC is an affiliate of Citigroup Global Markets Inc. (one of the underwriters). CGMRC makes, and purchases from lenders, commercial and multifamily mortgage loans primarily for the purpose of securitizing them in CMBS transactions. CGMRC also purchases and finances residential mortgage loans, consumer receivables and other financial assets.
Neither CGMRC nor any of its affiliates will insure or guarantee distributions on the certificates. The Certificateholders will have no rights or remedies against CGMRC for any losses or other claims in connection with the certificates or the Mortgage Loans except in respect of the repurchase and substitution obligations for material document defects or material breaches of the representations and warranties made by CGMRC in the related Mortgage Loan Purchase Agreement as described under “Description of the Mortgage Loan Purchase Agreements—General.”
CGMRC’s Commercial Mortgage Securitization Program. CGMRC, directly or through correspondents or affiliates, originates multifamily and commercial mortgage loans throughout the United States and abroad. CGMRC has been engaged in the origination of multifamily and commercial mortgage loans for securitization since 1996 and has been involved in the securitization of residential mortgage loans since 1987. The multifamily and commercial mortgage loans originated by CGMRC include both fixed rate loans and floating rate loans. Most of the multifamily and commercial mortgage loans included by CGMRC in commercial mortgage securitizations sponsored by CGMRC have been originated, directly or through correspondents, by CGMRC or an affiliate. CGMRC securitized approximately $1.25 billion, $1.49 billion, $2.60 billion, $4.27 billion, $7.02 billion, $6.35 billion, $1.08 billion, $0, $517 million, $1.25 billion, $1.73 billion, $4.75 billion, $5.23 billion and $6.19 billion of multifamily and commercial mortgage loans in public and private offerings during the calendar years 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014 and 2015, respectively.
In addition, in the normal course of its business, CGMRC may also acquire multifamily and commercial mortgage loans from various third-party originators. These mortgage loans may have been originated using underwriting guidelines not established by CGMRC.
CGMRC has also sponsored, in private placement transactions, multifamily and commercial mortgage loans which it either originated or acquired from third-party originators that underwrote them to their own underwriting criteria.
In connection with the commercial mortgage securitization transactions in which it participates, CGMRC generally transfers the subject mortgage assets to a depositor, who then transfers those mortgage assets to the issuing entity for the related securitization. In return for the transfer of the subject mortgage assets by the depositor to the issuing entity, the issuing entity issues commercial mortgage pass-through certificates that are in whole or in part backed by, and supported by the cash flows generated by, those mortgage assets.
CGMRC generally works with rating agencies, unaffiliated mortgage loan sellers, servicers, affiliates and underwriters in structuring a securitization transaction. CGMRC will generally act as a sponsor, originator and/or mortgage loan seller in the commercial mortgage securitization transactions in which it participates. In such transactions there may be a co-sponsor and/or other mortgage loan sellers and
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originators. Generally, CGMRC and/or the related depositor contract with other entities to service the multifamily and commercial mortgage loans following their transfer into a trust fund in exchange for a series of certificates.
Review of CGMRC Mortgage Loans.
Overview. In connection with the preparation of this prospectus, CGMRC conducted a review of the Mortgage Loans that it is selling to the Depositor. The review was conducted as set forth below and was conducted with respect to each of the CGMRC Mortgage Loans. No sampling procedures were used in the review process.
Database. First, CGMRC created a database of information (the “CGMRC Securitization Database”) obtained in connection with the origination of the CGMRC Mortgage Loans, including:
| · | certain information from the CGMRC Mortgage Loan documents; |
| · | certain information from the rent rolls and operating statements for, and certain leases relating to, the related Mortgaged Properties (in each case to the extent applicable); |
| · | insurance information for the related Mortgaged Properties; |
| · | information from third party reports such as the appraisals, environmental and property condition reports, seismic reports, zoning reports and other zoning information; |
| · | bankruptcy searches with respect to the related borrowers; and |
| · | certain information and other search results obtained by the CGMRC deal team for each of the CGMRC Mortgage Loans during the underwriting process. |
CGMRC also included in the CGMRC Securitization Database certain updates to such information received by the CGMRC securitization team after origination, such as information from the interim servicer regarding loan payment status and current escrows, updated rent rolls and leasing activity information provided pursuant to the Mortgage Loan documents, and information otherwise brought to the attention of the CGMRC securitization team. Such updates were not intended to be, and do not serve as, a re-underwriting of any Mortgage Loan.
Using the information in the CGMRC Securitization Database, CGMRC created a Microsoft Excel file (the “CGMRC Data File”) and provided that file to the Depositor for the inclusion in this prospectus (particularly in Annexes A-1, A-2 and A-3 to this prospectus) of information regarding the CGMRC Mortgage Loans.
Data Comparison and Recalculation. CGMRC (or the Depositor on its behalf) engaged a third-party accounting firm to perform certain data comparison and recalculation procedures designed by CGMRC, relating to information in this prospectus regarding the CGMRC Mortgage Loans. These procedures included:
| · | comparing the information in the CGMRC Data File against various source documents provided by CGMRC that are described above under “—Database” above; |
| · | comparing numerical information regarding the CGMRC Mortgage Loans and the related Mortgaged Properties disclosed in this prospectus against the CGMRC Data File; and |
| · | recalculating certain percentages, ratios and other formulae relating to the CGMRC Mortgage Loans disclosed in this prospectus. |
Legal Review. CGMRC also reviewed and responded to a Due Diligence Questionnaire (as defined below) relating to the CGMRC Mortgage Loans, which questionnaire was prepared by the Depositor’s
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legal counsel for use in eliciting information relating to the CGMRC Mortgage Loans and including such information in this prospectus to the extent material.
Although the Due Diligence Questionnaire may be revised from time to time, it typically contains various questions regarding the CGMRC Mortgage Loans, the related Mortgaged Properties, the related borrowers, sponsors and tenants, and any related additional debt. For example, the due diligence questionnaire (a “Due Diligence Questionnaire”) may seek to elicit, among other things, the following information:
| · | whether any Mortgage Loans were originated by third party originators and the names of such originators, and whether such Mortgage Loans were underwritten or re-underwritten in accordance with CGMRC’s (or the applicable mortgage loan seller’s) criteria; |
| · | whether any Mortgage Loans are not first liens, or have a loan-to-value ratio greater than 80%; |
| · | whether any Mortgage Loans are 30 days or more delinquent with respect to any monthly debt service payment as of the cut-off date or have been 30 days or more delinquent at any time during the 12-month period immediately preceding the cut-off date; |
| · | a description of any material issues with respect to any of the Mortgage Loans; |
| · | whether any Mortgage Loans permit, or have existing, mezzanine debt, additional debt secured by the related Mortgaged Properties or other material debt, and the material terms and conditions for such debt; |
| · | whether any Mortgaged Properties have additional debt that is included in another securitization transaction and information related to such other securitization transaction; |
| · | whether intercreditor agreements, subordination and standstill agreements or similar agreements are in place with respect to secured debt, mezzanine debt or additional debt and the terms of such agreements; |
| · | a list of any Mortgage Loans that are interest-only for their entire term or a portion of their term; |
| · | a list of Mortgage Loans that permit prepayment or defeasance (in whole or in part), or provide for yield maintenance, and the types of prepayment lock-out provisions and prepayment charges that apply; |
| · | whether any Mortgage Loans permit the release of all or a portion of the related Mortgaged Properties, and the material terms of any partial release, substitution and condemnation/casualty provisions; |
| · | a list of Mortgage Loans that are cross-collateralized or secured by multiple properties, or that have related borrowers with other Mortgage Loans in the subject securitization; |
| · | whether any Mortgage Loans have a right of first refusal or right of first offer or similar options, in favor of a tenant or any other party; |
| · | whether there are post-close escrows or earn-out reserves that could be used to pay down the Mortgage Loan, or whether there are escrows or holdbacks that have not been fully funded; |
| · | information regarding lockbox arrangements, grace periods, interest accrual and amortization provisions, non-recourse carveouts, and any other material provisions with respect to the Mortgage Loan; |
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| · | whether the borrower or sponsor of any related borrower has been subject to bankruptcy proceedings, or has a past or present material criminal charge or record; |
| · | whether any borrower is not a special purpose entity; |
| · | whether any borrowers or sponsors of related borrowers have been subject to litigation or similar proceedings and the material terms thereof; |
| · | whether any borrower under a Mortgage Loan is affiliated with a borrower under another Mortgage Loan to be included in the issuing entity; |
| · | whether any of the Mortgage Loans is a leasehold mortgage, the terms of the related ground lease, and whether the term of the related ground lease extends at least 20 years beyond the stated loan maturity; |
| · | a list of any related Mortgaged Properties for which a single tenant occupies over 20% of such property, and whether there are any significant lease rollovers at a particular Mortgaged Property; |
| · | a list of any significant tenant concentrations or material tenant issues, e.g., dark tenants, subsidized tenants, government or student tenants, or Section 8 tenants, etc.; |
| · | a description of any material leasing issues at the related Mortgaged Properties; |
| · | whether any related Mortgaged Properties are subject to condemnation proceedings or litigation; |
| · | a list of related Mortgaged Properties for which a Phase I environmental site assessment has not been completed, or for which a Phase II was performed, and whether any environmental site assessment reveals any material adverse environmental condition or circumstance at any related Mortgaged Property except for those which will be remediated by the cut-off date; |
| · | whether there is any terrorism, earthquake, tornado, flood, fire or hurricane damage with respect to any of the related Mortgaged Properties, or whether there are any zoning issues at the Mortgaged Properties; |
| · | a list of Mortgaged Properties for which an engineering inspection has not been completed and whether any property inspection revealed material issues; and/or |
| · | general information regarding property type, condition, use, plans for renovation, etc. |
CGMRC also provided to origination counsel a set of mortgage loan representations and warranties substantially similar to those attached as Annex D-1 to this prospectus and requested that origination counsel identify exceptions to such representations and warranties. CGMRC compiled and reviewed the draft exceptions received from origination counsel, engaged separate counsel to review the exceptions, revised the exceptions and provided them to the Depositor for inclusion on Annex D-3 to this prospectus. In addition, for each CGMRC Mortgage Loan originated by CGMRC or its affiliates, CGMRC prepared and delivered to its securitization counsel for review an asset summary, which summary includes important loan terms and certain property level information obtained during the origination process. The loan terms included in each asset summary may include, without limitation, the principal amount, the interest rate, the loan term, the interest calculation method, the due date, any applicable interest-only period, any applicable amortization period, a summary of any prepayment and/or defeasance provisions, a summary of any lockbox and/or cash management provisions, a summary of any release provisions, and a summary of any requirement for the related borrower to fund up-front and/or on-going reserves. The property level information obtained during the origination process included in each asset summary may include, without limitation, a description of the related Mortgaged Property (including property type, ownership structure, use, location, size, renovations, age and physical attributes), information relating to
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the commercial real estate market in which the Mortgaged Property is located, information relating to the related borrower and sponsor of the related borrower, an underwriter’s assessment of strengths and risks of the loan transaction, tenant analysis, and summaries of third party reports such as appraisal, environmental and property condition reports.
For each CGMRC Mortgage Loan, if any, purchased by CGMRC or its affiliates from a third-party originator of such CGMRC Mortgage Loan, CGMRC reviewed the purchase agreement and related representations and warranties, and exceptions to those representations and warranties, made by the seller of such CGMRC Mortgage Loan to CGMRC or its affiliates, reviewed certain provisions of the related Mortgage Loan documents and third party reports concerning the related Mortgaged Property provided by the originator of such CGMRC Mortgage Loan, prepared exceptions to the representations and warranties in the Mortgage Loan Purchase Agreement based upon such review, and provided them to the Depositor for inclusion on Annex D-3 to this prospectus. With respect to any CGMRC Mortgage Loan that is purchased by CGMRC or its affiliates from a third party originator, the representations and warranties made by the third party originator in the related purchase agreement between CGMRC or its affiliates, on the one hand, and the third party originator, on the other hand, are solely for the benefit of CGMRC or its affiliates. The rights, if any, that CGMRC or its affiliates may have under such purchase agreement upon a breach of such representations and warranties made by the third party originator will not be assigned to the Trustee, and the Certificateholders and the Trustee will not have any recourse against the third party originator in connection with any breach of the representations and warranties made by such third party originator. As described under “Description of the Mortgage Loan Purchase Agreements—General”, the substitution or repurchase obligation of CGMRC, as Mortgage Loan Seller, with respect to the CGMRC Mortgage Loans under the related Mortgage Loan Purchase Agreement constitutes the sole remedy available to the Certificateholders and the Trustee for any uncured material breach of any CGMRC’s representations and warranties regarding the CGMRC Mortgage Loans, including any CGMRC Mortgage Loan that is purchased by CGMRC or its affiliates from a third party originator.
In addition, with respect to each CGMRC Mortgage Loan, CGMRC reviewed, and in certain cases requested that its counsel review, certain Mortgage Loan document provisions as necessary for disclosure of such provisions in this prospectus, such as property release provisions and other provisions specifically disclosed in this prospectus.
Certain Updates. Furthermore, CGMRC requested the borrowers under the CGMRC Mortgage Loans (or the borrowers’ respective counsel) for updates on any significant pending litigation that existed at origination. Moreover, if CGMRC became aware of a significant natural disaster in the vicinity of a Mortgaged Property relating to a CGMRC Mortgage Loan, CGMRC requested information on the property status from the related borrower in order to confirm whether any material damage to the property had occurred.
Large Loan Summaries. Finally, CGMRC prepared, and reviewed with origination counsel and/or securitization counsel, the loan summaries for those of the CGMRC Mortgage Loans included in the 10 largest Mortgage Loans (considering any group of Crossed Mortgage Loans as a single Mortgage Loan) in the Mortgage Pool, and the abbreviated loan summaries for those of the CGMRC Mortgage Loans included in the next 10 largest Mortgage Loans (considering any group of Crossed Mortgage Loans as a single Mortgage Loan) in the Mortgage Pool, which loan summaries and abbreviated loan summaries are incorporated in “Description of Top Twenty Mortgage Loans and Additional Mortgage Loan Information” in Annex A-3 to this prospectus.
Findings and Conclusions. Based on the foregoing review procedures, CGMRC found and concluded that the disclosure regarding the CGMRC Mortgage Loans in this prospectus is accurate in all material respects. CGMRC also found and concluded that the CGMRC Mortgage Loans were originated in accordance with CGMRC’s origination procedures and underwriting criteria, except for any material deviations described under “—Exceptions” below. CGMRC attributes to itself all findings and conclusions resulting from the foregoing review procedures.
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CGMRC’s Underwriting Guidelines and Processes.
General. CGMRC’s commercial mortgage loans are primarily originated in accordance with the procedures and underwriting criteria described below. However, variations from the procedures and criteria described below 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 CGMRC. Therefore, this general description of CGMRC’s origination procedures and underwriting criteria is not intended as a representation that every commercial mortgage loan originated by it or on its behalf complies entirely with all criteria set forth below.
Process. The credit underwriting process for each CGMRC loan is performed by a deal team comprised of real estate professionals which typically includes an originator, an underwriter, a commercial closer and a third party due diligence provider operating under the review of CGMRC. This team conducts a thorough review of the related mortgaged property, which in most cases includes an examination of the following information, to the extent both applicable and available: 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 condition/engineering (see “—Escrow Requirements”, “—Title Insurance Policy”, “—Property Insurance”, “—Third Party Reports—Appraisal”, “—Third Party Reports—Environmental Report” and “—Third Party Reports—Property Condition Report” below). In some cases (such as a property having a limited operating history or having been recently acquired by its current owner), historical operating statements may not be available. Rent rolls would not be examined for certain property types, such as hospitality properties or single tenant properties, and tenant leases would not be examined for certain property types, such as hospitality, self storage, multifamily and manufactured housing community properties.
A member of the CGMRC deal team or one of its agents performs an inspection of the property as well as a review of the surrounding market environment, including demand generators and competing properties (if any), 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 CGMRC deal team or one of its agents also performs a detailed review of the financial status, credit history, credit references and background of the borrower and certain key principals using 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 CGMRC’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.
Credit Approval. All commercial mortgage loans must be presented to one or more credit committees that include 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 Ratio and Loan-to-Value Ratio Requirements. CGMRC’s underwriting standards generally require a minimum debt service coverage ratio of 1.20x and a maximum loan-to-value ratio of 80%. However, these thresholds are guidelines and exceptions are permitted under the guidelines on the merits of each individual loan, such as reserves, letters of credit and/or guarantees and
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CGMRC’s assessment of the property’s future prospects. Property and loan information is not updated for securitization unless CGMRC determines that information in its possession has become stale.
Certain properties may also be encumbered by subordinate debt secured by such 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 debt service coverage ratio and loan-to-value ratio parameters.
Amortization Requirements. While CGMRC’s underwriting guidelines generally permit a maximum amortization period of 30 years, certain loans may provide for interest-only payments through maturity or for a portion of the loan term. If the loan entails only a partial interest-only period, the monthly debt service, annual debt service and debt service coverage ratio set forth in this prospectus and Annex A-1 to this prospectus reflect a calculation on the future (larger) amortizing loan payment. See “Description of the Mortgage Pool” in this prospectus.
Escrow Requirements. CGMRC may require borrowers to fund escrows for taxes, insurance, capital expenditures and replacement reserves. In addition, CGMRC may identify certain risks that warrant additional escrows or holdbacks for items to be released to the borrower upon the satisfaction of certain conditions. Such escrows or holdbacks may cover tenant improvements/leasing commissions, deferred maintenance, environmental remediation or unfunded obligations, among other things. 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 CGMRC commercial mortgage loans.
Generally, CGMRC requires escrows as follows:
| · | Taxes—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 typically required to satisfy all taxes and assessments, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if there is an institutional sponsor or the sponsor is a high net worth individual or (ii) if and to the extent that a single or major tenant (which may be a ground tenant) at the related mortgaged property is required to pay taxes directly or reimburse the landlord for the real estate taxes paid. |
| · | Insurance—An initial deposit and monthly escrow deposits equal to 1/12th of the annual property insurance premium are typically required to pay all insurance premiums, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if the related borrower maintains a blanket insurance policy, (ii) if and to the extent that a single or major tenant (which may be a ground tenant) at the related mortgaged property is obligated to maintain the insurance or is permitted to self-insure, or (iii) if and to the extent that another third party unrelated to the borrower (such as a condominium board, if applicable) is obligated to maintain the insurance. |
| · | Replacement Reserves—Replacement reserves are generally calculated in accordance with the expected useful life of the components of the mortgaged property during the term of the mortgage loan. Annual replacement reserves are generally underwritten to the suggested replacement reserve amount from an independent, third-party property condition or engineering report, or to certain minimum requirements depending on the property type, except that such escrows are not required in certain circumstances, including, but not limited to, if and to the extent that a single or major tenant (which may be a ground tenant) at the related mortgaged property is responsible for all repairs and maintenance, including those required with respect to the roof and structure of the improvements. |
| · | Tenant Improvement / Leasing Commissions—In the case of retail, office and industrial properties, a tenant improvement / leasing commission reserve may be required to be funded |
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| either at loan origination and/or during the term of the mortgage loan to cover anticipated leasing commissions or tenant improvement costs that might be associated with re-leasing certain space involving major tenants, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if the tenant’s lease extends beyond the loan term or (ii) if the rent for the space in question is considered below market. |
| · | Deferred Maintenance—A deferred maintenance reserve may be required to be funded at loan origination in an amount equal to 125% of the estimated cost of material immediate repairs or replacements identified in the property condition report, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if the sponsor of the borrower delivers a guarantee to complete the immediate repairs in a specified amount of time, (ii) if the deferred maintenance amount does not materially impact the related mortgaged property’s function, performance or value or (iii) if a single or major tenant (which may be a ground tenant) at the related mortgaged property is responsible for the repairs. |
| · | Environmental Remediation—An environmental remediation reserve may be required to be funded at loan origination in an amount equal to 100% to 125% of the estimated remediation cost identified in the environmental report, except that such escrows are not required in certain circumstances, including, but not limited to, (i) if the sponsor of the borrower delivers a guarantee wherein it agrees to take responsibility and pay for the identified environmental issues, (ii) if environmental insurance is obtained or already in place or (iii) if a third party unrelated to the borrower is identified as the responsible party. |
For a description of the escrows collected with respect to the CGMRC Mortgage Loans, please see Annex A-1 to this prospectus.
Title Insurance Policy. The borrower is required to provide, and CGMRC or its counsel typically will review, a title insurance policy for each property. The provisions of the title insurance policy are required to comply with the mortgage loan representation and warranty set forth in paragraph (6) on Annex D-1 to this prospectus without any exceptions that CGMRC deems material.
Property Insurance. CGMRC requires the borrower to provide, or authorizes the borrower to rely on a tenant or other third party to obtain, insurance policies meeting the requirements set forth in the mortgage loan representations and warranties in paragraphs (16) and (29) on Annex D-1 to this prospectus without any exceptions that CGMRC deems material (other than with respect to deductibles and allowing a tenant to self-insure).
Third Party Reports. In addition to or as part of applicable origination guidelines or reviews described above, in the course of originating the CGMRC Mortgage Loans, CGMRC generally considered the results of third party reports as described below. In many instances, however, one or more provisions of the guidelines were waived or modified in light of the circumstances of the relevant loan or property.
Appraisal
CGMRC obtains an appraisal meeting the requirements described in the mortgage loan representation and warranty set forth in paragraph (41) on Annex D-1 to this prospectus without any exceptions that CGMRC deems material. In addition, the appraisal (or a separate letter) includes a statement by the appraiser that the guidelines in Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended, were followed in preparing the appraisal.
Environmental Report
CGMRC 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 CGMRC. CGMRC or its designated agent typically reviews the Phase I site assessment to verify the presence or absence of potential adverse environmental conditions. In cases in which the Phase I site assessment identifies any such conditions, CGMRC generally requires that the condition be addressed in a manner
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that complies with the mortgage loan representation and warranty set forth in paragraph (40) on Annex D-1 to this prospectus without any exceptions that CGMRC deems material.
Property Condition Report
CGMRC generally obtains a current property condition report (a “PCR”) for each mortgaged property prepared by a structural engineering firm approved by CGMRC. CGMRC 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, CGMRC 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. See “—Escrow Requirements” above.
Servicing. Interim servicing for all CGMRC loans prior to securitization is typically performed by a nationally recognized rated third party interim servicer. In addition, primary servicing is occasionally retained by certain qualified mortgage brokerage firms under established sub-servicing agreements with CGMRC, which firms may continue primary servicing certain loans following the securitization closing date. Otherwise, servicing responsibilities are transferred from the interim servicer to the master servicer of the securitization trust (and a primary servicer when applicable) at closing of the securitization. From time to time, the interim servicer may retain primary servicing.
Co-Originations. From time to time, CGMRC originates mortgage loans or whole loans together with other financial institutions. The resulting mortgage loans or whole loans are evidenced by two or more promissory notes, at least one of which will reflect CGMRC as the payee. CGMRC has in the past and may in the future deposit such promissory notes for which it is named as payee with one or more securitization trusts, while its co-originators have in the past and may in the future deposit such promissory notes for which they are named payee into other securitization trusts. The Vertex Pharmaceuticals HQ Whole Loan was co-originated with Morgan Stanley Bank, N.A. and in accordance with the underwriting guidelines described above.
Exceptions. The CGMRC Mortgage Loans were originated in accordance with the underwriting standards set forth above.
Compliance with Rule 15Ga-1 under the Exchange Act. CGMRC most recently filed a Form ABS-15G pursuant to Rule 15Ga-1 under the Exchange Act on February 16, 2016. CGMRC’s Central Index Key is 0001541001. With respect to the period from and including July 1, 2013 to and including June 30, 2016, CGMRC does not have any activity to report as required by Rule 15Ga-1 under the Exchange Act with respect to repurchase or replacement requests in connection with breaches of representations and warranties made by it as a sponsor of commercial mortgage securitizations.
Retained Interests in This Securitization. Neither CGMRC nor any of its affiliates will retain any certificates issued by the Issuing Entity or any other economic interest in this securitization as of the Closing Date. However, CGMRC or its affiliates may own in the future certain classes of certificates. Any such party will have the right to dispose of any such certificates at any time.
The Depositor
The Depositor is Deutsche Mortgage & Asset Receiving Corporation (the “Depositor”). The Depositor is a special purpose corporation incorporated in the State of Delaware on March 22, 1996, for the purpose of engaging in the business, among other things, of acquiring and depositing mortgage loans in trust in exchange for certificates evidencing interest in such trusts and selling or otherwise distributing such certificates. The principal executive offices of the Depositor are located at 60 Wall Street, New York, New York 10005. The telephone number is (212) 250-2500. The Depositor’s capitalization is nominal. All of the shares of capital stock of the Depositor are held by DB U.S. Financial Markets Holding Corporation.
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During the 8 years ending July 15, 2016, the Depositor has acted as depositor with respect to public and private conduit or combined conduit/large loan commercial mortgage securitization transactions in an aggregate amount of approximately $83.298 billion.
The Depositor does not have, nor is it expected in the future to have, any significant assets and is not engaged in activities unrelated to the securitization of mortgage loans. The Depositor will not have any business operations other than securitizing mortgage loans and related activities.
The depositor purchases commercial mortgage loans and interests in commercial mortgage loans for the purpose of selling those assets to trusts created in connection with the securitization of pools of assets and does not engage in any activities unrelated to those securitizations. On the Closing Date, the depositor will acquire the mortgage loans from each mortgage loan seller and will simultaneously transfer them, without recourse, to the trustee for the benefit of the Certificateholders.
The depositor remains responsible under the PSA for providing the master servicer, special servicer, certificate administrator and trustee with certain information and other assistance requested by those parties and reasonably necessary to performing their duties under the PSA. The depositor also remains responsible for mailing notices to the Certificateholders upon the appointment of certain successor entities under the PSA.
The Issuing Entity
The issuing entity, CD 2016-CD1 Mortgage Trust, will be a New York common law trust, formed on the Closing Date pursuant to the PSA.
The only activities that the issuing entity may perform are those set forth in the PSA, 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. Accordingly, the issuing entity may not issue securities other than the certificates, or invest in securities, other than investing of funds in the Collection Account and other accounts maintained under the PSA in certain short-term permitted investments. The issuing entity may not lend or borrow money, except that the master servicer, the special servicer and the trustee may make Advances of delinquent monthly debt service payments and Servicing Advances to the issuing entity, but only to the extent it does not deem such Advances to be non-recoverable from the related mortgage loan; such Advances are intended to provide liquidity, rather than credit support. The PSA may be amended as set forth under “Pooling and Servicing Agreement—Amendment”. The issuing entity administers the mortgage loans through the trustee, the certificate administrator, the master servicer and the special servicer. A discussion of the duties of the trustee, the certificate administrator, the master servicer and the special servicer, including any discretionary activities performed by each of them, is set forth in this prospectus under “Transaction Parties—The Trustee and Certificate Administrator”, “—The Master Servicer”and “—The Special Servicer” and “Pooling and Servicing Agreement”.
The only assets of the issuing entity other than the mortgage loans and any REO Properties are the Collection Account and other accounts maintained pursuant to the PSA, the short-term investments in which funds in the Collection Account and other accounts are invested. The issuing entity has no present liabilities, but has potential liability relating to ownership of the mortgage loans and any REO Properties and certain other activities described in this prospectus, and indemnity obligations to the trustee, the certificate administrator, the depositor, the master servicer, the special servicer and the operating advisor. The fiscal year of the issuing entity is the calendar year. The issuing entity has no executive officers or board of directors and acts through the trustee, the certificate administrator, the master servicer and the special servicer.
The depositor will be contributing the mortgage loans to the issuing entity. The depositor will be purchasing the mortgage loans from the mortgage loan sellers, as described under “Description of the Mortgage Loan Purchase Agreements”.
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The Trustee and Certificate Administrator
Wells Fargo Bank, National Association (“Wells Fargo Bank”) will act as trustee, certificate administrator, tax administrator, certificate registrar, the 17g-5 information provider and custodian under the PSA.
Wells Fargo Bank is a national banking association and a wholly-owned subsidiary of Wells Fargo & Company. A diversified financial services company, Wells Fargo & Company is a U.S. bank holding company with approximately $1.8 trillion in assets and approximately 265,000 employees as of December 31, 2015, which provides banking, insurance, trust, mortgage and consumer finance services throughout the United States and internationally. Wells Fargo Bank 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 Sponsors, the master servicer, the special servicer, the trustee, the operating advisor, the asset representations reviewer and the Mortgage Loan Sellers may maintain banking and other commercial relationships with Wells Fargo Bank and its affiliates. Wells Fargo Bank maintains principal corporate trust offices at 9062 Old Annapolis Road, Columbia, Maryland 21045-1951 (among other locations) and its office for certificate transfer services is located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479.
Under the terms of the PSA, Wells Fargo Bank is responsible for securities administration, which includes pool performance calculations, distribution calculations and related distributions to certificateholders and the preparation of monthly distribution reports. As certificate administrator, Wells Fargo Bank is responsible for the preparation and filing of all REMIC tax returns on behalf of the Trust REMICs and the Prudential Plaza Loan REMIC and all grantor trust tax returns on behalf of the Grantor Trust and the preparation of monthly reports on Form 10-D, certain current reports on Form 8-K and annual reports on Form 10-K that are required to be filed with the SEC on behalf of the issuing entity. Wells Fargo Bank has been engaged in the business of securities administration since June 30, 1995, and in connection with commercial mortgage-backed securities since 1997. As of December 31, 2015, Wells Fargo Bank was acting as securities administrator with respect to more than $400 billion of outstanding commercial mortgage-backed securities.
Wells Fargo Bank has provided corporate trust services since 1934. Wells Fargo Bank acts as a trustee for a variety of transactions and asset types, including corporate and municipal bonds, mortgage-backed and asset-backed securities and collateralized debt obligations. As of December 31, 2015, Wells Fargo Bank was acting as trustee on approximately 367 series of commercial mortgage-backed securities with an aggregate principal balance of approximately $151 billion.
In its capacity as trustee on commercial mortgage securitizations, Wells Fargo 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, Wells Fargo has not been required to make an advance on a commercial mortgage-backed securities transaction.
Wells Fargo Bank is acting as custodian (the “Custodian”) of the mortgage files pursuant to and subject to the PSA. In that capacity, Wells Fargo Bank is responsible to hold and safeguard the mortgage notes and other contents of the mortgage files on behalf of the trustee for the benefit of the Certificateholders. Wells Fargo Bank maintains each mortgage file in a separate file folder marked with a unique bar code to assure loan-level file integrity and to assist in inventory management. Files are segregated by transaction or investor. Wells Fargo Bank has been engaged in the mortgage document custody business for more than 25 years. Wells Fargo Bank maintains its commercial document custody facilities in Minneapolis, Minnesota. As of December 31, 2015, Wells Fargo Bank was acting as custodian of more than 173,000 commercial mortgage files.
Wells Fargo Bank serves or may have served within the past two years as loan file custodian for various mortgage loans owned by a Sponsor or an affiliate of a Sponsor, and one or more of those mortgage loans may be included in the Trust. The terms of any custodial agreement under which those services are provided by Wells Fargo Bank are customary for the mortgage-backed securitization industry and provide for the delivery, receipt, review and safekeeping of mortgage loan files.
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For two CMBS transactions in its portfolio, Wells Fargo Bank disclosed material noncompliance on its 2015 Annual Statement of Compliance furnished pursuant to Item 1123 of Regulation AB to the required recipients. For one CMBS transaction, the material noncompliance was an administrative error that caused an overpayment to a certain class and a correlating underpayment to a certain class. The affected distribution was revised the same month to correct the error. For the other CMBS transaction, distributions for one month were paid one day late as a result of human error.
On June 18, 2014, a group of institutional investors filed a civil complaint in the Supreme Court of the State of New York, New York County, against Wells Fargo Bank, N.A., in its capacity as trustee under 276 residential mortgage backed securities (“RMBS”) trusts, which was later amended on July 18, 2014, to increase the number of trusts to 284 RMBS trusts. On November 24, 2014, the plaintiffs filed a motion to voluntarily dismiss the state court action without prejudice. That same day, a group of institutional investors filed a civil complaint in the United States District Court for the Southern District of New York (the “District Court”) against Wells Fargo Bank, N.A., alleging claims against the bank in its capacity as trustee for 274 residential mortgage-backed securities (“RMBS”) trusts (the “Complaint”). In December 2014, the plaintiffs’ motion to voluntarily dismiss their original state court action was granted. As with the prior state court action, the Complaint is one of six similar complaints filed contemporaneously against RMBS trustees (Deutsche Bank, Citibank, HSBC, The Bank of New York Mellon and U.S. Bank) by a group of institutional investor plaintiffs. The Complaint against Wells Fargo Bank, N.A. alleges that the trustee caused losses to investors and asserts causes of action based upon, among other things, the trustee’s alleged failure to (i) enforce repurchase obligations of mortgage loan sellers for purported breaches of representations and warranties, (ii) notify investors of alleged events of default purportedly caused by breaches by mortgage loan servicers, and (iii) abide by appropriate standards of care following alleged events of default. Relief sought includes money damages in an unspecified amount, reimbursement of expenses, and equitable relief. Other cases alleging similar causes of action have been filed against Wells Fargo Bank, N.A. and other trustees in the same court by RMBS investors in these and other transactions and these cases have been consolidated before the same judge. On January 19, 2016, an order was entered in connection with the complaint in which the District Court declined to exercise jurisdiction over 261 trusts at issue in the complaint, the District Court also allowed all plaintiffs to file amended complaints if they so choose and three amended complaints have been filed.
There can be no assurances as to the outcome of the litigation, or the possible impact of the litigation on Wells Fargo Bank or the RMBS trusts. However, Wells Fargo Bank denies liability and believes that it has performed its obligations under the RMBS trusts in good faith, that its actions were not the cause of losses to investors and that it has meritorious defenses, and it intends to contest the plaintiffs’ claims vigorously.
Neither Wells Fargo Bank nor any of its affiliates will retain any certificates issued by the issuing entity or any other economic interest in this securitization other than as set forth under “—The Non-Serviced Master Servicer”, except that Wells Fargo Bank has committed to purchase $112,842,000 of the Notional Amount of Class X-A for investment. However, Wells Fargo Bank or its affiliates may, from time to time after the initial sale of the certificates to investors on the Closing Date, acquire additional certificates pursuant to secondary market transactions. Any such party will have the right to dispose of any certificates at any time, whether acquired on or after the Closing Date.
The foregoing information set forth under this heading “—The Trustee and Certificate Administrator” has been provided by Wells Fargo Bank.
For a description of any material affiliations, relationships and related transactions between the certificate administrator and the other transaction parties, see “Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties”.
The trustee and certificate administrator will only be liable under the PSA to the extent of the obligations specifically imposed by the PSA. For further information regarding the duties, responsibilities, rights and obligations of the trustee and certificate administrator under the PSA, including those related to indemnification, see “Pooling and Servicing Agreement—Limitation on Liability; Indemnification”. Certain terms of the PSA regarding the certificate administrator’s removal, replacement or resignation are
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described under“Pooling and Servicing Agreement—Resignation and Removal of the Trustee and the Certificate Administrator”.
The Master Servicer
Midland Loan Services, a Division of PNC Bank, National Association, a national banking association (“Midland”), is expected to act as the master servicer and in this capacity will initially be responsible for the master servicing and administration of the Mortgage Loans and any Serviced Companion Loans pursuant to the PSA. Certain servicing and administrative functions may also be provided by one or more primary servicers that previously serviced the mortgage loans for the applicable loan seller. Midland’s principal servicing office is located at 10851 Mastin Street, Building 82, Suite 300, Overland Park, Kansas 66210.
Midland is a real estate financial services company that provides loan servicing, asset management and technology solutions for large pools of commercial and multifamily real estate assets. Midland is approved as a master servicer, special servicer and primary servicer for investment-grade commercial and multifamily mortgage-backed securities (“CMBS”) by S&P Global Ratings, Moody’s Investors Service, Inc., Fitch Ratings, Inc. and Morningstar Credit Ratings, LLC. Midland has received the highest rankings as a master, primary and special servicer of real estate assets under U.S. CMBS transactions from S&P Global Ratings, Fitch Ratings, Inc. and Morningstar Credit Ratings, LLC. For each category, S&P Global Ratings ranks Midland as “Strong”, Fitch Ratings, Inc. ranks Midland as “CMS1” as a master servicer, and “CSS1” as a special servicer, and Morningstar Credit Ratings, LLC ranks Midland as “CS1”. Midland is also a HUD/FHA-approved mortgagee and a Fannie Mae-approved multifamily loan servicer.
Midland has detailed operating procedures across the various servicing functions to maintain compliance with its servicing obligations and the servicing standards under Midland’s servicing agreements, including procedures for managing delinquent and specially serviced loans. The policies and procedures are reviewed annually and centrally managed. Furthermore, Midland’s disaster recovery plan is reviewed annually.
Midland will not have primary responsibility for custody services of original documents evidencing the underlying Mortgage Loans or the Serviced Companion Loans. Midland may from time to time have custody of certain of such documents as necessary for enforcement actions involving particular Mortgage Loans or the Serviced Companion Loans or otherwise. To the extent that Midland has custody of any such documents for any such servicing purposes, such documents will be maintained in a manner consistent with the Servicing Standard.
No securitization transaction involving commercial or multifamily mortgage loans in which Midland was acting as master servicer, primary servicer or special servicer has experienced a servicer event of default or servicer termination event as a result of any action or inaction of Midland as master servicer, primary servicer or special servicer, as applicable, including as a result of Midland’s failure to comply with the applicable servicing criteria in connection with any securitization transaction. Midland has made all advances required to be made by it under the servicing agreements on the commercial and multifamily mortgage loans serviced by Midland in securitization transactions.
From time-to-time Midland is a party to lawsuits and other legal proceedings as part of its duties as a loan servicer (e.g., enforcement of loan obligations) and/or arising in the ordinary course of business. Midland 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 loans pursuant to the PSA.
Midland currently maintains an Internet-based investor reporting system, CMBS Investor Insight®, that contains performance information at the portfolio, loan and property levels on the various commercial mortgage-backed securities transactions that it services. Certificateholders, prospective transferees of the certificates and other appropriate parties may obtain access to CMBS Investor Insight® through Midland’s website at www.pnc.com/midland. Midland may require registration and execution of an access agreement in connection with providing access to CMBS Investor Insight®.
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As of June 30, 2016, Midland was master and/or primary servicing approximately 28,906 commercial and multifamily mortgage loans with a principal balance of approximately $384 billion. The collateral for such loans is located in all 50 states, the District of Columbia, Puerto Rico, Guam and Canada. Approximately 9,661 of such loans, with a total principal balance of approximately $147 billion, pertain to commercial and multifamily mortgage-backed securities. The related loan pools include multifamily, office, retail, hospitality and other income-producing properties.
Midland has been servicing commercial and multifamily loans and leases in CMBS and other servicing transactions since 1992. The table below contains information on the size of the portfolio of commercial and multifamily loans and leases in CMBS and other servicing transactions for which Midland has acted as master and/or primary servicer from 2013 to 2015.
Portfolio Size – Master/Primary Servicing | Calendar Year End | |||||
2013 | 2014 | 2015 | ||||
| CMBS | $141 | $157 | $149 | |||
| Other | $167 | $179 | $255 | |||
| Total | $308 | $336 | $404 | |||
As of June 30, 2016, Midland was named the special servicer in approximately 215 commercial mortgage-backed securities transactions with an aggregate outstanding principal balance of approximately $109 billion. With respect to such transactions as of such date, Midland was administering approximately 81 assets with an outstanding principal balance of approximately $714 million.
Midland has acted as a special servicer for commercial and multifamily loans and leases in CMBS and other servicing transactions since 1992. The table below contains information on the size of the portfolio of specially serviced commercial and multifamily loans and leases and REO properties that have been referred to Midland as special servicer in CMBS and other servicing transactions from 2013 to 2015.
Portfolio Size –Special Servicing | Calendar Year End | |||||
2013 | 2014 | 2015 | ||||
| Total | $70 | $85 | $110 | |||
Midland may enter into one or more arrangements with the Directing Certificateholder, a Controlling Class Certificateholder, any directing certificateholder, any Companion Loan Holder, the other Certificateholders (or an affiliate or a third-party representative of one or more of the preceding) or any other person with the right to appoint or remove and replace the special servicer to provide for a discount and/or revenue sharing with respect to certain of the special servicer compensation in consideration of, among other things, Midland’s appointment (or continuance) as special servicer under the PSA and any related co-lender agreement and limitations on the right of such person to remove the special servicer.
Pursuant to certain interim servicing agreements between GACC and/or certain of its affiliates, on the one hand, and Midland, on the other hand, Midland acts as interim servicer with respect to certain GACC Mortgage Loans, including, prior to their inclusion in the issuing entity.
Midland will acquire the right to act as master servicer and/or primary servicer (and the related right to receive and retain the excess servicing strip) with respect to the Mortgage Loans sold to the issuing entity by the sponsor pursuant to one or more servicing rights appointment agreements entered into on the Closing Date. The “excess servicing strip” means a portion of the Servicing Fee payable to Midland that accrues at aper annum rate initially equal to the Servicing Fee Rate minus 0.0025%, but which may be reduced under certain circumstances as provided in the PSA.
PNC Bank, National Association and its affiliates may use some of the same service providers (e.g., legal counsel, accountants and appraisal firms) as are retained on behalf of the issuing entity. In some cases, fee rates, amounts or discounts may be offered to PNC Bank, National Association and its affiliates by a third party vendor which differ from those offered to the issuing entity as a result of
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scheduled or ad hoc rate changes, differences in the scope, type or nature of the service or transaction, alternative fee arrangements, and negotiation by PNC Bank, National Association or its affiliates other than the Midland division.
From time to time, Midland and/or its affiliates may purchase or sell securities, including certificates issued in this offering in the secondary market.
The foregoing information regarding Midland under this heading “Transaction Parties—The Master Servicer” has been provided by Midland.
The roles and responsibilities of the master servicer are set forth in this prospectus under“Pooling and Servicing Agreement”. The master servicer’s ability to waive or modify any terms, fees, penalties or payments on the Mortgage Loans (other than the Non-Serviced Mortgage Loans) and the related Serviced Companion Loans, and the effect of that ability on the potential cash flows from such Mortgage Loans and the related Serviced Companion Loans, are described under “Pooling and Servicing Agreement—Modifications, Waivers and Amendments”.
The master servicer will only be liable under the PSA to the extent of the obligations specifically imposed by the PSA. Certain terms of the PSA regarding the master servicer removal, replacement, resignation or transfer are described under “Pooling and Servicing Agreement—Limitation on Liability; Indemnification”, “—Termination of Servicer and Special Servicer for Cause—Servicer Termination Events” and “—Rights Upon Servicer Termination Event”. The master servicer’s rights and obligations with respect to indemnification, and certain limitations on the master servicer’s liability under the PSA, are described under“Pooling and Servicing Agreement—Limitation on Liability; Indemnification”.
The Non-Serviced Master Servicer
Wells Fargo Bank is, or is expected to be, the Non-Serviced Master Servicer with respect to (i) the 10 Hudson Yards Whole Loan under the Hudson Yards 2016-10HY Trust and Servicing Agreement, (ii) the Westfield San Francisco Centre Whole Loan under the DBJPM 2016-SFC Trust and Servicing Agreement, (iii) the Prudential Plaza Whole Loan under the COMM 2015-CCRE26 Pooling and Servicing Agreement, (iv) prior to the Birch Run Premium Outlets Control Note Securitization Date, the Birch Run Premium Outlets Whole Loan under the COMM 2016-DC2 Pooling and Servicing Agreement, (v) the Vertex Pharmaceuticals HQ Whole Loan under the WFCM 2016-BNK1 Pooling and Servicing Agreement and (vi) the 401 South State Street Whole Loan under the CGCMT 2016-P4 Pooling and Servicing Agreement. Wells Fargo Bank is a national banking association organized under the laws of the United States of America, and is a wholly-owned direct and indirect subsidiary of Wells Fargo & Company. Wells Fargo Bank is also the trustee, certificate administrator, custodian, 17g-5 information provider and certificate registrar under the PSA. On December 31, 2008, Wells Fargo & Company acquired Wachovia Corporation, the owner of Wachovia Bank, National Association (“Wachovia”), and Wachovia Corporation merged with and into Wells Fargo & Company. On March 20, 2010, Wachovia merged with and into Wells Fargo Bank. Like Wells Fargo Bank, Wachovia acted as master servicer of securitized commercial and multifamily mortgage loans and, following the merger of the holding companies, Wells Fargo Bank and Wachovia integrated their two servicing platforms under a senior management team that is a combination of both legacy Wells Fargo Bank managers and legacy Wachovia managers.
The principal west coast commercial mortgage master servicing offices of Wells Fargo Bank are located at MAC A0227-020, 1901 Harrison Street, Oakland, California 94612. The principal east coast commercial mortgage master servicing offices of Wells Fargo Bank are located at MAC D1086, 550 South Tryon Street, Charlotte, North Carolina 28202.
Wells Fargo Bank has been master servicing securitized commercial and multifamily mortgage loans in excess of ten years. Wells Fargo Bank’s primary servicing system runs on McCracken Financial Solutions software, Strategy CS. Wells Fargo Bank reports to trustees and certificate administrators in the CREFC® format. The following table sets forth information about Wells Fargo Bank’s portfolio of master or primary serviced commercial and multifamily mortgage loans (including loans in securitization transactions and loans owned by other investors) as of the dates indicated:
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Commercial and | As of | As of | As of | As of | ||||
| By Approximate Number: | 33,391 | 33,605 | 32,716 | 31,747 | ||||
| By Approximate Aggregate Unpaid Principal Balance (in billions): | $437.49 | $475.39 | $503.34 | $503.65 |
Within this portfolio, as of June 30, 2016, are approximately 23,158 commercial and multifamily mortgage loans with an unpaid principal balance of approximately $401.0 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 commercial real estate collateralized debt obligation securities, Wells Fargo Bank also services whole loans for itself and a variety of investors. The properties securing loans in Wells Fargo Bank’s servicing portfolio, as of June 30, 2016, were located in all 50 states, the District of Columbia, Guam, Mexico, the Bahamas, the Virgin Islands and Puerto Rico and include retail, office, multifamily, industrial, hotel and other types of income-producing properties.
Also included in the above portfolio are commercial mortgage loans that Wells Fargo Bank services in Europe through its London Branch. Wells Fargo Bank has been servicing commercial mortgage loans in Europe through its London Branch for more than ten years. Through affiliated entities formerly known as Wachovia Bank, N.A., London Branch and Wachovia Bank International, and as a result of its acquisition of commercial mortgage servicing rights from Hypothekenbank Frankfurt AG, formerly Eurohypo AG, in 2013, it has serviced loans secured by properties in Germany, Ireland, the Netherlands, and the UK. As of June 30, 2016, its European third party servicing portfolio, which is included in the above table, is approximately $1.5 billion.
In its master servicing and primary servicing activities, Wells Fargo Bank utilizes a mortgage-servicing technology platform with multiple capabilities and reporting functions. This platform allows Wells Fargo Bank 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 following table sets forth information regarding principal and interest advances and servicing advances made by Wells Fargo Bank, as master servicer, on commercial and multifamily mortgage loans included in commercial mortgage-backed securitizations. The information set forth below is the average amount of such advances outstanding over the periods indicated (expressed as a dollar amount and as a percentage of Wells Fargo Bank’s portfolio, as of the end of each such period, of master serviced commercial and multifamily mortgage loans included in commercial mortgage-backed securitizations).
Period | Approximate Securitized | Approximate | Approximate | |||
| Calendar Year 2013 | $346,011,017,466 | $2,158,219,403 | 0.62% | |||
| Calendar Year 2014 | $377,947,659,331 | $1,750,352,607 | 0.46% | |||
| Calendar Year 2015 | $401,673,056,650 | $1,600,995,208 | 0.40% | |||
| YTD Q2 2016 | $389,377,596,079 | $702,835,003 | 0.18% |
| * | “UPB” means unpaid principal balance, “P&I” means principal and interest advances and “PPA” means property protection advances. |
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Wells Fargo Bank is rated by Fitch, S&P and Morningstar as a primary servicer, a master servicer and a special servicer of commercial mortgage loans. Wells Fargo Bank’s servicer ratings by each of these agencies are outlined below:
US Servicer Ratings | Fitch | S&P | Morningstar | |||
| Primary Servicer: | CPS1- | Strong | MOR CS1 | |||
| Master Servicer: | CMS1- | Strong | MOR CS1 | |||
| Special Servicer: | CSS2 | Above Average | MOR CS2 | |||
UK Servicer Ratings | Fitch | S&P |
| |||
| Primary Servicer: | CPS2 | Average | ||||
| Special; Servicer: | CSS3 | Average |
The long-term issuer ratings of Wells Fargo Bank are rated “AA-” by S&P, “Aa2” by Moody’s and “AA” by Fitch. The short-term issuer ratings of Wells Fargo Bank are rated “A-1+” by S&P, “P-1” by Moody’s and “F1+” by Fitch.
Wells Fargo Bank 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. Wells Fargo Bank’s master 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 Wells Fargo Bank’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 Federal Home Loan Mortgage Corporation.
Wells Fargo Bank may perform any of its obligations under any Non-Serviced PSA through one or more third-party vendors, affiliates or subsidiaries. Notwithstanding the foregoing, Wells Fargo Bank will remain responsible for its duties thereunder. Wells Fargo Bank may engage third-party vendors to provide technology or process efficiencies. Wells Fargo Bank monitors its third-party vendors in compliance with its internal procedures and applicable law. Wells Fargo Bank has entered into contracts with third-party vendors for the following functions:
| · | provision of Strategy and Strategy CS software; |
| · | tracking and reporting of flood zone changes; |
| · | abstracting of leasing consent requirements contained in loan documents; |
| · | legal representation; |
| · | assembly of data regarding buyer and seller (borrower) with respect to proposed loan assumptions and preparation of loan assumption package for review by Wells Fargo Bank; |
| · | performance of property inspections; |
| · | performance of tax parcel searches based on property legal description, monitoring and reporting of delinquent taxes, and collection and payment of taxes; and |
| · | Uniform Commercial Code searches and filings. |
Wells Fargo Bank may also enter into agreements with certain firms to act as a primary servicer and to provide cashiering or non-cashiering sub-servicing on the related Mortgage Loans and Non-Serviced Companion Loans. Wells Fargo Bank monitors and reviews the performance of sub-servicers appointed by it. Generally, all amounts received by Wells Fargo Bank on the related Mortgage Loans and Non-Serviced Companion Loans will initially be deposited into a common clearing account with collections on other mortgage loans serviced by Wells Fargo Bank and will then be allocated and transferred to the
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appropriate account as described in this prospectus. On the day any amount is to be disbursed by Wells Fargo Bank, that amount is transferred to a common disbursement account prior to disbursement.
Wells Fargo Bank (in its capacity as Non-Serviced Master Servicer) will not have primary responsibility for custody services of original documents evidencing the related Non-Serviced Mortgage Loans or Non-Serviced Companion Loans. On occasion, Wells Fargo Bank may have custody of certain of such documents as are necessary for enforcement actions involving the related Non-Serviced Mortgage Loans, Non-Serviced Companion Loans or otherwise. To the extent Wells Fargo Bank performs custodial functions as a servicer, documents will be maintained in a manner consistent with the servicing standard under the related Non-Serviced PSA.
A Wells Fargo Bank proprietary website (www.wellsfargo.com/com/comintro) provides investors with access to investor reports for commercial mortgage-backed securitization transactions for which Wells Fargo Bank is master servicer, and also provides borrowers with access to current and historical loan and property information for these transactions.
Wells Fargo & Company files reports with the SEC as required under the Exchange Act. Such reports include information regarding Wells Fargo Bank and may be obtained at the website maintained by the SEC at www.sec.gov.
There are no legal proceedings pending against Wells Fargo Bank, or to which any property of Wells Fargo Bank is subject, that are material to the Certificateholders, nor does Wells Fargo Bank have actual knowledge of any proceedings of this type contemplated by governmental authorities.
Wells Fargo Bank has entered, or is expected to enter, into one or more agreements with the related Mortgage Loan Sellers to purchase the master servicing and/or primary servicing rights to the 10 Hudson Yards Whole Loan, the Westfield San Francisco Centre Whole Loan, the Prudential Plaza Whole Loan, the Birch Run Premium Outlets Whole Loan, the Vertex Pharmaceuticals HQ Whole Loan and the 401 South State Street Whole Loan.
Pursuant to certain interim servicing agreements between Wells Fargo Bank and GACC and/or certain of its affiliates, Wells Fargo Bank acts as interim servicer with respect to certain mortgage loans owned by GACC or those affiliates from time to time, which may include, prior to their inclusion in the Issuing Entity, some or all of the GACC Mortgage Loans.
Pursuant to certain interim servicing agreements between Wells Fargo Bank and CGMRC and/or certain of its affiliates, Wells Fargo Bank acts as interim servicer with respect to certain mortgage loans owned by CGMRC or those affiliates from time to time, which may include, prior to their inclusion in the Issuing Entity, some or all of the CGMRC Mortgage Loans.
Neither Wells Fargo Bank nor any of its affiliates will retain any certificates issued by the issuing entity or any other economic interest in this securitization other than as set forth above, except that Wells Fargo Bank has committed to purchase $112,842,000 of the Notional Amount of Class X-A for investment. However, Wells Fargo Bank or its affiliates may, from time to time after the initial sale of the certificates to investors on the Closing Date, acquire additional certificates pursuant to secondary market transactions. Any such party will have the right to dispose of any certificates at any time, whether acquired on or after the Closing Date.
The foregoing information under this heading “Transaction Parties—The Non-Serviced Master Servicer” has been provided by Wells Fargo Bank.
The role and responsibilities of Wells Fargo Bank with respect to the related Non-Serviced Whole Loans are similar to those of the master servicer of the Mortgage Loans (other than Non-Serviced Mortgage Loans) under the PSA, and are further summarized in this prospectus under“Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
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The Special Servicer
Rialto Capital Advisors, LLC, a Delaware limited liability company (“Rialto”), will initially be appointed to act as special servicer for the Mortgage Loans (other than any Excluded Special Servicer Loan or any Non-Serviced Mortgage Loan) and any Serviced Companion Loans (in such capacity, the “Special Servicer”) and in this capacity will be responsible for the servicing and administration of such Mortgage Loans (other than any Excluded Special Servicer Loan or any Non-Serviced Mortgage Loan) and Serviced Companion Loans that are Specially Serviced Loans and any associated REO Properties and, in certain circumstances, will review, evaluate and provide or withhold consent as to certain Major Decisions and Special Servicer Decisions and other transactions relating to such Mortgage Loans (other than any Excluded Special Servicer Loan or Non-Serviced Mortgage Loan) and Serviced Companion Loans that are non-Specially Serviced Loans, pursuant to the PSA.
Rialto maintains its principal servicing office at 790 NW 107th Avenue, 4th Floor, Miami, Florida 33172.
Rialto has been engaged in the special servicing of commercial mortgage loans for commercial real estate securitizations since approximately May 2012. Rialto currently has a commercial mortgage-backed securities special servicer rating of “CSS2” by Fitch, a commercial loan special servicer ranking of “Above Average” by S&P and a commercial mortgage special servicer ranking of “MOR CS2” by Morningstar.
Rialto is a wholly-owned subsidiary of Rialto Capital Management, LLC, a Delaware limited liability company (“RCM”). RCM is a vertically integrated commercial real estate investment and asset manager and an indirect wholly-owned subsidiary of Lennar Corporation (“Lennar”) (NYSE: LEN and LEN.B). As of June 30, 2016, RCM was the sponsor of, and certain of its affiliates were investors in, nine private equity funds (collectively, the “Funds”) with an aggregate of approximately $3.5 billion of equity under management and RCM also advised one separately managed account with $400 million of committed capital. Four of such funds are focused on distressed and value-add real estate related investments, three of such funds is focused on investments in commercial mortgage-backed securities and the two other funds and the separately managed account are focused on mezzanine debt and credit investments. To date, RCM has acquired and/or is managing over $7.3 billion of non- and sub-performing real estate assets, representing approximately 10,800 loans. Included in this number are approximately $3 billion in structured transactions with the Federal Deposit Insurance Corporation (“FDIC”). RCM was also a sub-advisor and investor in an approximately $4.6 billion Public-Private Investment Fund with the U.S. Department of the Treasury, which was liquidated in October of 2012.
In addition, RCM has underwritten and purchased, primarily for the Funds, over $4.3 billion in face value of subordinate, newly-originated commercial mortgage-backed securities bonds in 62 different securitizations totaling approximately $69 billion in overall transaction size. RCM has the right to appoint the special servicer for each of these transactions.
RCM has over 400 employees and is headquartered in Miami with two other main offices located in New York City and Atlanta. In addition, the asset management platform utilizes twelve satellite offices across Nevada, Arizona, California, Colorado, Oregon, Illinois, North Carolina and Florida. It is also supported in local markets by the Lennar infrastructure which provides access to over 6,800 employees across the country’s largest real estate markets.
Rialto has detailed operating policies and procedures which are reviewed at least annually and updated as appropriate. These policies and procedures for the performance of its special servicing obligations are, among other things, in compliance with the applicable servicing criteria set forth in Item 1122 of Regulation AB. Rialto has developed strategies and procedures for managing delinquent loans, loans subject to bankruptcies of the borrowers and other breaches by borrowers of the underlying loan documents that are designed to maximize value from the assets for the benefit of certificateholders. These strategies and procedures vary on a case by case basis, and include, but are not limited to, liquidation of the underlying collateral, note sales, discounted payoffs, and borrower negotiation or workout in accordance with the related servicing standard. The strategy pursued by Rialto for any particular property depends upon, among other things, the terms and provisions of the underlying loan
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documents, the jurisdiction where the underlying property is located and the condition and type of underlying property. 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.
Rialto is subject to external and internal audits and reviews. Rialto is subject to Lennar’s internal audit reviews, typically on a semi-annual basis, which focus on specific business areas such as finance, reporting, loan asset management and REO management. Rialto is also subject to external audits as part of the external audit of Lennar and stand-alone audits of the FDIC transactions and the Funds. As part of such external audits, auditors perform test work and review internal controls throughout the year. As a result of this process, Rialto has been determined to be Sarbanes-Oxley compliant.
Rialto maintains a web-based asset management system that contains performance information at the portfolio, loan and property levels on the various loan and REO assets that it services. Additionally, Rialto has a formal, documented disaster recovery and business continuity plan which is managed by Lennar’s on-site staff.
As of June 30, 2016, Rialto and its affiliates were actively special servicing approximately 1,800 portfolio loans with a principal balance of approximately $600 million and were responsible for approximately 1,300 portfolio REO assets with a principal balance of approximately $1.4 billion.
Rialto is also currently performing special servicing for 66 commercial real estate securitizations. With respect to such securitization transactions, Rialto is administering over 4,800 assets with an original principal balance at securitization of approximately $71 billion. The asset pools specially serviced by Rialto include residential, multifamily/condo, office, retail, hotel, healthcare, industrial, manufactured housing and other income-producing properties as well as residential and commercial land.
The table below sets forth information about Rialto’s portfolio of specially serviced commercial and multifamily mortgage loans and REO properties in commercial mortgage-backed securitization transactions as of the dates indicated:
CMBS Pools | As of | As of | As of | As of | ||||
| Number of CMBS Pools Named Special Servicer | 16 | 27 | 45 | 66 | ||||
| Approximate Aggregate Unpaid Principal Balance(1) | $18.9 billion | $32.4 billion | $49.2 billion | $71 billion | ||||
| Approximate Number of Specially Serviced Loans or REO Properties(2) | 19 | 27 | 28 | 35 | ||||
| Approximate Aggregate Unpaid Principal Balance of Specially Serviced Loans or REO Properties(2) | $21 million | $101 million | $126.9 million | $286 million |
| (1) | Includes all commercial and multifamily mortgage loans and related REO properties in Rialto’s portfolio for which Rialto is the named special servicer, regardless of whether such mortgage loans and related REO properties are, as of the specified date, specially serviced by Rialto. |
| (2) | Includes only those commercial and multifamily mortgage loans and related REO properties in Rialto’s portfolio for which Rialto is the named special servicer that are, as of the specified date, specially serviced by Rialto. Does not include any resolutions during the specified year. |
In its capacity as the Special Servicer, Rialto will not have primary responsibility for custody services of original documents evidencing the underlying mortgage loans. Rialto may from time to time have custody of certain of such documents as necessary for enforcement actions involving particular underlying mortgage loans or otherwise. To the extent that Rialto has custody of any such documents for any such servicing purposes, such documents will be maintained in a manner consistent with the Servicing Standard.
Rialto does not have any material advancing rights or obligations with respect to the commercial mortgage-backed securities pools as to which it acts as special servicer. In certain instances Rialto may have the right or be obligated to make property related servicing advances in emergency situations with respect to certain commercial mortgage-backed securities pools as to which it acts as special servicer.
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There are, to the actual current knowledge of Rialto, no special or unique factors of a material nature involved in special servicing the particular types of assets included in this securitization transaction, as compared to the types of assets specially serviced by Rialto in other commercial mortgage-backed securitization pools generally, for which Rialto has developed processes and procedures which materially differ from the processes and procedures employed by Rialto in connection with its special servicing of commercial mortgage-backed securitization pools generally. There have not been, during the past three years, any material changes to the policies or procedures of Rialto in the servicing function it will perform under the PSA for assets of the same type included in this securitization transaction.
No securitization transaction in which Rialto was acting as special servicer has experienced a servicer event of default as a result of any action or inaction of Rialto as special servicer, including as a result of a failure by Rialto to comply with the applicable servicing criteria in connection with any securitization transaction. Rialto has not been terminated as special servicer in any securitization, either due to a servicing default or the application of a servicing performance test or trigger. Rialto has made all advances required to be made by it under the servicing agreements related to the securitization transactions in which Rialto is acting as special servicer. There has been no previous disclosure of material noncompliance with the applicable servicing criteria by Rialto in connection with any securitization in which Rialto was acting as special servicer.
Rialto does not believe that its financial condition will have any adverse effect on the performance of its duties under the PSA and, accordingly, Rialto believes that its financial condition will not have any material impact on the Mortgage Pool performance or the performance of the Certificates.
From time to time Rialto is a party to lawsuits and other legal proceedings as part of its duties as a loan servicer (e.g., enforcement of loan obligations) and/or arising in the ordinary course of business. Rialto 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 loans pursuant to the PSA. There are currently no legal proceedings pending, and no legal proceedings known to be contemplated by governmental authorities, against Rialto or of which any of its property is the subject, that are material to the Certificateholders.
Rialto occasionally engages consultants to perform property inspections and to provide 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 with the exception of some outsourced base servicing functions.
In the commercial mortgage-backed securitizations in which Rialto acts as special servicer, Rialto may enter into one or more arrangements with any party entitled to appoint or remove and replace the special servicer to provide for a discount and/or revenue sharing with respect to certain of the special servicer compensation in consideration of, among other things, Rialto’s appointment as special servicer under the applicable servicing agreement and limitations on such person’s right to replace Rialto as the special servicer.
Rialto Capital Advisors, LLC, the expected special servicer for this transaction, is an affiliate of (a) the entity or entities that is committed to purchasing the Class X-D, Class X-E, Class X-F, Class E, Class F, Class G and Class V certificates and (b) RREF III Debt AIV, LP or its affiliate, which is expected to be appointed as the initial Directing Certificateholder with respect to each Mortgage Loan (other than any Non-Serviced Mortgage Loan or any Excluded Special Servicer Loan). Rialto Capital Advisors, LLC is expected to act as the special servicer and it or an affiliate assisted RREF III Debt AIV, LP and/or one or more of its affiliates with its due diligence of the Mortgage Loans prior to the Closing Date. In addition, Rialto Capital Advisors, LLC is an affiliate of the entity that is expected to be the initial controlling class certificateholder and the initial directing certificateholder under the WFCM 2016-BNK1 Pooling and Servicing Agreement, which is expected to govern the servicing and administration of the Vertex Pharmaceuticals HQ Whole Loan.
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From time to time, Rialto and/or its affiliates may purchase securities, including CMBS certificates. Rialto and/or its affiliates may review this prospectus and purchase certificates issued in this offering, including in the secondary market.
Except as described above, neither Rialto nor any of its affiliates will retain any certificates issued by the issuing entity. Any such party will have the right to dispose of such certificates at any time.
The foregoing information regarding the special servicer set forth in this section entitled “—The Special Servicer” has been provided by Rialto. None of the depositor, the underwriters, the master servicer, the operating advisor, the asset representations reviewer, the trustee, the certificate administrator, or any of their affiliates takes any responsibility for this information or makes any representation or warranty as to its accuracy or completeness.
The special servicer will be required to pay all expenses incurred in connection with its responsibilities under the PSA (subject to reimbursement as described in this prospectus).
The special servicer may be terminated, with respect to the Mortgage Loans and Serviced Companion Loans, without cause, by (i) the applicable Certificateholders (if a Control Termination Event has occurred and is continuing) and (ii) the Directing Certificateholder (for so long as a Control Termination Event does not exist), as described and to the extent in “Pooling and Servicing Agreement—Replacement of Special Servicer Without Cause” in this prospectus.
The special servicer may resign under the PSA as described under “Pooling and Servicing Agreement—Resignation of the Master Servicer and Special Servicer” in this prospectus.
Certain duties and obligations of Rialto Capital Advisors, LLC as the Special Servicer and the provisions of the PSA are described under “Pooling and Servicing Agreement”. Rialto Capital Advisors, LLC’s ability to waive or modify any terms, fees, penalties or payments on the Mortgage Loans and the potential effect of that ability on the potential cash flows from the Mortgage Loans are described under “Pooling and Servicing Agreement—Modifications, Waivers and Amendments” below.
The special servicer and various related persons and entities will be entitled to be indemnified by the issuing entity for certain losses and liabilities incurred by the special servicer as described under “Pooling and Servicing Agreement—Limitation on Liability; Indemnification” in this prospectus.
The special servicer will only be liable under the PSA to the extent of the obligations specifically imposed by the PSA. Certain terms of the PSA regarding the special servicer’s removal, replacement, resignation or transfer are described under “Pooling and Servicing Agreement—Limitation on Liability; Indemnification”, “—Termination of Servicer and Special Servicer for Cause—Servicer Termination Events” and “—Rights Upon Servicer Termination Event”. The special servicer’s rights and obligations with respect to indemnification, and certain limitations on the special servicer’s liability under the PSA, are described under“Pooling and Servicing Agreement—Limitation on Liability; Indemnification”.
The Operating Advisor and Asset Representations Reviewer
Park Bridge Lender Services LLC (“Park Bridge Lender Services”), a New York limited liability company and an indirect, wholly owned subsidiary of Park Bridge Financial LLC (“Park Bridge Financial”), will act as operating advisor under the PSA with respect to each Mortgage Loan (other than Non-Serviced Mortgage Loans and the Servicing Shift Mortgage Loan) and Serviced Whole Loan (other than the Servicing Shift Whole Loan). Park Bridge Lender Services will also act as asset representations reviewer under the PSA with respect to each Mortgage Loan. Park Bridge Lender Services has an address at 600 Third Avenue, 40th Floor, New York, New York 10036 and its telephone number is (212) 230-9090.
Park Bridge Financial is a privately held commercial real estate finance advisory firm headquartered in New York, New York. Since its founding in 2009, Park Bridge Financial and its affiliates have been engaged by commercial banks (community, regional and multi-national), opportunity funds, REITs, investment banks, insurance companies, entrepreneurs and hedge funds on a wide variety of advisory
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assignments. These engagements have included: mortgage brokerage, loan syndication, contract underwriting, valuations, risk assessments, surveillance, litigation support, expert testimony, loan restructures as well as the disposition of commercial mortgages and related collateral.
Park Bridge Financial’s technology platform is server-based with back-up, disaster-recovery and encryption services performed by vendors and data centers that comply with industry and regulatory standards.
As of June 30, 2016, Park Bridge Lender Services was acting as operating advisor or trust advisor for commercial mortgage-backed securities transactions with an approximate aggregate initial principal balance of $85.7 billion issued in 83 transactions.
As of June 30, 2016, Park Bridge Lender Services is acting as asset representations reviewer for CMBS transactions with an approximate aggregate initial principal balance of $12.1 billion issued in 15 transactions.
There are no legal proceedings pending against Park Bridge Lender Services, or to which any property of Park Bridge Lender Services is subject, that are material to the Certificateholders, nor does Park Bridge Lender Services have actual knowledge of any proceedings of this type contemplated by governmental authorities.
The foregoing information under this heading “Transaction Parties—The Operating Advisor and Asset Representations Reviewer” has been provided by Park Bridge Lender Services.
For a description of any material affiliations, relationships and related transactions between the operating advisor and the other transaction parties, see “Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties”.
The operating advisor and the asset representations reviewer will only be liable under the PSA to the extent of their respective obligations specifically imposed by the PSA. For further information regarding the duties, responsibilities, rights and obligations of the operating advisor and the asset representations reviewer under the PSA, including those related to indemnification, see “Pooling and Servicing Agreement—The Operating Advisor”, “—The Asset Representations Reviewer” and “—Limitation on Liability; Indemnification”. Certain terms of the PSA regarding the operating advisor’s and the asset representations reviewer’s removal, replacement, resignation or transfer are described under “—The Operating Advisor” and “—The Asset Representations Reviewer”, as applicable.
Description of the Certificates
General
The certificates will be issued pursuant to a pooling and servicing agreement, among the depositor, the master servicer, the special servicer, the trustee, the certificate administrator, the operating advisor and the asset representations reviewer (the “PSA”) and will represent in the aggregate the entire ownership interest in the issuing entity. The assets of the issuing entity will consist of: (1) the Mortgage Loans and all payments under and proceeds of the Mortgage Loans received after the Cut-off Date (exclusive of payments of principal and/or interest due on or before the Cut-off Date and interest relating to periods prior to, but due after, the Cut-off Date); (2) any REO Property but, with respect to any Whole Loan, only to the extent of the issuing entity’s interest in such Whole Loan; (3) those funds or assets as from time to time are deposited in the accounts discussed in “Pooling and Servicing Agreement—Accounts” (but, with respect to any Whole Loan, only to the extent of the issuing entity’s interest in such Whole Loan), if established; (4) the rights of the mortgagee under all insurance policies with respect to its Mortgage Loans; and (5) certain rights of the depositor under each MLPA relating to Mortgage Loan document delivery requirements and the representations and warranties of each mortgage loan seller regarding the Mortgage Loans it sold to the depositor.
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The CD 2016-CD1 Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2016-CD1 will consist of the following classes: the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates (collectively, with the Class A-M certificates, the “Class A Certificates”), the Class X-A, Class X-B, Class X-C, Class X-D, Class X-E and Class X-F (collectively, the “Class X Certificates”), Class A-M, Class B, Class C, Class D, Class E, Class F, Class G, Class V and Class R certificates.
The Class A Certificates (other than the Class A-M certificates) and the Class X Certificates are referred to collectively in this prospectus as the “Senior Certificates”. The Class A-M, Class B, Class C, Class D, Class E, Class F and Class G certificates are referred to collectively in this prospectus as the “Subordinate Certificates”. The Class R certificates are sometimes referred to in this prospectus as the “Residual Certificates”. The Senior Certificates and the Subordinate Certificates are collectively referred to in this prospectus as the “Regular Certificates”. The Senior Certificates (other than the Class X Certificates) and the Subordinate Certificates are collectively referred to in this prospectus as the “Principal Balance Certificates”. The Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class X-A, Class A-M, Class B and Class C certificates are also referred to in this prospectus as the “Offered Certificates”.
Upon initial issuance, the Principal Balance Certificates will have the respective Certificate Balances, and the Class X Certificates will have the respective Notional Amounts, shown below (in each case, subject to a variance of plus or minus 5%):
Class | Initial Certificate Balance or | |
| Offered Certificates | ||
| A-1 | $ 30,826,000 | |
| A-2 | $ 40,000,000 | |
| A-SB | $ 46,236,000 | |
| A-3 | $ 168,000,000 | |
| A-4 | $ 207,191,000 | |
| X-A | $ 566,092,000 | |
| A-M | $ 73,839,000 | |
| B | $ 31,644,000 | |
| C | $ 28,129,000 | |
| Non-Offered Certificates | ||
| X-B | $ 59,773,000 | |
| X-C | $ 31,645,000 | |
| X-D | $ 15,823,000 | |
| X-E | $ 6,153,000 | |
| X-F | $ 23,733,985 | |
| D | $ 31,645,000 | |
| E | $ 15,823,000 | |
| F | $ 6,153,000 | |
| G | $ 23,733,985 | |
| V | N/A | |
| R | N/A |
The “Certificate Balance” of any class of Principal Balance Certificates outstanding at any time represents the maximum amount that 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 issuing entity, all as described in this prospectus. On each Distribution Date, the Certificate Balance of each class of Principal Balance Certificates will be reduced by any distributions of principal actually made on, and by any Realized Losses actually allocated to, that class of Principal Balance Certificates on that Distribution Date. In the event that Realized Losses previously allocated to a class of Principal Balance Certificates in reduction of its Certificate Balance are recovered subsequent to such Certificate Balance being reduced to zero, holders of such class of Principal Balance Certificates may receive distributions in respect of such recoveries in accordance with the distribution priorities described under “—Distributions—Priority of Distributions” below.
The Residual Certificates will not have a Certificate Balance or entitle their holders to distributions of principal or interest.
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The Class X Certificates will not have Certificate Balances, nor will they entitle their holders to distributions of principal, but the Class X Certificates will represent the right to receive distributions of interest in an amount equal to the aggregate interest accrued on their respective notional amounts (each, a “Notional Amount”). The Notional Amount of the Class X-A certificates will equal the aggregate of the Certificate Balances of the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4 and Class A-M certificates. The initial Notional Amount of the Class X-A certificates will be approximately $566,092,000. The Notional Amount of the Class X-B certificates will equal the aggregate of the Certificate Balances of the Class B and Class C certificates. The initial Notional Amount of the Class X-B certificates will be approximately $59,773,000. The Notional Amount of the Class X-C certificates will equal the Certificate Balance of the Class D certificates. The initial Notional Amount of the Class X-C certificates will be approximately $31,645,000. The Notional Amount of the Class X-D certificates will equal the Certificate Balance of the Class E certificates. The initial Notional Amount of the Class X-D certificates will be approximately $15,823,000. The Notional Amount of the Class X-E certificates will equal the Certificate Balance of the Class F certificates. The initial Notional Amount of the Class X-E certificates will be approximately $6,153,000. The Notional Amount of the Class X-F certificates will equal the Certificate Balance of the Class G certificates. The initial Notional Amount of the Class X-F certificates will be approximately $23,733,985.
The Class V certificates will not have a Certificate Balance nor will they entitle their holders to distributions of principal, but the Class V certificates will represent the right to receive Excess Interest received on any ARD Loan.
“Excess Interest” with respect to the ARD Loan is the interest accrued (or paid currently, if required under the applicable loan documents) on the related outstanding principal balance at the Revised Rate in respect of such ARD Loan in excess of the interest accrued at the Initial Rate,plus any related interest accrued on such amounts, to the extent permitted by applicable law and the related Mortgage Loan documents.
The Mortgage Loans (exclusive of Excess Interest) will be held by the Lower-Tier REMIC. The certificates (other than the Class V certificates) will be issued by the Upper-Tier REMIC (collectively with the Lower-Tier REMIC, the “Trust REMICs”). The Class V certificates will be issued by the grantor trust (the “Grantor Trust”).
Distributions
Method, Timing and Amount
Distributions on the certificates are required to be made by the certificate administrator, to the extent of available funds as described in this prospectus, on the fourth business day following each Determination Date (each, a “Distribution Date”). The “Determination Date” will be the sixth day of each calendar month (or, if the sixth calendar day of that month is not a business day, then the next business day) commencing in September 2016.
All distributions (other than the final distribution on any certificate) are required to be made to the Certificateholders in whose names the certificates are registered at the close of business on each Record Date. With respect to any Distribution Date, the “Record Date” will be the last business day of the month preceding the month in which that Distribution Date occurs. These distributions are required to be made by wire transfer in immediately available funds to the account specified by the Certificateholder at a bank or other entity having appropriate facilities to accept such funds, if the Certificateholder has provided the certificate administrator with written wiring instructions no less than five business days prior to the related Record Date (which wiring instructions may be in the form of a standing order applicable to all subsequent distributions) or otherwise by check mailed to the Certificateholder. The final distribution on any certificate is required to be made in like manner, but only upon presentation and surrender of the certificate at the location that will be specified in a notice of the pendency of the final distribution.
The master servicer is authorized but not required to direct the investment of funds held in the Collection Account in U.S. government securities and other obligations that satisfy criteria established by
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the Rating Agencies (“Permitted Investments”). The master servicer will be entitled to retain any interest or other income earned on such funds and the master servicer will be required to bear any losses resulting from the investment of such funds, as provided in the PSA. The certificate administrator is authorized but not required to direct the investment of funds held in the Lower-Tier REMIC Distribution Account, the Upper-Tier REMIC Distribution Account, the Interest Reserve Account and the Gain-on-Sale Reserve Account in Permitted Investments. The certificate administrator will be entitled to retain any interest or other income earned on such funds and the certificate administrator will be required to bear any losses resulting from the investment of such funds, as provided in the PSA.
Available Funds
The aggregate amount available for distribution to holders of the certificates on each Distribution Date (the “Available Funds”) will, in general, equal the sum of the following amounts (without duplication):
(a) the aggregate amount of all cash received on the Mortgage Loans (in the case of any Non-Serviced Mortgage Loan, only to the extent received by the issuing entity pursuant to the related Non-Serviced PSA and any REO Property (including Compensating Interest Payments with respect to the Mortgage Loans required to be deposited by the master servicer) that is on deposit in the Collection Account (in each case, exclusive of any amount on deposit in the Collection Account that is held for the benefit of the holder of any related Companion Loan), as of the Master Servicer Remittance Date, exclusive of (without duplication):
| · | all scheduled payments of principal and/or interest (the “Periodic Payments”) and any balloon payments paid by the borrowers of a Mortgage Loan that are due on a Due Date (without regard to grace periods) after the end of the related Collection Period (without regard to grace periods), excluding Excess Interest and interest relating to periods prior to, but due after, the Cut-off Date; |
| · | all unscheduled payments of principal (including prepayments), unscheduled interest, liquidation proceeds, net insurance proceeds and Insurance and Condemnation Proceeds and other unscheduled recoveries received subsequent to the related Determination Date (or, with respect to voluntary prepayments of principal of each Mortgage Loan with a Due Date occurring after the related Determination Date, subsequent to the related Due Date) allocable to the Mortgage Loans; |
| · | all amounts in the Collection Account that are due or reimbursable to any person other than the Certificateholders; |
| · | with respect to each Actual/360 Loan and any Distribution Date occurring in each February and in any January occurring in a year that is not a leap year (unless such Distribution Date is the final Distribution Date), the related Withheld Amount to the extent those funds are on deposit in the Collection Account; |
| · | all Excess Interest allocable to the Mortgage Loans (which is separately distributed to the Class V certificates); |
| · | all yield maintenance charges and prepayment premiums; |
| · | all amounts deposited in the Collection Account in error; and |
| · | any late payment charges or accrued interest on a Mortgage Loan allocable to the default interest rate for such Mortgage Loan, to the extent permitted by law, excluding any interest calculated at the Mortgage Rate for the related Mortgage Loan; |
(b) if and to the extent not already included inclause (a), the aggregate amount transferred from the REO Account allocable to the Mortgage Loans to the Collection Account for such Distribution Date;
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(c) 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
(d) with respect to each Actual/360 Loan and any Distribution Date occurring in each March (or February, if such Distribution Date is the final Distribution Date), the related Withheld Amounts as required to be deposited in the Lower-Tier REMIC Distribution Account pursuant to the PSA.
The “Collection Period” for each Distribution Date and any Mortgage Loan (including any Companion Loan) will be the period commencing on the day immediately following the Due Date for such Mortgage Loan (including any Companion Loan) in the month preceding the month in which that Distribution Date occurs or the date that would have been the Due Date if such Mortgage Loan (including any Companion Loan) had a Due Date in such preceding month and ending on and including the Due Date for such Mortgage Loan (including any related Companion Loan) occurring in the month in which that Distribution Date occurs. Notwithstanding the foregoing, in the event that the last day of a Collection Period (or applicable grace period) is not a business day, any Periodic Payments received with respect to Mortgage Loans (including any Companion Loan) relating to such Collection Period on the business day immediately following such day will be deemed to have been received during such Collection Period and not during any other Collection Period.
“Due Date” means, with respect to each Mortgage Loan (including any Companion Loan), the date on which scheduled payments of principal, interest or both are required to be made by the related borrower.
Priority of Distributions
On each Distribution Date, prior to the Crossover Date, for so long as the Certificate Balances or Notional Amounts of the Regular Certificates have not been reduced to zero, the certificate administrator is required to apply amounts on deposit in the Distribution Account, to the extent of the Available Funds, in the following order of priority:
First, to the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B, Class X-C, Class X-D, Class X-E and Class X-F certificates, in respect of interest, up to an amount equal to, andpro rata in accordance with, the respective Interest Distribution Amount for such Classes;
Second, to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, in reduction of the Certificate Balances thereof, in the following priority:
1. to the Class A-SB certificates, in reduction of the Certificate Balance thereof, an amount equal to the Principal Distribution Amount for such Distribution Date, until the Certificate Balance of the Class A-SB certificates has been reduced to the Class A-SB Planned Principal Balance as set forth on Annex E for such Distribution Date;
2.then, to the Class A-1 certificates, in reduction of the Certificate Balance thereof, an amount equal to the Principal Distribution Amount (or the portion thereof remaining after distributions on the Class A-SB certificates pursuant to clause (1) above) for such Distribution Date, until the Certificate Balance of the Class A-1 certificates has been reduced to zero;
3.then, to the Class A-2 certificates, in reduction of the Certificate Balance thereof, an amount equal to the Principal Distribution Amount (or the portion thereof remaining after distributions on the Class A-1 and Class A-SB certificates pursuant to clauses (1) and (2) above) for such Distribution Date, until the Certificate Balance of the Class A-2 certificates has been reduced to zero;
4.then, to the Class A-3 certificates, in reduction of the Certificate Balance thereof, an amount equal to the Principal Distribution Amount (or the portion thereof remaining after distributions on the Class A-1, Class A-2 and Class A-SB certificates pursuant to clauses (1), (2) and (3) above) for such Distribution Date, until the Certificate Balance of the Class A-3 certificates has been reduced to zero;
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5.then, to the Class A-4 certificates, in reduction of the Certificate Balance thereof, an amount equal to the Principal Distribution Amount (or the portion thereof remaining after distributions on the Class A-1, Class A-2, Class A-SB and Class A-3 certificates pursuant to clauses (1), (2), (3) and (4) above) for such Distribution Date, until the Certificate Balance of the Class A-4 certificates has been reduced to zero; and
6.then, to the Class A-SB certificates, in reduction of the Certificate Balance thereof, an amount equal to the Principal Distribution Amount (or the portion thereof remaining after distributions on the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates pursuant to clauses (1), (2), (3), (4) and (5) above) for such Distribution Date, until the Certificate Balance of the Class A-SB certificates has been reduced to zero;
Third, to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, up to an amount equal to, andpro rata, based upon the aggregate unreimbursed Realized Losses previously allocated to each such Class;
Fourth,to the Class A-M certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of such Class;
Fifth, to the Class A-M certificates, in reduction of the Certificate Balance thereof, an amount equal to the Principal Distribution Amount less amounts of Principal Distribution Amount distributed pursuant to all prior clauses, until the Certificate Balance of such Class is reduced to zero;
Sixth, to the Class A-M certificates, up to an amount equal to the aggregate of unreimbursed Realized Losses previously allocated to such Class;
Seventh, to the Class B certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of such Class;
Eighth, to the Class B certificates, in reduction of the Certificate Balance thereof, an amount equal to the Principal Distribution Amount less amounts of Principal Distribution Amount distributed pursuant to all prior clauses, until the Certificate Balance of such Class is reduced to zero;
Ninth, to the Class B certificates, up to an amount equal to the aggregate of unreimbursed Realized Losses previously allocated to such Class;
Tenth, to the Class C certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of such Class;
Eleventh, to the Class C certificates, in reduction of the Certificate Balance thereof, an amount equal to the Principal Distribution Amount less amounts of Principal Distribution Amount distributed pursuant to all prior clauses, until the Certificate Balance of such Class is reduced to zero;
Twelfth, to the Class C certificates, up to an amount equal to the aggregate of unreimbursed Realized Losses previously allocated to such Class;
Thirteenth, to the Class D certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of such Class;
Fourteenth, to the Class D certificates, in reduction of the Certificate Balance thereof, an amount equal to the Principal Distribution Amount less amounts of Principal Distribution Amount distributed pursuant to all prior clauses, until the Certificate Balance of such Class is reduced to zero;
Fifteenth, to the Class D certificates, up to an amount equal to the aggregate of unreimbursed Realized Losses previously allocated to such Class;
Sixteenth, to the Class E certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of such Class;
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Seventeenth, to the Class E Certificates, in reduction of the Certificate Balance thereof, an amount equal to the Principal Distribution Amount less amounts of Principal Distribution Amount distributed pursuant to all prior clauses, until the Certificate Balance of such Class is reduced to zero;
Eighteenth, to the Class E certificates, up to an amount equal to the aggregate of unreimbursed Realized Losses previously allocated to such Class;
Nineteenth, to the Class F certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of such Class;
Twentieth, to the Class F certificates, in reduction of the Certificate Balance thereof, an amount equal to the Principal Distribution Amount less amounts of Principal Distribution Amount distributed pursuant to all prior clauses, until the Certificate Balance of such Class is reduced to zero;
Twenty-first, to the Class F certificates, up to an amount equal to the aggregate of unreimbursed Realized Losses previously allocated to such Class;
Twenty-second, to the Class G certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount of such Class;
Twenty-third, to the Class G certificates, in reduction of the Certificate Balance thereof, an amount equal to the Principal Distribution Amount less amounts of Principal Distribution Amount distributed pursuant to all prior clauses, until the Certificate Balance of such Class is reduced to zero;
Twenty-fourth, to the Class G certificates, up to an amount equal to the aggregate of unreimbursed Realized Losses previously allocated to such Class; and
Twenty-fifth, to the Class R certificates as specified in the PSA.
Notwithstanding the foregoing, on each Distribution Date occurring on or after the Crossover Date, regardless of the allocation of principal payments described in prioritySecond above, the Principal Distribution Amount for such Distribution Date will be distributed to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates,pro rata, based on their respective Certificate Balances, in reduction of their respective Certificate Balances, until the Certificate Balance of each such class is reduced to zero, and without regard to the Class A-SB Planned Principal Balance. The “Crossover Date” is the Distribution Date on which the Certificate Balance of each of the Class A-M, Class B, Class C, Class D, Class E, Class F and Class G certificates is (or will be) reduced to zero. None of the Class X Certificates will be entitled to any distribution of principal.
Reimbursement of previously allocated Realized Losses will not constitute distributions of principal for any purpose and will not result in an additional reduction in the Certificate Balance of the class of certificates in respect of which a reimbursement is made.
Pass-Through Rates
The interest rate (the “Pass-Through Rate”) applicable to each class of certificates (other than the Class V and Class R certificates) for any Distribution Date will equal the rates set forth below:
The Pass-Through Rate for the Class A-1 certificates will be aper annum rate equal to 1.4430%.
The Pass-Through Rate for the Class A-2 certificates will be aper annum rate equal to 2.4530%.
The Pass-Through Rate for the Class A-SB certificates will be aper annum rate equal to 2.6220%.
The Pass-Through Rate for the Class A-3 certificates will be aper annum rate equal to 2.4590%.
The Pass-Through Rate for the Class A-4 certificates will be aper annum rate equal to 2.7240%.
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The Pass-Through Rate for the Class A-M certificates will be aper annum rate equal to 2.9260%.
The Pass-Through Rate for the Class B certificates will be aper annum rate equal to the lesser of (i) the WAC Rate that corresponds to the related interest accrual period and (ii) 3.0770%.
The Pass-Through Rate for the Class C certificates will be aper annum rate equal to the lesser of (i) the WAC Rate that corresponds to the related interest accrual period and (ii) 3.6310%.
The Pass-Through Rate for the Class D certificates will be aper annum rate equal to (i) the WAC Rate that corresponds to the related interest accrual period minus (ii) 1.2500%, but in any case, not less than 0.0000%.
The Pass-Through Rate for the Class E certificates will be aper annum rate equal to 2.5500%.
The Pass-Through Rate for the Class F certificates will be aper annum rate equal to 2.5500%.
The Pass-Through Rate for the Class G certificates will be aper annum rate equal to 2.5500%.
The Pass-Through Rate for the Class X-A certificates for any Distribution Date will equal the excess, if any, of (a) the WAC Rate for the related Distribution Date, over (b) the weighted average of the Pass-Through Rates on the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4 and Class A-M certificates for such Distribution Date, weighted on the basis of their respective Certificate Balances immediately prior to that Distribution Date.
The Pass-Through Rate for the Class X-B certificates for any Distribution Date will equal the excess, if any of (a) the WAC Rate for the related Distribution Date, over (b) the weighted average of the Pass-Through Rates on the Class B and Class C certificates for such Distribution Date, weighted on the basis of their respective Certificate Balances immediately prior to that Distribution Date.
The Pass-Through Rate for the Class X-C certificates for any Distribution Date will equal aper annumrate equal to 1.2500%.
The Pass-Through Rate for the Class X-D certificates for any Distribution Date will equal the excess, if any, of (a) the WAC Rate for the related Distribution Date, over (b) the Pass-Through Rate on the Class E certificates for such Distribution Date.
The Pass-Through Rate for the Class X-E certificates for any Distribution Date will equal the excess, if any of (a) the WAC Rate for the related Distribution Date, over (b) the Pass-Through Rate on the Class F certificates for such Distribution Date.
The Pass-Through Rate for the Class X-F certificates for any Distribution Date will equal the excess, if any of (a) the WAC Rate for the related Distribution Date, over (b) the Pass-Through Rate on the Class G certificates for such Distribution Date.
The Class V certificates will not have a Pass-Through Rate or be entitled to distributions in respect of interest other than Excess Interest, if any, with respect to the ARD Loan.
The “WAC Rate” with respect to any Distribution Date is equal to the weighted average of the applicable Net Mortgage Rates of the Mortgage Loans (including a Non-Serviced Mortgage Loan) as of the first day of the related Collection Period, weighted on the basis of their respective Stated Principal Balances as of the first day of such Collection Period (after giving effect to any payments received during any applicable grace period).
The “Net Mortgage Rate” for each Mortgage Loan (including a Non-Serviced Mortgage Loan) is equal to the related Mortgage Rate then in effect (without regard to any increase in the interest rate of any ARD Loan after the related Anticipated Repayment Date), less the related Administrative Cost Rate;provided, however, that for purposes of calculating Pass-Through Rates and Withheld Amounts, the Net Mortgage Rate for any Mortgage Loan will be determined without regard to any modification, waiver or amendment
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of the terms of the related Mortgage Loan, whether agreed to by the master servicer, the special servicer or resulting from a bankruptcy, insolvency or similar proceeding involving the related borrower. Notwithstanding the foregoing, for Mortgage Loans that do not accrue interest on a 30/360 Basis, then, solely for purposes of calculating the Pass-Through Rate on the Regular Certificates, the Net Mortgage Rate of any 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 the 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 required to be paid in respect of the Mortgage Loan during the one-month period at the related Net Mortgage Rate;provided, however, that with respect to each Actual/360 Loan, the Net Mortgage Rate for the one-month period (1) prior to 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 (in either case, unless the related Distribution Date is the final Distribution Date) will be determined exclusive of Withheld Amounts, and (2) prior to the Due Date in March (or February, if the related Distribution Date is the final Distribution Date), will be determined inclusive of Withheld Amounts for the immediately preceding February and January, as applicable.
“Administrative Cost Rate” as of any date of determination will be aper annum rate equal to the sum of the Servicing Fee Rate, the Certificate Administrator/Trustee Fee Rate, the Operating Advisor Fee Rate and the CREFC® Intellectual Property Royalty License Fee Rate.
“Mortgage Rate” with respect to any Mortgage Loan (including any Non-Serviced Mortgage Loan) or any related Companion Loan is theper annum rate at which interest accrues on the Mortgage Loan or the related Companion Loan as stated in the related Mortgage Note or the promissory note evidencing such Companion Loan without giving effect to any default rate or Revised Rate.
Interest Distribution Amount
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 with respect to such class for such Distribution Date and (ii) the Interest Shortfall, if any, with respect to such class for such Distribution Date, less (B) any Excess Prepayment Interest Shortfall allocated to such class on such Distribution Date.
The “Interest Accrual Amount” with respect to any Distribution Date and any class of Regular Certificates is equal to interest for the related Interest Accrual Period accrued at the Pass-Through Rate for such class on the Certificate Balance or Notional Amount, as applicable, for such class immediately prior to that Distribution Date. Calculations of interest for each Interest Accrual Period will be made on 30/360 Basis.
An “Interest Shortfall” with respect to any Distribution Date for any class of Regular Certificates is the portion of the Interest Distribution Amount for such class remaining unpaid as of the close of business on the preceding Distribution Date.
The “Interest Accrual Period” for each Distribution Date will be the calendar month immediately preceding the month in which that Distribution Date occurs.
Principal Distribution Amount
The “Principal Distribution Amount” for any Distribution Date will be equal to the sum of the following amounts:
(a) the Principal Shortfall for that Distribution Date,
(b) the Scheduled Principal Distribution Amount for that Distribution Date, and
(c) the Unscheduled Principal Distribution Amount for that Distribution Date;
provided that the Principal Distribution Amount for any Distribution Date will be reduced, to not less than zero, by the amount of any reimbursements of:
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(A) Nonrecoverable Advances (including any servicing advance with respect to a Non-Serviced Mortgage Loan under the related Non-Serviced PSA reimbursed out of general collections on the Mortgage Loans), with interest on such Nonrecoverable Advances at the Reimbursement Rate, that are paid or reimbursed from principal collections 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
(B) Workout-Delayed Reimbursement Amounts paid or reimbursed from principal collections 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,further, that in the case of clauses (A) and (B) above, if any of the amounts that were reimbursed from principal collections on the Mortgage Loans (including REO Loans) are subsequently recovered on the related Mortgage Loan (or REO Loan), such recovery will increase the Principal Distribution Amount for the Distribution Date related to the period in which such recovery occurs.
The “Scheduled Principal Distribution Amount” for each Distribution Date will equal the aggregate of the principal portions of (a) all Periodic Payments (excluding balloon payments) with respect to the Mortgage Loans due during or, if and to the extent not previously received or advanced and distributed to Certificateholders on a preceding Distribution Date, prior to the related Collection Period and all Assumed Scheduled Payments with respect to the Mortgage Loans for the related Collection Period, in each case to the extent paid by the related borrower as of the related Determination Date (or, with respect to each Mortgage Loan with a Due Date occurring, or a grace period ending, after the related Determination Date, the related Due Date or, last day of such grace period, as applicable, to the extent received by the master servicer as of the business day preceding the Master Servicer Remittance Date) or advanced by the master servicer or the trustee, as applicable, and (b) all balloon payments with respect to the Mortgage Loans to the extent received on or prior to the related Determination Date (or, with respect to each Mortgage Loan with a Due Date occurring, or a grace period ending, after the related Determination Date, the related Due Date or, last day of such grace period, as applicable, to the extent received by the master servicer as of the business day preceding the Master Servicer Remittance Date), and to the extent not included in clause (a) above. The Scheduled Principal Distribution Amount from time to time will include all late payments of principal made by a borrower with respect to the Mortgage Loans, including late payments in respect of a delinquent balloon payment, received by the times described above in this definition, except to the extent those late payments are otherwise available to reimburse the master servicer or the trustee, as the case may be, for prior Advances, as described above.
The “Unscheduled Principal Distribution Amount” for each Distribution Date will equal the aggregate of the following: (a) all prepayments of principal received on the Mortgage Loans as of the Determination Date; and (b) the principal portion of 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;provided that all such Liquidation Proceeds and Insurance and Condemnation Proceeds will be reduced by any unpaid Special Servicing Fees, Liquidation Fees, any amount related to the Loss of Value Payments to the extent that such amount was transferred into the Collection Account during the related collection period, accrued interest on Advances and other additional trust fund expenses incurred in connection with the related Mortgage Loan, thus reducing the Unscheduled Principal Distribution Amount.
The “Assumed Scheduled Payment” for any Collection Period and with respect to any Mortgage Loan (including the Non-Serviced Mortgage Loans), as the case may be, that is delinquent in respect of its balloon payment or any REO Loan (excluding, for purposes of any P&I Advances, the portion allocable to any related Companion Loan), is an amount equal to the sum of (a) the principal portion of the Periodic Payment that would have been due on such Mortgage Loan or REO Loan on the related Due Date based on the constant payment required by such related Mortgage Note or the original amortization schedule of the Mortgage Loan (as calculated with interest at the related Mortgage Rate), if applicable, assuming the related balloon payment has not become due, after giving effect to any reduction in the principal balance
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occurring in connection with a modification, a default or a bankruptcy modification (or similar proceeding), and (b) interest on the Stated Principal Balance of that Mortgage Loan or REO Loan (excluding, for purposes of any P&I Advances, the portion allocable to any related Companion Loan) at its Mortgage Rate (net of the related Servicing Fees (other than in the case of any Non-Serviced Mortgage Loan, the servicing fee rate pursuant to the applicable pooling and servicing agreement)).
The “Principal Shortfall” for any Distribution Date means the amount, if any, by which (1) the Principal Distribution Amount for the prior Distribution Date exceeds (2) the aggregate amount actually distributed on the preceding Distribution Date in respect of such Principal Distribution Amount.
The “Class A-SB Planned Principal Balance” for any Distribution Date is the balance shown for such Distribution Date in the table set forth in Annex E to this prospectus. Such balances were calculated using, among other things, certain weighted average life assumptions. See “Yield and Maturity Considerations—Weighted Average Life”. Based on such assumptions, the Certificate Balance of the Class A-SB certificates on each Distribution Date would be expected to be reduced to the balance indicated for such Distribution Date in the table set forth in Annex E to this prospectus. We cannot assure you, however, that the mortgage loans will perform in conformity with our assumptions. Therefore, we cannot assure you that the balance of the Class A-SB certificates on any Distribution Date will be equal to the balance that is specified for such Distribution Date in the table.
Certain Calculations with Respect to Individual Mortgage Loans
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 on such Mortgage Loan or advanced for such Distribution Date. With respect to any Companion Loan on any date of determination, the Stated Principal Balance will equal the unpaid principal balance of such Companion Loan as of such date. With respect to any Whole Loan on any date of determination, the Stated Principal Balance of such Whole Loan will be the sum of the Stated Principal Balance of the related Mortgage Loan and each related Companion Loan on such date. The Stated Principal Balance of a Mortgage Loan or Whole Loan may also be reduced in connection with any modification that reduces the principal amount due on such Mortgage Loan or Whole Loan, as the case may be, or 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”. If any Mortgage Loan or Whole Loan is paid in full or the Mortgage Loan or Whole Loan (or any Mortgaged Property acquired in respect of the Mortgage Loan or Whole 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 or Whole Loan will be zero.
For purposes of calculating allocations of, or recoveries in respect of, Realized Losses, as well as for purposes of calculating the Servicing Fee and Certificate Administrator/Trustee Fee payable each month, each REO Property (including any REO Property with respect to any Non-Serviced Mortgage Loan held pursuant to the related Non-Serviced PSA) will be treated as if there exists with respect to such REO Property an outstanding Mortgage Loan and, if applicable, each related Companion Loan (an “REO Loan”), and all references to Mortgage Loan or Companion Loan and pool of Mortgage Loans in this prospectus, when used in that context, will be deemed to also be references to or to also include, as the case may be, any REO Loans. Each REO Loan will generally be deemed to have the same characteristics as its actual predecessor Mortgage Loan (including related Companion Loan), including the same fixed Mortgage Rate (and, accordingly, the same Net Mortgage Rate) and the same unpaid principal balance and Stated Principal Balance. Amounts due on the predecessor Mortgage Loan (including related Companion Loan) including any portion of it payable or reimbursable to the master servicer, the special servicer, the operating advisor, the asset representations reviewer, the certificate administrator or the trustee, as applicable, will continue to be “due” in respect of the REO Loan; and amounts received in respect of the related REO Property, net of payments to be made, or reimbursement to the master servicer for payments previously advanced, in connection with the operation and management of that property, generally will be applied by the master servicer as if received on the predecessor Mortgage Loan or related Companion Loan.
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With respect to each Serviced Whole Loan, no amounts relating to the related REO Property or REO Loan allocable to any related Companion Loan will be available for amounts due to the Certificateholders or to reimburse the issuing entity, other than in the limited circumstances related to Servicing Advances, indemnification, Special Servicing Fees and other reimbursable expenses related to such Serviced Whole Loan incurred with respect to such Serviced Whole Loan in accordance with the PSA.
Excess Interest
On each Distribution Date, the certificate administrator is required to distribute any Excess Interest received with respect to the ARD Loan on or prior to the related Determination Date to the holders of the Class V certificates. Excess Interest will not be available to make distributions to any other class of certificates or to provide credit support for other classes of certificates or offset any interest shortfalls or to pay any other amounts to any other party under the PSA.
Application Priority of Mortgage Loan Collections or Whole Loan Collections
Absent express provisions in the related Mortgage Loan documents (and, with respect to each Serviced Whole Loan, the related Intercreditor Agreement), all amounts collected by or on behalf of the issuing entity in respect of any Mortgage Loan in the form of payments from the related borrower, Liquidation Proceeds, condemnation proceeds or insurance proceeds (excluding, if applicable, in the case of each Serviced Whole Loan, any amounts payable to the holder of the related Companion Loan(s) pursuant to the related Intercreditor Agreement) will be deemed to be allocated for purposes of collecting amounts due under the Mortgage Loan, pursuant to the PSA, in the following order of priority:
First, as a recovery of any unreimbursed Advances (including any Workout-Delayed Reimbursement Amount) with respect to the related Mortgage Loan and unpaid interest at the Reimbursement Rate on such Advances and, if applicable, unreimbursed and unpaid expenses of the issuing entity;
Second, as a recovery of Nonrecoverable Advances and any interest on those Nonrecoverable Advances at the Reimbursement Rate, to the extent previously paid or reimbursed from principal collections on the Mortgage Loans (as described in the firstproviso in the definition of Principal Distribution Amount);
Third, to the extent not previously allocated pursuant to clause First, as a recovery of accrued and unpaid interest on such Mortgage Loan (exclusive of default interest and Excess Interest) to the extent of the excess of (i) accrued and unpaid interest on such Mortgage Loan at the related Mortgage Rate in effect from time to time through the end of the applicable mortgage interest accrual period, over (ii) the sum of (a) the cumulative amount of the reductions (if any) in the amount of related P&I Advances for such Mortgage Loan that have occurred in connection with related Appraisal Reduction Amounts (to the extent collections have not been allocated as recovery of accrued and unpaid interest pursuant to clause Fifth below on earlier dates) and (b) Accrued AB Loan Interest;
Fourth, to the extent not previously allocated pursuant to clause First, as a recovery of principal of such Mortgage Loan then due and owing, including by reason of acceleration of such Mortgage Loan following a default thereunder (or, if the Mortgage Loan has been liquidated, as a recovery of principal to the extent of its entire remaining unpaid principal balance);
Fifth, as a recovery of (i) accrued and unpaid interest on such Mortgage Loan to the extent of the cumulative amount of the reductions (if any) in the amount of related P&I Advances for such Mortgage Loan that have occurred in connection with related Appraisal Reduction Amounts and (ii) Accrued AB Loan Interest (in each of clause (i) and (ii), to the extent collections have not been allocated as recovery of accrued and unpaid interest pursuant to this clause Fifth on earlier dates);
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Sixth, as a recovery of amounts to be currently allocated to the payment of, or escrowed for the future payment of, real estate taxes, assessments and insurance premiums and similar items relating to such Mortgage Loan;
Seventh, as a recovery of any other reserves to the extent then required to be held in escrow with respect to such Mortgage Loan;
Eighth, as a recovery of any yield maintenance charge or prepayment premium then due and owing under such Mortgage Loan;
Ninth, as a recovery of any late payment charges and default interest and Excess Interest then due and owing under such Mortgage Loan;
Tenth, as a recovery of any assumption fees and Modification Fees then due and owing under such Mortgage Loan;
Eleventh, as a recovery of any other amounts then due and owing under such Mortgage Loan other than remaining unpaid principal (if both consent fees and Operating Advisor Consulting Fees are due and owing,first, allocated to consent fees andthen, allocated to Operating Advisor Consulting Fees); and
Twelfth, as a recovery of any remaining principal of such Mortgage Loan to the extent of its entire remaining unpaid principal balance; and
Thirteenth, in the case of an ARD Loan after the related Anticipated Repayment Date, any accrued but unpaid Excess Interest;
provided that, to the extent required under the REMIC provisions of the Code, payments or proceeds received (or receivable by exercise of the lender’s rights under the related Mortgage Loan documents) with respect to any partial release of a Mortgaged Property (including in connection with a condemnation) at a time when the loan-to-value ratio of the related Mortgage Loan or Serviced Whole Loan exceeds 125%, or would exceed 125% following any partial release (based solely on the value of real property and excluding personal property and going concern value, if any) must be collected and allocated to reduce the principal balance of the Mortgage Loan or Serviced Whole Loan in the manner permitted by such REMIC provisions.
“Accrued AB Loan Interest” means, with respect to any AB Modified Loan and any date of determination, accrued and unpaid interest that remains unpaid with respect to the junior note(s) of such AB Modified Loan.
Collections by or on behalf of the issuing entity in respect of any REO Property (exclusive of the amounts to be allocated to the payment of the costs of operating, managing, leasing, maintaining and disposing of such REO Property and, if applicable, in the case of each Serviced Whole Loan, exclusive of any amounts payable to the holder of the related Companion Loan(s), as applicable, pursuant to the related Intercreditor Agreement) will be deemed to be allocated for purposes of collecting amounts due under the Mortgage Loan, pursuant to the PSA, in the following order of priority:
First, as a recovery of any unreimbursed Advances (including any Workout-Delayed Reimbursement Amount) with respect to the related Mortgage Loan and interest at the Reimbursement Rate on all Advances and, if applicable, unreimbursed and unpaid expenses of the issuing entity with respect to the related Mortgage Loan;
Second, as a recovery of Nonrecoverable Advances and any interest on those Nonrecoverable Advances at the Reimbursement Rate, to the extent previously paid or reimbursed from principal collections on the Mortgage Loans (as described in the firstproviso in the definition of Principal Distribution Amount);
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Third, to the extent not previously allocated pursuant to clause First, as a recovery of accrued and unpaid interest on such Mortgage Loan (exclusive of default interest and Excess Interest) to the extent of the excess of (i) accrued and unpaid interest on such Mortgage Loan at the related Mortgage Rate in effect from time to time through the end of the applicable mortgage interest accrual period, over (ii) the sum of (a) the cumulative amount of the reductions (if any) in the amount of related P&I Advances for such Mortgage Loan that have occurred in connection with related Appraisal Reduction Amounts (to the extent collections have not been allocated as a recovery of accrued and unpaid interest pursuant to clause Fifth below on earlier dates and (b) Accrued AB Loan Interest;
Fourth, to the extent not previously allocated pursuant to clause First, as a recovery of principal of such Mortgage Loan to the extent of its entire unpaid principal balance;
Fifth, as a recovery of (i) accrued and unpaid interest on such Mortgage Loan to the extent of the cumulative amount of the reductions (if any) in the amount of related P&I Advances for such Mortgage Loan that have occurred in connection with related Appraisal Reduction Amounts and (ii) Accrued AB Loan Interest (in each of clause (i) and (ii), to the extent collections have not been allocated as recovery of accrued and unpaid interest pursuant to this clause Fifth on earlier dates);
Sixth, as a recovery of any yield maintenance charge or prepayment premium then due and owing under such Mortgage Loan;
Seventh, as a recovery of any late payment charges and default interest and Excess Interest then due and owing under such Mortgage Loan;
Eighth, as a recovery of any assumption fees and Modification Fees then due and owing under such Mortgage Loan; and
Ninth, as a recovery of any other amounts then due and owing under such Mortgage Loan other than remaining unpaid principal (if both consent fees and Operating Advisor Consulting Fees are due and owing,first, allocated to consent fees andthen, allocated to Operating Advisor Consulting Fees); and
Tenth, in the case of an ARD Loan after the related Anticipated Repayment Date, any accrued but unpaid Excess Interest.
Allocation of Yield Maintenance Charges and Prepayment Premiums
On any Distribution Date, prepayment premiums and yield maintenance charges collected in respect of the Mortgage Loans during the related Collection Period will be required to be distributed by the certificate administrator to the holders of the Class A-1 through Class D Certificates in the following manner: such holders will receive the product of (a) a fraction, not greater than one, the numerator of which is the amount of principal distributed to such class of certificates on such Distribution Date and the denominator of which is the total amount of principal distributed to the holders of each of the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class A-M, Class B, Class C, Class D, Class E, Class F and Class G certificates 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 the prepayment premiums or the yield maintenance charges, as applicable, collected on such principal prepayment during the related Collection Period.
Any yield maintenance charges or prepayment premiums collected during the related Collection Period remaining after such distributions described in the preceding paragraph (the “IO Group YM Distribution Amount”) will be allocated in the following manner:
(a)first, to the Class X-A certificates, in an amount equal to the product of (a) a fraction, the numerator of which is the aggregate amount of principal distribution to the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4 and Class A-M certificates on such Distribution Date and the
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denominator of which is the total Principal Distribution Amount in respect of such Distribution Date, multiplied by (b) the IO Group YM Distribution Amount;
(b)second, to the Class X-B certificates, in an amount equal to the product of (a) a fraction, the numerator of which is the aggregate amount of principal distribution to the Class B and Class C certificates on such Distribution Date and the denominator of which is the total Principal Distribution Amount in respect of such Distribution Date, multiplied by (b) the IO Group YM Distribution Amount;
(c)third, to the Class X-C certificates, in an amount equal to the product of (a) a fraction, the numerator of which is the amount of principal distribution to the Class D certificates on such Distribution Date and the denominator of which is the total Principal Distribution Amount in respect of such Distribution Date, multiplied by (b) the IO Group YM Distribution Amount;
(d)fourth, to the Class X-D certificates, in an amount equal to the product of (a) a fraction, the numerator of which is the amount of principal distribution to the Class E certificates on such Distribution Date and the denominator of which is the total Principal Distribution Amount in respect of such Distribution Date, multiplied by (b) the IO Group YM Distribution Amount;
(e)fifth, to the Class X-E certificates, in an amount equal to the product of (a) a fraction, the numerator of which is the amount of principal distribution to the Class F certificates on such Distribution Date and the denominator of which is the total Principal Distribution Amount in respect of such Distribution Date, multiplied by (b) the IO Group YM Distribution Amount; and
(f)sixth, to the Class X-F certificates, the IO Group YM Distribution Amount remaining after such distribution to the holders of the Class X-A, Class X-B, Class X-C, Class X-D and Class X-E certificates described in (a) through (e) above.
The “Base Interest Fraction” for any principal prepayment on any Mortgage Loan and for any of the Class A-1 through Class D certificates will be a fraction (not greater than one) (a) whose numerator is the greater of zero and the amount, if any, by which (i) the Pass-Through Rate on such class of certificates exceeds (ii) the yield rate (as provided by the master servicer) used in calculating the prepayment premium or yield maintenance charge, as applicable, with respect to such principal prepayment and (b) whose denominator is the amount, if any, by which (i) the Mortgage Rate on such Mortgage Loan exceeds (ii) the yield rate (as provided by the master servicer) used in calculating the prepayment premium or yield maintenance charge, as applicable, with respect to such principal prepayment;provided,however, that if such yield rate is greater than or equal to the Mortgage Rate on such Mortgage Loan, then the Base Interest Fraction will be zero;provided,further, that if such yield rate is greater than or equal to the Mortgage Rate on such Mortgage Loan, but less than the Pass-Through Rate described in the clause (a)(i) above, then the Base Interest Fraction will be one.
The yield rate with respect to any prepaid Mortgage Loan will be equal to the yield rate stated in the related loan documents, or if none is stated, will be the yield rate which, when compounded monthly, is equivalent to the yield, on the U.S. Treasury primary issue with a maturity date closest to the maturity date or the related Anticipated Repayment Date, as applicable, for the prepaid Mortgage Loan. In the event that there are: (a) two or more U.S. Treasury issues with the same coupon, the issue with the lower yield will be selected and (b) two or more U.S. Treasury issues with maturity dates equally close to the maturity date or the related Anticipated Repayment Date, as applicable, for such prepaid Mortgage Loan, the issue with the earlier maturity date will be selected.
In the case of the Serviced Whole Loan, prepayment premiums or yield maintenance charges actually collected in respect of such Serviced Whole Loan will be allocated in the proportions described in the applicable intercreditor agreement. See “Description of the Mortgage Pool—The Whole Loans” in this prospectus.
For a description of yield maintenance charges, see “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans” and “Certain Legal Aspects of Mortgage Loans—Default Interest and Limitations on Prepayments”.
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Assumed Final Distribution Date; Rated Final Distribution Date
The “Assumed Final Distribution Date” with respect to any class of certificates is the Distribution Date on which the aggregate Certificate Balance or Notional Amount of that class of certificates would be reduced to zero based on the assumptions set forth below. The Assumed Final Distribution Date with respect to each class of Offered Certificates will in each case be as follows:
Class Designation | Assumed Final Distribution | |
| Class A-1 | August 2021 | |
| Class A-2 | August 2021 | |
| Class A-SB | July 2026 | |
| Class A-3 | July 2026 | |
| Class A-4 | August 2026 | |
| Class X-A | August 2026 | |
| Class A-M | August 2026 | |
| Class B | August 2026 | |
| Class C | August 2026 |
The Assumed Final Distribution Dates set forth above were calculated without regard to any delays in the collection of balloon payments and without regard to delinquencies, defaults or liquidations. Accordingly, in the event of defaults on the Mortgage Loans, the actual final Distribution Date for one or more classes of the Offered Certificates may be later, and could be substantially later, than the related Assumed Final Distribution Date(s).
In addition, the Assumed Final Distribution Dates set forth above were calculated on the basis of a 0% CPR prepayment rate and the Modeling Assumptions. Since the rate of payment (including prepayments) of the Mortgage Loans may exceed the scheduled rate of payments, and could exceed the scheduled rate by a substantial amount, the actual final Distribution Date for one or more classes of the Offered Certificates may be earlier, and could be substantially earlier, than the related Assumed Final Distribution Date(s). The rate of payments (including prepayments) on the Mortgage Loans will depend on the characteristics of the Mortgage Loans, as well as on the prevailing level of interest rates and other economic factors, and we cannot assure you as to actual payment experience.
The “Rated Final Distribution Date” for each class of Offered Certificates will be the Distribution Date in August 2049. See “Ratings”.
Prepayment Interest Shortfalls
If a borrower prepays a Mortgage Loan or Serviced Whole Loan (with such prepayment allocated between the related Mortgage Loan and Serviced Companion Loan in accordance with the related Intercreditor Agreement) 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 and any Excess Interest) 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 (without regard to any prepayment premium or yield maintenance charge actually collected) constitute a “Prepayment Interest Excess”. Conversely, if a borrower prepays a Mortgage Loan or Serviced Whole Loan (with such prepayment allocated between the related Mortgage Loan and Serviced Companion Loan in accordance with the related Intercreditor Agreement) in whole or in part after the Determination Date (or, with respect to each Mortgage Loan or Serviced Companion Loan, as applicable, with a due date occurring after the related Determination Date, the related Due Date) in any calendar month and does not pay interest on such prepayment through the following Due Date, then the shortfall in a full month’s interest (net of related Servicing Fees and any Excess Interest) on such prepayment will constitute a “Prepayment Interest Shortfall”.
To the extent that the Prepayment Interest Excess for all Mortgage Loans (other than the Non-Serviced Mortgage Loans) or Serviced Companion Loans serviced by the master servicer exceeds the Compensating Interest Payment for all Mortgage Loans (other than the Non-Serviced Mortgage Loans) or Serviced Companion Loans serviced by the master servicer as of any Distribution Date, such excess
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amount (the “Net Prepayment Interest Excess”) will be payable to the master servicer as additional compensation.
The master servicer will be required to deliver to the certificate administrator for deposit in the Distribution Account (other than the portion of any Compensating Interest Payment described below that is allocable to a Serviced Companion Loan) on each Master Servicer Remittance Date, without any right of reimbursement thereafter, a cash payment (a “Compensating Interest Payment”) in an amount, with respect to each Mortgage Loan (other than the Non-Serviced Mortgage Loans) and any related Serviced Pari Passu Companion Loan, equal to the lesser of:
| (i) | the aggregate amount of Prepayment Interest Shortfalls incurred in connection with voluntary principal prepayments received in respect of the Mortgage Loans (other than the Non-Serviced Mortgage Loans) and any related Serviced Pari Passu Companion Loan (in each case other than a Specially Serviced Loan or a Mortgage Loan or any related Serviced Pari Passu Companion Loan on which the special servicer allowed a prepayment on a date other than the applicable Due Date) for the related Distribution Date, and |
| (ii) | the aggregate of (A) that portion of the master servicer’s Servicing Fees for the related Distribution Date that is, in the case of each Mortgage Loan, Serviced Pari Passu Companion Loan and REO Loan for which such Servicing Fees are being paid in such Collection Period, calculated at a rate of 0.0025%per annum, (B) all Prepayment Interest Excesses received by the master servicer during such Collection Period with respect to the Mortgage Loans (and, so long as a Whole Loan is serviced under the PSA, any related Serviced Pari Passu Companion Loan) subject to such prepayment and (C) to the extent earned on principal prepayments, net investment earnings payable to the master servicer for such Collection Period received by the master servicer during such Collection Period with respect to the Mortgage Loan or any related Serviced Pari Passu Companion Loan, as applicable, subject to such prepayment. In no event will the rights of the Certificateholders to the offset of the aggregate Prepayment Interest Shortfalls be cumulative. |
If a Prepayment Interest Shortfall occurs with respect to a Mortgage Loan or Serviced Whole Loan as a result of the master servicer failing to enforce the related Mortgage Loan or Serviced Whole Loan documents regarding principal prepayments (a “Prohibited Prepayment”) (other than (t) the Non-Serviced Mortgage Loans, (u) in accordance with the terms of the Mortgage Loan documents, (v) subsequent to a default under the related Mortgage Loan documents (providedthat the master servicer reasonably believes that acceptance of such prepayment is consistent with the Servicing Standard) or if the Mortgage Loan or Serviced Whole Loan is a Specially Serviced Loan, (w) at the request or with the consent of the special servicer and so long as a Control Termination Event has not occurred or is not continuing (other than with respect to Excluded Loans), the Directing Certificateholder, (x) pursuant to applicable law or a court order, (y) in connection with the payment of any Insurance and Condemnation Proceeds unless the master servicer did not apply the proceeds thereof in accordance with the terms of the related loan documents and such failure causes the shortfall or (z) a previously Specially Serviced Loan with respect to which the special servicer has waived or amended the prepayment restriction such that the related borrower is not required to prepay on a Due Date or pay interest that would have accrued on the amount prepaid through and including the last day of the Interest Accrual Period occurring following the date of such prepayment), then for purposes of calculating the Compensating Interest Payment for the related Distribution Date, master servicer will pay, without regard to clause (ii) above, the aggregate amount of Prepayment Interest Shortfalls with respect to such Mortgage Loan or Serviced Whole Loan otherwise described in clause (i) above in connection with such Prohibited Prepayments.
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 and the portion of the compensating interest payments allocable to the Non-Serviced Mortgage Loans to the extent received from the related Non-Serviced Master Servicer (the aggregate of the Prepayment Interest Shortfalls that are not so covered, as to the related Distribution Date, the “Excess Prepayment Interest
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Shortfall”) will be allocated on that Distribution Date among each class of Regular Certificates,pro rata in accordance with their respective Interest Accrual Amounts for that Distribution Date.
Subordination; Allocation of Realized Losses
The rights of holders of the Subordinate Certificates to receive distributions of amounts collected or advanced on the Mortgage Loans will be subordinated, to the extent described in this prospectus, to the rights of holders of the Senior Certificates. In particular, the rights of the holders of the Subordinate Certificates to receive distributions of interest and principal, as applicable, will be subordinated to such rights of the holders of the Senior Certificates.
This subordination will be effected in two ways: (i) by the preferential right of the holders of a class of certificates on any Distribution Date the amounts of interest and/or principal distributable to them prior to any distribution being made on such Distribution Date in respect of any classes of certificates subordinate to that class (as described above under “—Distributions—Priority of Distributions”)and (ii) by the allocation of Realized Losses to classes of certificates that are subordinate to more senior classes, as described below.
No other form of credit support will be available for the benefit of the Offered Certificates.
Prior to the Crossover Date, allocation of principal on any Distribution Date will be made as described under “—Distributions—Priority of Distributions” above. On or after the Crossover Date, allocation of principal will be made to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates that are still outstanding,pro rata, until their Certificate Balances have been reduced to zero. See “—Distributions—Priority of Distributions” above.
Allocation to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, for so long as they are outstanding, of the entire Principal Distribution Amount for each Distribution Date will have the effect of reducing the aggregate Certificate Balance of the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 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-SB, Class A-3 and Class A-4 certificates, the percentage interest in the issuing entity evidenced by the A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates will be decreased (with a corresponding increase in the percentage interest in the issuing entity evidenced by the Subordinate Certificates), thereby increasing, relative to their respective Certificate Balances, the subordination afforded to the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates by the Subordinate Certificates.
Following retirement of the Class A-1, Class A-2, Class A-SB, Class A-3 and Class A-4 certificates, the successive allocation on each Distribution Date of the remaining Principal Distribution Amount to the Class A-M, Class B, Class C, Class D, Class E, Class F and Class G certificates, in that order, for so long as they are outstanding, will provide a similar, but diminishing benefit to those certificates (other than to Class G certificates) as to the relative amount of subordination afforded by the outstanding classes of certificates with later sequential designations.
On each Distribution Date, immediately following the distributions to be made to the Certificateholders on that date, the certificate administrator is required to calculate the amount, if any, by which the aggregate Certificate Balance of the Principal Balance Certificates, after giving effect to distributions of principal on such Distribution Date, exceeds the aggregate Stated Principal Balance of the Mortgage Loans in the Mortgage Pool (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 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 deficit, a “Realized Loss”). The certificate administrator will be required to allocate any Realized Losses among the respective classes of Principal Balance Certificates in the following order, until the Certificate Balance of each such class is reduced to zero:
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first, to the Class G certificates;
second, to the Class F certificates;
third, to the Class E certificates;
fourth, to the Class D certificates;
fifth, to the Class C certificates;
sixth, to the Class B certificates; and
seventh, to the Class A-M certificates.
Following the reduction of the Certificate Balances of all classes of Subordinate Certificates to zero, the certificate administrator will be required to allocate Realized Losses among the Senior Certificates (other than the Class X Certificates),pro rata, based upon their respective Certificate Balances, until their respective Certificate Balances have been reduced to zero.
Realized Losses will not be allocated to the Class V certificates or the Class R certificates and will not be directly allocated to the Class X Certificates. However, the Notional Amounts of the classes of Class X Certificates will be reduced if the related classes of Principal Balance Certificates are reduced by such Realized Losses.
In general, Realized Losses could result from the occurrence of: (1) losses and other shortfalls on or in respect of the Mortgage Loans, including as a result of defaults and delinquencies on the related Mortgage Loans, Nonrecoverable Advances made in respect of the Mortgage Loans, the payment to the special servicer of any compensation as described in “Pooling and Servicing Agreement—Servicing and Other Compensation and Payment of Expenses”, and the payment of interest on Advances and certain servicing expenses; and (2) certain unanticipated, non-Mortgage Loan specific expenses of the issuing entity, including certain reimbursements to the certificate administrator or trustee as described under “Transaction Parties—The Trustee and Certificate Administrator”, and certain federal, state and local taxes, and certain tax-related expenses, payable out of the issuing entity, as described under “Material Federal Income Tax Considerations”.
A class of certificates will be considered outstanding until its Certificate Balance or Notional Amount is reduced to zero, except that the Class V certificates will be considered outstanding so long as holders of such certificates are entitled to receive Excess Interest. However, notwithstanding a reduction of its Certificate Balance to zero, reimbursements of any previously allocated Realized Losses are required thereafter to be made to a class of Principal Balance Certificates in accordance with the payment priorities set forth in “—Distributions—Priority of Distributions” above.
Reports to Certificateholders; Certain Available Information
Certificate Administrator Reports
On each Distribution Date, the certificate administrator will be required to prepare and make available to each Certificateholder of record on the certificate administrator’s website a Distribution Date statement providing all information required under Regulation AB and in the form of Annex B relating to distributions made on that date for the relevant class and the recent status of the Mortgage Loans. The certificate administrator will include on each Distribution Date statement a statement that each Certificateholder may access such notices via the certificate administrator’s website and that each Certificateholder may register to receive electronic mail notifications when such notices are posted thereon.
In addition, the certificate administrator will include (to the extent it receives such information) (i) the identity of any Mortgage Loans permitting additional debt, identifying (A) the amount of any additional debt incurred during the related Collection Period, (B) the total debt service coverage ratio calculated on the basis of the Mortgage Loan and such additional debt and (C) the aggregate loan-to-value ratio
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calculated on the basis of the Mortgage Loan and the additional debt in each applicable Form 10-D filed on behalf of the issuing entity and (ii) the beginning and ending account balances for each of the Securitization Accounts (for the applicable period) in each Form 10-D filed on behalf of the issuing entity.
Within a reasonable period of time after the end of each calendar year, the certificate administrator is required to furnish to each person or entity who at any time during the calendar year was a holder of a certificate, a statement containing information (i) the amount of the distribution on each Distribution Date in reduction of the Certificate Balance of the certificates, and (ii) the amount of the distribution on each Distribution Date of the applicable Interest Accrual Amount, in each case, as to the applicable class, aggregated for the related calendar year or applicable partial year during which that person was a Certificateholder, together with any other information that the certificate administrator deems necessary or desirable, or that a Certificateholder or Certificate Owner reasonably requests, to enable Certificateholders to prepare their tax returns for that calendar year. This obligation of the certificate administrator will be deemed to have been satisfied to the extent that substantially comparable information will be provided by the certificate administrator pursuant to any requirements of the Code as from time to time are in force.
In addition, the certificate administrator will make available on its website (www.ctslink.com), to the extent received from the applicable person, on each Distribution Date to each Privileged Person the following reports (other than clause (1) below, the “CREFC® Reports”) prepared by the master servicer, the certificate administrator or the special servicer, as applicable, substantially in the form provided in the PSA, in the case of the Distribution Date Statement (which form is subject to change) and as required under the PSA in the case of the CREFC®Reports and including substantially the following information:
(1) a report as of the close of business on the immediately preceding Determination Date, containing the information provided for in Annex B;
(2) a Commercial Real Estate Finance Council (“CREFC®”) delinquent loan status report;
(3) a CREFC® historical loan modification and corrected loan report;
(4) a CREFC® advance recovery report;
(5) a CREFC® total loan report;
(6) a CREFC® operating statement analysis report;
(7) a CREFC® comparative financial status report;
(8) a CREFC® net operating income adjustment worksheet;
(9) a CREFC® real estate owned status report;
(10) a CREFC® servicer watch list;
(11) a CREFC® loan level reserve and letter of credit report;
(12) a CREFC® property file;
(13) a CREFC® financial file;
(14) a CREFC® loan setup file; and
(15) a CREFC® loan periodic update file.
The master servicer or the special servicer, as applicable, may omit any information from these reports that the master servicer or the special servicer, as applicable, regards as confidential, so long as such information is not required to be disclosed pursuant to Item 1125 of Regulation AB. Subject to any
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potential liability for willful misconduct, bad faith or negligence as described under “Pooling and Servicing Agreement—Limitation on Liability; Indemnification”, none of the master servicer, the special servicer, the trustee or the certificate administrator will be responsible for the accuracy or completeness of any information supplied to it by a borrower or another party to the PSA or a party under an Non-Serviced PSA that is included in any reports, statements, materials or information prepared or provided by it. Some information will be made available to Certificateholders by electronic transmission as may be agreed upon between the depositor and the certificate administrator.
On or before each Master Servicer Remittance Date, the master servicer will deliver to the certificate administrator by electronic means:
| · | a CREFC® property file; |
| · | a CREFC® financial file; |
| · | a CREFC® loan setup file (with respect to the first Master Servicer Remittance Date only); and |
| · | a CREFC® loan periodic update file. |
In addition, the master servicer (with respect to a Mortgage Loan that is not a Specially Serviced Loan) or applicable special servicer (with respect to Specially Serviced Loans and REO Properties) is also required to prepare the following for each Mortgaged Property and REO Property:
| · | Within 30 days after receipt of a quarterly operating statement, if any, commencing for the quarter ending December 31, 2016, a CREFC®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,provided, however, that any analysis or report with respect to the first calendar quarter of each year will not be required to the extent provided in the then current applicable CREFC® guidelines (it being understood that as of the date of this prospectus, the applicable CREFC® guidelines provide that such analysis or report with respect to the first calendar quarter (in each year) is not required) for a Mortgaged Property unless such Mortgaged Property is analyzed on a trailing 12 month basis, or if the related Mortgage Loan (other than a Non-Serviced Mortgage Loan) is on the CREFC® Servicer Watch List). The master servicer (with respect to non-Specially Serviced Loans) or the special servicer (with respect to Specially Serviced Loans and REO Properties), as applicable, will deliver to the certificate administrator, the operating advisor and each holder of a Serviced Companion Loan by electronic means the operating statement analysis upon request. |
| · | Within 60 days after receipt by the special servicer (with respect to Specially Serviced Loans and REO Properties) or within 45 days after receipt by the master servicer (with respect to a Mortgage Loan that is not a Specially Serviced Loan) of any annual operating statements or rent rolls commencing for the calendar year ending December 31, 2016, a CREFC®net operating income 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 described in the PSA to “normalize” the full year net operating income and debt service coverage numbers used by the master servicer to satisfy its reporting obligation described in clause (8) above. Such special servicer or the master servicer will deliver to the certificate administrator, the operating advisor and each holder of a related Serviced Companion Loan by electronic means the CREFC®net operating income adjustment worksheet upon request. |
Certificate Owners and any holder of a Serviced Companion Loan who are also Privileged Persons may also obtain access to any of the certificate administrator reports upon request and pursuant to the provisions of the PSA.
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“Privileged Person” includes the depositor and its designees, the initial purchasers, the underwriters, the mortgage loan sellers, the master servicer, the special servicer, any Excluded Special Servicer, the trustee, the certificate administrator, any additional servicer designated by the master servicer or the special servicer, the Directing Certificateholder (but only prior to the occurrence of a Consultation Termination Event), the operating advisor, any affiliate of the operating advisor designated by the operating advisor, the asset representations reviewer, any holder of a Companion Loan who provides an Investor Certification, any person who provides the certificate administrator with an Investor Certification and any nationally recognized statistical rating organization within the meaning of Section 3(a)(62) of the Exchange Act (“NRSRO”), including any Rating Agency, that delivers a NRSRO Certification to the certificate administrator, which Investor Certification and NRSRO Certification may be submitted electronically via the certificate administrator’s website;provided that in no event may a Borrower Party (other than a Borrower Party that is the special servicer) be entitled to receive (i) if such party is the Directing Certificateholder or any Controlling Class Certificateholder (each such party, as applicable, an “Excluded Controlling Class Holder”), any Excluded Information via the certificate administrator’s website unless a loan-by-loan segregation is later performed by the certificate administrator, in which case such access will only be prohibited with respect to the related Excluded Controlling Class Loan and (ii) if such party is not the Directing Certificateholder or any Controlling Class Certificateholder, any information other than the Distribution Date statement;provided,however, that, if the special servicer obtains knowledge that it is a Borrower Party, the special servicer will nevertheless be a Privileged Person;provided,further,however, that the special servicer will not directly or indirectly provide any information solely related to any Excluded Special Servicer Loan (which may include any asset status reports, Final Asset Status Reports (or summaries thereof), and such other information as may be specified in the PSA pertaining to such Excluded Special Servicer Loan) to the related Borrower Party, any of the special servicer’s employees or personnel or any of its affiliates involved in the management of any investment in the related Borrower Party or the related Mortgaged Propertyor, to its actual knowledge, any non-affiliate that holds a direct or indirect ownership interest in the related Borrower Party, and will maintain sufficient internal controls and appropriate policies and procedures in place in order to comply with those obligations;provided,further,however, that any Excluded Controlling Class Holder will be permitted to obtain, upon reasonable request in accordance with terms of the PSA, any Excluded Information relating to any Excluded Controlling Class Loan with respect to which such Excluded Controlling Class Holder is not a Borrower Party (if such Excluded Information is not otherwise available via the certificate administrator’s website) from the master servicer (with respect to non-Specially Serviced Loans) or the special servicer (with respect to Specially Serviced Loans), in each case, to the extent in the possession of the master servicer or the special servicer, as applicable.
“Borrower Party” means a borrower, a mortgagor, a manager of a Mortgaged Property, Restricted Mezzanine Holder or any Borrower Party Affiliate.
“Borrower Party Affiliate” means, with respect to a borrower, a mortgagor, a manager of a Mortgaged Property or a Restricted Mezzanine Holder, (a) any other person controlling or controlled by or under common control with such borrower, mortgagor, manager or Restricted Mezzanine Holder, as applicable, (b) solely with respect to the 10 largest Mortgage Loans by Stated Principal Balance, any other person owning, directly or indirectly, 25% or more of the beneficial interests in such borrower, mortgagor or manager, as applicable, or (c) any other person owning, directly or indirectly, 25% or more of the beneficial interests in such Restricted Mezzanine Holder. For the purposes of this definition, “control” when used with respect to any specified person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Restricted Mezzanine Holder” means a holder of a related mezzanine loan that has been accelerated or as to which the mezzanine lender has initiated foreclosure or enforcement proceedings against the equity collateral pledged to secure such mezzanine loan.
“Excluded Controlling Class Loan” means a Mortgage Loan or Whole Loan with respect to which the Directing Certificateholder or any Controlling Class Certificateholder is a Borrower Party.
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“Excluded Information” means, with respect to any Excluded Controlling Class Loan, any information solely related to such Excluded Controlling Class Loan and/or the related Mortgaged Properties, which may include any asset status reports, Final Asset Status Reports (or summaries thereof), and such other information as may be specified in the PSA pertaining to such Excluded Controlling Class Loan and/or the related Mortgaged Properties other than such information with respect to such Excluded Controlling Class Loan that is aggregated with information on other Mortgage Loans at a pool level.
“Excluded Loan” means a Mortgage Loan or Whole Loan with respect to which the Directing Certificateholder or the holder of the majority of the Controlling Class is a Borrower Party.
“Investor Certification” means a certificate (which may be in electronic form), substantially in the form attached to the PSA or in the form of an electronic certification on the certificate administrator’s website (which may be a “click-through”), representing (i) that such person executing the certificate is a Certificateholder, the Directing Certificateholder (to the extent such person is not a Certificateholder), a beneficial owner of a certificate, a Companion Loan Holder or a prospective purchaser of a certificate (or any investment advisor or manager or other representative of the foregoing), (ii) that either (a) such person is not a Borrower Party, in which case such person will have access to all the reports and information made available to Certificateholders via the certificate administrator’s website under the PSA, or (b) such person is a Borrower Party, in which case (1) if such person is the Directing Certificateholder or a Controlling Class Certificateholder, such person will have access to all the reports and information made available to Certificateholders via the certificate administrator’s website under the PSA other than any Excluded Information as set forth in the PSA or (2) if such person is not the Directing Certificateholder or a Controlling Class Certificateholder, in which case such person will only receive access to the Distribution Date statements prepared by the certificate administrator, (iii) that such person has received a copy of the final prospectus and (iv) such person agrees to keep any Privileged Information confidential and will not violate any securities laws;provided,however, that any Excluded Controlling Class Holder (i) will be permitted to obtain, upon reasonable request in accordance with terms of PSA, any Excluded Information relating to any Excluded Controlling Class Loan with respect to which such Excluded Controlling Class Holder is not a Borrower Party (if such Excluded Information is not otherwise available via the certificate administrator’s website on account of it constituting Excluded Information) from the master servicer (with respect to non-Specially Serviced Loans) or the special servicer (with respect to Specially Serviced Loans), in each case, to the extent in the possession of the master servicer or the special servicer, as applicable and (ii) will be considered a Privileged Person for all other purposes, except with respect to its ability to obtain information with respect to any related Excluded Controlling Class Loan.
A “Certificateholder” is the person in whose name a certificate is registered in the certificate register or any beneficial owner thereof;provided, however, that solely for the purposes of giving any consent, approval, waiver or taking any action pursuant to the PSA, any certificate registered in the name of or beneficially owned by (i) the master servicer, the special servicer (including, for the avoidance of doubt, any Excluded Special Servicer), the trustee, the certificate administrator, the depositor, any mortgage loan seller or any affiliate of any of such persons or (ii) any Borrower Party, in each case will be deemed not to be outstanding (provided that notwithstanding the foregoing, any Controlling Class certificates owned by an Excluded Controlling Class Holder will not be deemed to be outstanding as to such Excluded Controlling Class Holder solely with respect to any related Excluded Controlling Class Loan; andprovided,further, that any Controlling Class certificates owned by the special servicer or an affiliate thereof will not be deemed to be outstanding as to the special servicer or such affiliate solely with respect to any related Excluded Special Servicer Loan), and the Voting Rights to which it is entitled will not be taken into account in determining whether the requisite percentage of Voting Rights necessary to effect any such consent, approval, waiver or take any such action has been obtained;provided,however, that the foregoing restrictions will not apply in the case of the master servicer, the special servicer (including, for the avoidance of doubt, any Excluded Special Servicer), the trustee, the certificate administrator, the depositor, any mortgage loan seller or any affiliate of any of such persons unless such consent, approval or waiver sought from such party would in any way increase its compensation or limit its obligations in the named capacities under the PSA or waive a Servicer Termination Event or trigger an Asset Review with respect to a Mortgage Loan;provided,further, that so long as there is no Servicer Termination Event with
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respect to the master servicer or the special servicer, the master servicer and the special servicer or such affiliate of either will be entitled to exercise such Voting Rights with respect to any issue which could reasonably be believed to adversely affect such party’s compensation or increase its obligations or liabilities under the PSA; andprovided,further, that such restrictions will not apply to (i) the exercise of the special servicer’s, the master servicer’s or any mortgage loan seller’s rights, if any, or any of their affiliates as a member of the Controlling Class or (ii) any affiliate of the depositor, the master servicer, the special servicer, the trustee or the certificate administrator that has provided an Investor Certification in which it has certified as to the existence of certain policies and procedures restricting the flow of information between it and the depositor, the master servicer, the special servicer, the trustee or the certificate administrator, as applicable.
“NRSRO Certification” means a certification (a) executed by an NRSRO or (b) provided electronically and executed by such NRSRO by means of a “click-through” confirmation on the 17g-5 Information Provider’s website in favor of the 17g-5 Information Provider that states that such NRSRO is a Rating Agency as such term is defined in the PSA or that such NRSRO has provided the depositor with the appropriate certifications pursuant to paragraph (e) of Rule 17g-5 under the Exchange Act (“Rule 17g-5”), that such NRSRO has access to the depositor’s 17g-5 website, and that such NRSRO will keep such information confidential except to the extent such information has been made available to the general public.
Certain information concerning the Mortgage Loans and the certificates, including the Distribution Date statements, CREFC® reports and supplemental notices with respect to such Distribution Date statements and CREFC® reports, may be provided by the certificate administrator at the direction of the depositor to certain market data providers, such as BlackRock Financial Management, Inc., Bloomberg Financial Markets, L.P., Trepp, LLC, Intex Solutions, Inc., Interactive Data Corporation, Markit LLC and Thomson Reuters Corporation, pursuant to the terms of the PSA.
Upon the reasonable request of any Certificateholder that has delivered an Investor Certification, the master servicer may provide (or forward electronically) at the expense of such Certificateholder copies of any appraisals, operating statements, rent rolls and financial statements obtained by the master servicer;provided that in connection with such request, the master servicer may require a written confirmation executed by the requesting person substantially in such form as may be reasonably acceptable to the master servicer, generally to the effect that such person is a Certificateholder or a beneficial holder of book-entry certificates (or an investment advisor for a Certificateholder or a beneficial holder of book-entry certificates) and a Privileged Person and will keep such information confidential and will use such information only for the purpose of analyzing asset performance and evaluating any continuing rights the Certificateholder may have under the PSA. Certificateholders will not, however, be given access to or be permitted to request copies of, any Mortgage Files or Diligence Files.
Information Available Electronically
The certificate administrator will make available to any Privileged Person via the certificate administrator’s website (and will make available to the general public this prospectus, Distribution Date statements, the PSA, the MLPAs and the SEC EDGAR filings referred to below):
| · | the following “deal documents”: |
| ○ | this prospectus; |
| ○ | the PSA, each sub-servicing agreement delivered to the certificate administrator from and after the closing date, if any, and the MLPAs and any amendments and exhibits to those agreements; and |
| ○ | the CREFC® loan setup file delivered to the certificate administrator by the master servicer; |
| · | the following “SEC EDGAR filings”: |
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| ○ | any reports on Forms 10-D, 10-K and 8-K that have been filed by the certificate administrator with respect to the issuing entity through the SEC’s Electronic Data Gathering and Retrieval (EDGAR) system; |
| · | the following documents, which will be made available under a tab or heading designated “periodic reports”: |
| ○ | the Distribution Date statements; |
| ○ | the CREFC® bond level files; |
| ○ | the CREFC® collateral summary files; |
| ○ | the CREFC® Reports, other than the CREFC® loan setup file (provided that they are received by the certificate administrator); and |
| ○ | the annual reports prepared by the operating advisor; |
| · | the following documents, which will be made available under a tab or heading designated “additional documents”: |
| ○ | the summary of any Final Asset Status Report as provided by the special servicer; |
| ○ | any property inspection reports, any environmental reports and appraisals delivered to the certificate administrator in electronic format; |
| · | the following documents, which will be made available under a tab or heading designated “special notices”: |
| ○ | notice of any release based on an environmental release under the PSA; |
| ○ | notice of any waiver, modification or amendment of any term of any Mortgage Loan; |
| ○ | notice of final payment on the certificates; |
| ○ | all notices of the occurrence of any Servicer Termination Event received by the certificate administrator; |
| ○ | any notice of resignation or termination of the master servicer or special servicer; |
| ○ | notice of resignation of the trustee or the certificate administrator, and notice of the acceptance of appointment by the successor trustee or the successor certificate administrator, as applicable; |
| ○ | any notice of any request by requisite percentage of Certificateholders for a vote to terminate the special servicer, the operating advisor or the asset representations reviewer; |
| ○ | any notice to Certificateholders of the operating advisor’s recommendation to replace the special servicer and the related report prepared by the operating advisor in connection with such recommendation; |
| ○ | notice of resignation or termination of the operating advisor or the asset representations reviewer and notice of the acceptance of appointment by the successor operating advisor or the successor asset representations reviewer; |
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| ○ | notice of the certificate administrator’s determination that an Asset Review Trigger has occurred and a copy of any Asset Review Report Summary received by the certificate administrator; |
| ○ | officer’s certificates supporting any determination that any Advance was (or, if made, would be) a Nonrecoverable Advance; |
| ○ | any notice of the termination of the issuing entity; |
| ○ | any notice that a Control Termination Event has occurred or is terminated or that a Consultation Termination Event has occurred; |
| ○ | any notice of the occurrence of an Operating Advisor Termination Event; |
| ○ | any notice of the occurrence of an Asset Representations Reviewer Termination Event; |
| ○ | any Proposed Course of Action Notice; |
| ○ | any assessment of compliance delivered to the certificate administrator; |
| ○ | any accountants’ attestation reports delivered to the certificate administrator; |
| ○ | any “special notices” requested by a Certificateholder to be posted on the certificate administrator’s website described under “—Certificateholder Communication” below; |
| ○ | the “Investor Q&A Forum”; and |
| ○ | solely to Certificateholders and Certificate Owners that are Privileged Persons, the “Investor Registry”; |
providedthat with respect to a Control Termination Event or a Consultation Termination Event deemed to exist due solely to the existence of an Excluded Loan, the certificate administrator will only be required to make available such notice of the occurrence and continuance of a Control Termination Event or the notice of the occurrence and continuance of a Consultation Termination Event to the extent the certificate administrator has been notified of such Excluded Loan.
Notwithstanding the description set forth above, for purposes of obtaining information or access to the certificate administrator’s website, all Excluded Information will be made available under one separate tab or heading rather than under the headings described above in the preceding paragraph.
Notwithstanding the foregoing, if the Directing Certificateholder or any Controlling Class Certificateholder, as applicable, is an Excluded Controlling Class Holder, such Excluded Controlling Class Holder is required to promptly notify each of the master servicer, the special servicer, the operating advisor, the trustee and the certificate administrator pursuant to the PSA and provide a new Investor Certification pursuant to the PSA and will not be entitled to access any Excluded Information (unless a loan-by-loan segregation is later performed by the certificate administrator in which case such access will only be prohibited with respect to the related Excluded Controlling Class Loan(s)) made available on the certificate administrator’s website for so long as it is an Excluded Controlling Class Holder. The PSA will require each Excluded Controlling Class Holder in such new Investor Certification to certify that it acknowledges and agrees that it is prohibited from accessing and reviewing (and it agrees not to access and review) any Excluded Information. In addition, if the Directing Certificateholder or any Controlling Class Certificateholder is not an Excluded Controlling Class Holder, such person will certify and agree that they will not share any Excluded Information with any Excluded Controlling Class Holder.
Notwithstanding the foregoing, nothing set forth in the PSA will prohibit the Directing Certificateholder or any Controlling Class Certificateholder from receiving, requesting or reviewing any Excluded Information relating to any Excluded Controlling Class Loan with respect to which the Directing Certificateholder or such Controlling Class Certificateholder is not a Borrower Party and, if such Excluded
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Information is not available via the certificate administrator’s website, such Directing Certificateholder or Controlling Class Certificateholder that is not a Borrower Party with respect to the related Excluded Controlling Class Loan will be permitted to obtain such information upon reasonable request in accordance with terms of the PSA and the master servicer and the special servicer, as applicable, may require and rely on such certifications prior to releasing any such information.
Any reports on Form 10-D filed by the certificate administrator will contain (i) the information required by Rule 15Ga-1(a) concerning all Mortgage Loans of the issuing entity that were the subject of a demand to repurchase or replace due to a breach of one or more representations and warranties and (ii) a reference to the most recent Form ABS-15G filed by the depositor and the mortgage loan sellers, if applicable, and the SEC’s assigned “Central Index Key” for each such filer.
The certificate administrator will not make any representation or warranty as to the accuracy or completeness of any report, document or other information made available on the certificate administrator’s website and will assume no responsibility for any such report, document or other information, other than with respect to such reports, documents or other information prepared by the certificate administrator. In addition, the certificate administrator may disclaim responsibility for any information distributed by it for which it is not the original source.
In connection with providing access to the certificate administrator’s website (other than with respect to access provided to the general public in accordance with the PSA), the certificate administrator may require registration and the acceptance of a disclaimer, including an agreement to keep certain nonpublic information made available on the website confidential, as required under the PSA. The certificate administrator will not be liable for the dissemination of information in accordance therewith.
The certificate administrator will make the “Investor Q&A Forum” available to Privileged Persons via the certificate administrator’s website under a tab or heading designated “Investor Q&A Forum”, where (i) Certificateholders and beneficial owners that are Privileged Persons may submit inquiries to (a) the certificate administrator relating to the Distribution Date statements, (b) the master servicer or the special servicer relating to servicing reports, the Mortgage Loans (excluding a Non-Serviced Mortgage Loan) or the related Mortgaged Properties or (c) the operating advisor relating to annual or other reports prepared by the operating advisor or actions by the special servicer referenced in such reports, and (ii) Privileged Persons may view previously submitted inquiries and related answers. The certificate administrator will forward such inquiries to the appropriate person and, in the case of an inquiry relating to a Non-Serviced Mortgage Loan, to the applicable party under the related Non-Serviced PSA. The certificate administrator, the master servicer, the special servicer or the operating advisor, as applicable, will be required to answer each inquiry, unless such party determines (i) the question is beyond the scope of the topics detailed above, (ii) that answering the inquiry would not be in the best interests of the issuing entity and/or the Certificateholders, (iii) that answering the inquiry would be in violation of applicable law, the PSA (including requirements in respect of non-disclosure of Privileged Information) or the Mortgage Loan documents, (iv) that answering the inquiry would materially increase the duties of, or result in significant additional cost or expense to, the certificate administrator, the master servicer, the special servicer or the operating advisor, as applicable, (v) that answering the inquiry would require the disclosure of Privileged Information (subject to the Privileged Information Exception), (vi) that answering the inquiry would or is reasonably expected to result in a waiver of an attorney-client privilege or the disclosure of attorney work product or (vii) that answering the inquiry is otherwise, for any reason, not advisable. In addition, no party will post or otherwise disclose any direct communications with the Directing Certificateholder as part of its responses to any inquiries. In the case of an inquiry relating to a Non-Serviced Mortgage Loan, the certificate administrator is required to make reasonable efforts to obtain an answer from the applicable party under the related Non-Serviced PSA;provided that the certificate administrator will not be responsible for the content of such answer, or any delay or failure to obtain such answer. The certificate administrator will be required to post the inquiries and related answers, if any, on the Investor Q&A Forum, subject to and in accordance with the PSA. The Investor Q&A Forum may not reflect questions, answers and other communications that are not submitted through the certificate administrator’s website. Answers posted on the Investor Q&A Forum will be attributable only to the respondent, and will not be deemed to be answers from any of the depositor, the underwriters or any of their respective affiliates.
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None of the underwriters, depositor, any of their respective affiliates or any other person will certify as to the accuracy of any of the information posted in the Investor Q&A Forum and no such person will have any responsibility or liability for the content of any such information.
The certificate administrator will make the “Investor Registry” available to any Certificateholder and beneficial owner that is a Privileged Person via the certificate administrator’s website. Certificateholders and beneficial owners may register on a voluntary basis for the “Investor Registry” and obtain contact information for any other Certificateholder or beneficial owner that has also registered,provided that they comply with certain requirements as provided for in the PSA.
The certificate administrator’s internet website will initially be located at “www.ctslink.com”. Access will be provided by the certificate administrator to such persons upon receipt by the certificate administrator from such person of an Investor Certification or NRSRO Certification in the form(s) attached to the PSA, which form(s) will also be located on and may be submitted electronically via the certificate administrator’s internet website. The parties to the PSA will not be required to provide that certification. In connection with providing access to the certificate administrator’s internet website, the certificate administrator may require registration and the acceptance of a disclaimer. The certificate administrator will not be liable for the dissemination of information in accordance with the terms of the PSA. The certificate administrator will make no representation or warranty as to the accuracy or completeness of such documents and will assume no responsibility for them. In addition, the certificate administrator may disclaim responsibility for any information distributed by the certificate administrator for which it is not the original source. Assistance in using the certificate administrator’s internet website can be obtained by calling the certificate administrator’s customer service desk at (866) 846-4526.
The certificate administrator is responsible for the preparation of tax returns on behalf of the issuing entity and the preparation of Distribution Reports on Form 10-D (based on information included in each monthly Distribution Date statements and other information provided by other transaction parties) and Annual Reports on Form 10-K and certain other reports on Form 8-K that are required to be filed with the SEC on behalf of the issuing entity.
“17g-5 Information Provider” means the certificate administrator.
The PSA will require the master servicer, subject to certain restrictions set forth in the PSA, to provide certain of the reports or, in the case of the master servicer and the Controlling Class Certificateholder, access to the reports available as set forth above, as well as certain other information received by the master servicer, to any Privileged Person so identified by a Certificate Owner or an underwriter, that requests reports or information. However, the master servicer will be permitted to require payment of a sum sufficient to cover the reasonable costs and expenses of providing copies of these reports or information (which such amounts in any event are not reimbursable as additional trust fund expenses). Except as otherwise set forth in this paragraph, until the time definitive certificates are issued, notices and statements required to be mailed to holders of certificates will be available to Certificate Owners of certificates only to the extent they are forwarded by or otherwise available through DTC and its Participants. Conveyance of notices and other communications by DTC to Participants, and by Participants to Certificate Owners, will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Except as otherwise set forth in this paragraph, the master servicer, the special servicer, the trustee, the certificate administrator and the depositor are required to recognize as Certificateholders only those persons in whose names the certificates are registered on the books and records of the certificate registrar. The initial registered holder of the certificates will be Cede & Co., as nominee for DTC.
Voting Rights
At all times during the term of the PSA, the voting rights for the certificates (the “Voting Rights”) will be allocated among the respective classes of Certificateholders as follows:
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(1) 2% in the case of the Class X-A, Class X-B, Class X-C, Class X-D, Class X-E and Class X-F certificates, allocatedpro rata, based upon their respective Notional Amounts as of the date of determination, and
(2) in the case of any Principal Balance Certificates, a percentage equal to the product of 98% and a fraction, the numerator of which is equal to the aggregate Certificate Balance (and solely in connection with certain votes relating to the replacement of the special servicer and operating advisor as described in this prospectus, taking into account any notional reduction in the Certificate Balance for Appraisal Reduction Amounts allocated to the certificates) of the class, in each case, determined as of the prior Distribution Date, and the denominator of which is equal to the aggregate Certificate Balance (and solely in connection with certain votes relating to the replacement of the special servicer and the operating advisor as described in this prospectus, taking into account any notional reduction in the Certificate Balance for Appraisal Reduction Amounts allocated to the certificates) of the Principal Balance Certificates, each determined as of the prior Distribution Date;
The Voting Rights of any class of certificates are required to be allocated among Certificateholders of such class in proportion to their respective percentage interests.
Neither the Class V certificates nor the Class R certificates will be entitled to any Voting Rights.
Delivery, Form, Transfer and Denomination
The Offered Certificates will be issued, maintained and transferred in the book-entry form only in minimum denominations of $10,000 initial Certificate Balance, and in multiples of $1 in excess of $10,000. The Class X Certificates will be issued, maintained and transferred only in minimum denominations of authorized initial Notional Amounts of not less than $10,000 and in integral multiples of $1 in excess of $10,000.
Book-Entry Registration
The Offered Certificates will initially be represented by one or more global certificates for each such class registered in the name of a 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 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 under “—Definitive Certificates” below. 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, société anonyme (“Clearstream”) and Euroclear Bank, as operator of the Euroclear System (“Euroclear”) participating organizations, the “Participants”), and all references in this prospectus 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;provided,however, that to the extent that the party to the PSA responsible for distributing any report, statement or other information has been provided in writing with the name of the Certificate Owner of such an Offered Certificate (or the prospective transferee of such Certificate Owner), such report, statement or other information will be provided to such Certificate Owner (or prospective transferee).
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 certificate administrator will initially serve as certificate registrar for purposes of recording and otherwise providing for the registration of the Offered Certificates.
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
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customers’ securities accounts in Clearstream’s and Euroclear’s names on the books of their respective depositaries (collectively, the “Depositaries”), which in turn will hold such positions in customers’ securities accounts in the Depositaries’ names on the books of DTC. DTC is a limited purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to Section 17A of the Exchange Act. 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 (“DTC Participants”) include securities brokers and dealers, banks, trust companies and clearing corporations. Indirect access to the DTC system also is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (“Indirect Participants”).
Transfers between DTC Participants will occur in accordance with DTC rules. Transfers between Clearstream Participants and Euroclear Participants will occur in accordance with the applicable rules and operating procedures of Clearstream and Euroclear.
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 Depositary; however, such cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its Depositary to take action to effect final settlement on its behalf by delivering or receiving securities in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream Participants and Euroclear Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, 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 will 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, such Offered Certificates may do so only through Participants and Indirect Participants. In addition, holders of Offered Certificates in global form (“Certificate Owners”) will receive all distributions of principal and interest through the Participants who in turn will receive them from DTC. Under a book-entry format, holders of such Offered Certificates may experience some delay in their receipt of payments, since such payments will be forwarded by the certificate administrator to Cede & Co., as nominee for DTC. DTC will forward such payments to its Participants, which thereafter will forward them to Indirect Participants or the applicable Certificate Owners. Certificate Owners will not be recognized by the trustee, the certificate administrator, the certificate registrar, the operating advisor, 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, except that Certificate Owners will be entitled to receive or have access to notices and information and to exercise certain rights as holders of beneficial interests in the certificates through the certificate administrator and the trustee to the extent described in “Description of the Certificates—Reports to Certificateholders; Certain Available Information”, “—Certificateholder Communication” and “—List of Certificateholders” and “Pooling and Servicing Agreement—The Operating
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Advisor”, “—The Asset Representations Reviewer”, “—Replacement of Special Servicer Without Cause”, “—Limitation on Rights of Certificateholders to Institute a Proceeding”, “—Termination; Retirement of Certificates” and “—Resignation and Removal of the Trustee and the Certificate Administrator”.
Under the rules, regulations and procedures creating and affecting DTC and its operations (the “DTC Rules”), DTC is required to make book-entry transfers of Offered Certificates in global form among Participants on whose behalf it acts with respect to such Offered Certificates and to receive and transmit distributions of principal of, and interest on, such 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 DTC 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 in global form to pledge such Offered Certificates to persons or entities that do not participate in the DTC system, or to otherwise act with respect to such Offered Certificates, may be limited due to the lack of a physical certificate for such Offered 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 PSA only at the direction of one or more Participants to whose accounts with DTC such certificate is 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.
Clearstream is incorporated under the laws of Luxembourg and is a global securities settlement clearing house. Clearstream holds securities for its participating organizations (“Clearstream Participants”) and facilitates the clearance and settlement of securities transactions between Clearstream Participants through electronic book-entry changes in accounts of Clearstream Participants, thereby eliminating the need for physical movement of certificates. Transactions may be settled in Clearstream in numerous currencies, including United States dollars. Clearstream provides to its Clearstream Participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic markets in several countries. Clearstream is regulated as a bank by the Luxembourg Monetary Institute. Clearstream Participants are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations and may include the underwriters. Indirect access to Clearstream is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Clearstream Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of the Euroclear system (“Euroclear Participants”) and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Transactions may now be settled in any of numerous currencies, including United States dollars. The Euroclear system includes various other services, including securities lending and borrowing and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described above. Euroclear is operated by Euroclear Bank S.A./N.V. (the “Euroclear Operator”). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator. Euroclear Participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries and may include the underwriters. Indirect access to the Euroclear system is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly.
Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related operating procedures of the Euroclear
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System and applicable Belgian law (collectively, the “Terms and Conditions”). The Terms and Conditions govern transfers of securities and cash within the Euroclear system, withdrawal of securities and cash from the Euroclear system, and receipts of payments with respect to securities in the Euroclear system. All securities in the Euroclear system are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear Participants and has no record of or relationship with persons holding through Euroclear Participants.
Although DTC, Euroclear and Clearstream have implemented the foregoing procedures in order to facilitate transfers of interests in book-entry securities 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 certificate administrator, 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.
Definitive Certificates
Owners of beneficial interests in book-entry certificates of any class will not be entitled to receive physical delivery of Definitive Certificates unless: (i) DTC advises the certificate registrar in writing that DTC is no longer willing or able to discharge properly its responsibilities as depository with respect to the book-entry certificates of such class or ceases to be a clearing agency, and the certificate administrator and the depositor are unable to locate a qualified successor within 90 days of such notice or (ii) the trustee has instituted or has been directed to institute any judicial proceeding to enforce the rights of the Certificateholders of such class and the trustee has been advised by counsel that in connection with such proceeding it is necessary or appropriate for the trustee to obtain possession of the certificates of such class.
Certificateholder Communication
Access to Certificateholders’ Names and Addresses
Upon the written request of any Certificateholder or Certificate Owner that has delivered an executed Investor Certification to the trustee or the certificate administrator (a “Certifying Certificateholder”), the certificate administrator (in its capacity as certificate registrar) will promptly furnish or cause to be furnished to such requesting party a list of the names and addresses of the certificateholders as of the most recent Record Date as they appear in the certificate register, at the expense of the requesting party.
Requests to Communicate
The PSA will require that the certificate administrator include on any Form 10–D any request received prior to the Distribution Date to which such Form 10-D relates (and on or after the Distribution Date preceding such Distribution Date) from a Certificateholder or Certificate Owner to communicate with other Certificateholders or Certificate Owners related to Certificateholders or Certificate Owners exercising their rights under the terms of the PSA. Any Form 10-D containing such disclosure regarding the request to communicate is required to include the following and no more than the following: (i) the name of the Certificateholder or Certificate Owner making the request, (ii) the date the request was received, (iii) a statement to the effect that the certificate administrator has received such request, stating that such Certificateholder or Certificate Owner is interested in communicating with other Certificateholders or Certificate Owners with regard to the possible exercise of rights under the PSA, and (iv) a description of the method other Certificateholders or Certificate Owners may use to contact the requesting Certificateholder or Certificate Owner.
Any Certificateholder or Certificate Owner wishing to communicate with other Certificateholders and Certificate Owners regarding the exercise of its rights under the terms of the PSA (such party, a “Requesting Investor”) should deliver a written request (a “Communication Request”) signed by an authorized representative of the Requesting Investor to the certificate administrator at the address below:
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9062 Old Annapolis Road
Columbia, Maryland 21045
Attention: Corporate Trust Administration Group—CD 2016-CD1
with a copy to:
trustadministrationgroup@wellsfargo.com
Any Communication Request must contain the name of the Requesting Investor and the method other Certificateholders and Certificate Owners should use to contact the Requesting Investor, and, if the Requesting Investors is not the registered holder of a class of certificates, then the Communication Request must contain (i) a written certification from the Requesting Investor that it is a beneficial owner of a class of certificates, (ii) the name of the transaction, CD 2016-CD1 and (iii) one of the following forms of documentation evidencing its beneficial ownership in such class of certificates: (A) a trade confirmation, (B) an account statement, (C) a medallion stamp guaranteed letter from a broker or dealer stating the Requesting Investor is the beneficial owner, or (D) a document acceptable to the certificate administrator that is similar to any of the documents identified in clauses (A) through (C). The certificate administrator will not be permitted to require any information other than the foregoing in verifying a certificateholder’s or certificate owner’s identity in connection with a Communication Request. Requesting Investors will be responsible for their own expenses in making any Communication Request, but will not be required to bear any expenses of the certificate administrator.
List of Certificateholders
Upon the written request of any Certificateholder, which is required to include a copy of the communication the Certificateholder proposes to transmit, that has provided an Investor Certification, which request is made for purposes of communicating with other holders of certificates of the same series with respect to their rights under the PSA or the certificates, the certificate registrar or other specified person will, within 10 business days after receipt of such request afford such Certificateholder (at such Certificateholder’s sole cost and expense) access during normal business hours to the most recent list of Certificateholders related to the class of certificates.
Description of the Mortgage Loan Purchase Agreements
General
On the Closing Date, the depositor will acquire the Mortgage Loans from each mortgage loan seller pursuant to a separate mortgage loan purchase agreement (each, a “MLPA”), between the applicable mortgage loan seller and the depositor.
Under the applicable MLPA, the depositor will require each mortgage loan seller to deliver (or cause to be delivered) to the certificate administrator, in its capacity as custodian, among other things, the following documents (except that the documents with respect to each Non-Serviced Whole Loan (other than the original promissory note) will be held by the custodian under the related Non-Serviced PSA) with respect to each Mortgage Loan sold by the mortgage loan seller (collectively, as to each Mortgage Loan, the “Mortgage File”):
| (i) | (A) the original Mortgage Note, bearing, or accompanied by, all prior or intervening endorsements, endorsed by the most recent endorsee prior to the trustee or, if none, by the originator, without recourse, either in blank and further showing a complete, unbroken chain of endorsement from the originator or to the order of the trustee; and (B) in the case of each related Serviced Companion Loan, a copy of the executed Mortgage Note for such Serviced Companion Loan; |
| (ii) | the original (or a copy thereof certified from the applicable recording office) of the Mortgage and, if applicable, the originals (or copies thereof certified from the applicable recording office) of any intervening assignments thereof showing a complete chain of assignment from |
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| the originator of the Mortgage Loan or Serviced Whole Loan to the most recent assignee of record thereof prior to the trustee, if any, in each case with evidence of recording indicated thereon; |
| (iii) | an original or copy (if the related mortgage loan seller or its designee, rather than the custodian and its designee, is responsible for the recording thereof) of an Assignment of Mortgage, in recordable form (except for missing recording information and, if delivered in blank, except for the name of the assignee), executed by the most recent assignee of record thereof prior to the trustee or, if none, by the originator, either in blank or in favor of the trustee; |
| (iv) | (A) an original or copy of any related security agreement (if such item is a document separate from the Mortgage) and, if applicable, the originals or copies of any intervening assignments thereof showing a complete chain of assignment from the originator of the related Mortgage Loan or Serviced Whole Loan to the most recent assignee thereof prior to the trustee, if any; and (B) an original assignment of any related security agreement (if such item is a document separate from the related Mortgage) executed by the most recent assignee thereof prior to the trustee or, if none, by the originator, either in blank or in favor of the trustee, which assignment may be included as part of the corresponding Assignment of Mortgage referred to in clause (iii) above; |
| (v) | (A) stamped or certified copies of any UCC financing statements and continuation statements which were filed in order to perfect (and maintain the perfection of) any security interest held by the originator of the Mortgage Loan or Serviced Whole Loan (and each assignee of record prior to the trustee) in and to the personalty of the borrower at the Mortgaged Property (in each case with evidence of filing or recording thereon) and which were in the possession of the related mortgage loan seller (or its agent) at the time the Mortgage Files were delivered to the custodian, together with original UCC-3 assignments of financing statements showing a complete chain of assignment from the secured party named in such UCC-1 financing statement to the most recent assignee of record thereof prior to the trustee, if any, and (B) if any such security interest is perfected and the earlier UCC financing statements and continuation statements were in the possession of the related mortgage loan seller, an assignment of UCC financing statement by the most recent assignee of record prior to the trustee or, if none, by the originator, evidencing the transfer of such security interest, either in blank or in favor of the trustee;provided that other evidence of filing or recording reasonably acceptable to the trustee may be delivered in lieu of delivering such UCC financing statements including, without limitation, evidence of such filed or recorded UCC Financing Statement as shown on a written UCC search report from a reputable search firm, such as CSC/LexisNexis Document Solutions, Corporation Service Company, CT Corporation System and the like or printouts of on-line confirmations from such UCC filing or recording offices or authorized agents thereof; |
| (vi) | the original or a copy of the Loan Agreement relating to such Mortgage Loan, if any; |
| (vii) | the original or a copy of the lender’s title insurance policy issued in connection with the origination of the Mortgage Loan, together with all endorsements or riders (or copies thereof) that were issued with or subsequent to the issuance of such policy, insuring the priority of the Mortgage as a first lien on the Mortgaged Property, or a “marked up” commitment to insure marked as binding and countersigned by the related insurer or its authorized agent (which may be a pro forma or specimen title insurance policy which has been accepted or approved as binding in writing by the related title insurance company), or an agreement to provide the same pursuant to binding escrow instructions executed by an authorized representative of the title company; |
| (viii) | (A) the original or a copy of the related Assignment of Leases, Rents and Profits (if such item is a document separate from the Mortgage) and, if applicable, the originals or copies of any intervening assignments thereof showing a complete chain of assignment from the originator |
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| of the Mortgage Loan or Serviced Whole Loan to the most recent assignee of record thereof prior to the trustee, if any, in each case with evidence of recording thereon; and (B) an original or copy (if the related mortgage loan seller or its designee, rather than the Custodian and its designee, is responsible for the recording thereof) of an assignment of any related Assignment of Leases, Rents and Profits (if such item is a document separate from the Mortgage), in recordable form (except for missing recording information and, if delivered in blank, except for the name of the assignee), executed by the most recent assignee of record thereof prior to the trustee or, if none, by the originator, either in blank or in favor of the trustee, which assignment may be included as part of the corresponding Assignment of Mortgage referred to in clause (iii) above; |
| (ix) | the original or copy of any environmental indemnity agreements and copies of any environmental insurance policies pertaining to the related Mortgaged Property required in connection with origination of the related Mortgage Loan or Serviced Whole Loan and copies of Environmental Reports; |
| (x) | copies of the currently effective Management Agreements, if any, for the Mortgaged Properties; |
| (xi) | if the borrower has a leasehold interest in the related Mortgaged Property, the original or copy of the ground lease (or, with respect to a leasehold interest where the borrower is a lessee and that is a space lease or an air rights lease, the original of such space lease or air rights lease), and any related lessor estoppel or similar agreement or a copy thereof; if any; |
| (xii) | if the related assignment of contracts is separate from the Mortgage, the original executed version of such assignment of contracts and the assignment thereof, if any, to the trustee; |
| (xiii) | if any related Lock-Box Agreement or Cash Collateral Account Agreement is separate from the Mortgage or Loan Agreement, a copy thereof; with respect to the Reserve Accounts, Cash Collateral Accounts and Lock-Box Accounts, if any, a stamped or certified copy of the UCC-1 financing statements, if any, submitted for filing with respect to the related mortgagee’s security interest in the Reserve Accounts, Cash Collateral Accounts and Lock-Box Accounts and all funds contained therein (and UCC-3 assignments of financing statements assigning such UCC-1 financing statements to the trustee); |
| (xiv) | originals or copies of all assumption, modification, written assurance and substitution agreements, if any, with evidence of recording thereon if appropriate, in those instances where the terms or provisions of the Mortgage, the Mortgage Note or any related security document have been modified or the Mortgage Loan or Serviced Whole Loan has been assumed; |
| (xv) | the original or a copy of any guaranty of the obligations of the borrower under the Mortgage Loan or Serviced Whole Loan together with, as applicable, (A) the original or copies of any intervening assignments of such guaranty showing a complete chain of assignment from the originator of the Mortgage Loan or Serviced Whole Loan to the most recent assignee thereof prior to the trustee, if any, and (B) an original assignment of such guaranty executed by the most recent assignee thereof prior to the trustee or, if none, by the originator; |
| (xvi) | the original or a copy of the power of attorney (with evidence of recording thereon, if appropriate) granted by the related borrower if the Mortgage, Mortgage Note or other document or instrument referred to above was signed on behalf of the borrower pursuant to such power of attorney; |
| (xvii) | with respect to each Whole Loan, a copy of the related Intercreditor Agreement and, if applicable, a copy of the related Non-Lead PSA; |
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| (xviii) | with respect to hospitality properties, a copy of the franchise agreement, if any, an original or copy of the comfort letter, if any, and if, pursuant to the terms of such comfort letter, the general assignment of the Mortgage Loan is not sufficient to transfer or assign the benefits of such comfort letter to the Trust, a copy of the notice to the franchisor of the transfer of such Mortgage Loan and/or a copy of the request for the issuance of a new comfort letter in favor of the Trust (in each case, as and to the extent required pursuant to the terms of such comfort letter), with the original of any replacement comfort letter to be included in the Mortgage File following receipt thereof by the master servicer; |
| (xix) | the original (or copy, if the original is held by the master servicer or applicable master servicer under the applicable Non-Serviced PSA) of any letter of credit held by the lender as beneficiary or assigned as security for such Mortgage Loan or Serviced Whole Loan; |
| (xx) | the appropriate assignment or amendment documentation related to the assignment to the Trust of any letter of credit securing such Mortgage Loan or Serviced Whole Loan (or copy thereof, if the original is held by the master servicer or applicable master servicer under the applicable Non-Serviced PSA) which entitles the master servicer on behalf of the Trust and the Companion Noteholders (with respect to any Serviced Whole Loan) to draw thereon; and |
| (xxi) | with respect to any Mortgage Loan with related mezzanine debt or other subordinate debt (other than a Companion Loan), a copy of the related co-lender agreement, subordination agreement or other intercreditor agreement; |
provided that with respect to any Mortgage Loan which is a Non-Serviced Mortgage Loan on the Closing Date, the foregoing documents (other than the documents described in clause (i) above) will be delivered to and held by the custodian under the related Non-Serviced PSA on or prior to the Closing Date, and any assignments in favor of the trustee will be in favor of the trustee under the related Non-Serviced PSA.
In addition, each mortgage loan seller will be required to deliver the Diligence Files for each of its Mortgage Loans to the depositor by uploading such Diligence Files to the designated Intralinks website, and the depositor will deliver to the certificate administrator an electronic copy of such Diligence Files to be posted to the secure data room.
“Diligence File” means with respect to each Mortgage Loan or Companion Loan, if applicable, collectively the following documents in electronic format:
(a) A copy of each of the following documents:
| (i) | the Mortgage Note, endorsed on its face or by allonge attached to the Mortgage Note, without recourse, to the order of the trustee or in blank and further showing a complete, unbroken chain of endorsement from the originator (or, if the original Mortgage Note has been lost, an affidavit to such effect from the applicable mortgage loan seller or another prior holder, together with a copy of the Mortgage Note and an indemnity properly assigned and endorsed to the trustee); |
| (ii) | 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 to have been submitted for recording; |
| (iii) | assignment of the Mortgage in favor of the trustee or in blank and (subject to the completion of certain missing recording information and, if applicable, the assignee’s name) in recordable form (or, if the related mortgage loan seller is responsible for the recordation of that assignment, a copy of such assignment to be sent for recordation); |
| (iv) | any related assignment of leases and of any intervening assignments (if such item is a document separate from the Mortgage), with evidence of recording indicated thereon or certified to have been submitted for recording; |
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| (v) | an 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 and, if applicable, the assignee’s name) in recordable form (or, if the related mortgage loan seller is responsible for the recordation of that assignment, a copy of such assignment to be sent for recordation); |
| (vi) | the assignment of all unrecorded documents relating to the Mortgage Loan or a Serviced Whole Loan, if not already assigned pursuant to items (iii) or (v) above; |
| (vii) | all modification, consolidation, assumption, written assurance and substitution agreements in those instances in which the terms or provisions of the Mortgage or Mortgage Note have been modified or the Mortgage Loan has been assumed or consolidated; |
| (viii) | the 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) | any UCC financing statements, related amendments and continuation statements in the possession of the applicable mortgage loan seller; |
| (x) | an original assignment in favor of the trustee of any financing statement executed and filed in favor of the applicable mortgage loan seller in the relevant jurisdiction (or, if the related mortgage loan seller is responsible for the filing of that assignment, a copy of such assignment to be sent for filing); |
| (xi) | any intercreditor agreement relating to permitted debt of the mortgagor, including any intercreditor agreement relating to a Serviced Whole Loan; |
| (xii) | any loan agreement, escrow agreement, security agreement or letter of credit relating to a Mortgage Loan or a Serviced Whole Loan; |
| (xiii) | any ground lease, ground lessor estoppel, indemnity or guaranty relating to a Mortgage Loan or a Serviced Whole Loan; |
| (xiv) | any property management agreement relating to a Mortgage Loan or a Serviced Whole Loan; |
| (xv) | any franchise agreements and comfort letters or similar agreements relating to a Mortgage Loan or Serviced Whole Loan and, with respect to any franchise agreement, comfort letter or similar agreement, any assignment of such agreements or any notice to the franchisor of the transfer of a Mortgage Loan or Serviced Whole Loan and a request for confirmation that the issuing entity is a beneficiary of such comfort letter or other agreement, or for the issuance of a new comfort letter in favor of the issuing entity, as the case may be; |
| (xvi) | any lock-box or cash management agreement relating to a Mortgage Loan or a Serviced Whole Loan; |
| (xvii) | any related mezzanine intercreditor agreement; |
| (xviii) | all related environmental reports; |
| (xix) | all related environmental insurance policies; |
(b) a copy of any engineering reports or property condition reports;
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(c) other than with respect to a hotel property (except with respect to tenanted commercial space within a hotel property), copies of a rent roll;
(d) for any office, retail, industrial or warehouse property, a copy of all leases and estoppels and subordination and non-disturbance agreements delivered to the related mortgage loan seller;
(e) copies of all legal opinions (excluding attorney client communications between the related mortgage loan seller, and its counsel that are privileged communications or constitute legal or other due diligence analyses), if any, delivered in connection with the closing of the related Mortgage Loan;
(f) copies of all mortgagor’s certificates of hazard insurance and/or hazard insurance policies or other applicable insurance policies (to the extent not previously included as part of this definition), if any, delivered in connection with the origination of the related Mortgage Loan;
(g) a copy of the appraisal for the related Mortgaged Property(ies);
(h) for any Mortgage Loan that the related Mortgaged Property is leased to a single tenant, a copy of the lease;
(i) a copy of the applicable mortgage loan seller’s asset summary;
(j) copies of all surveys for the related Mortgaged Property or Mortgaged Properties;
(k) copies of any zoning reports;
(l) copies of financial statements of the related mortgagor;
(m) copies of operating statements for the related Mortgaged Property or Mortgaged Properties;
(n) copies of all UCC searches;
(o) copies of all litigation searches;
(p) copies of all bankruptcy searches;
(q) a copy of the origination settlement statement;
(r) a copy of the insurance consultant report;
(s) copies of the organizational documents of the related mortgagor and any guarantor;
(t) copies of the escrow statements;
(u) a copy of any closure letter (environmental);
(v) a copy of any environmental remediation agreement for the related Mortgaged Property or Mortgaged Properties; and
(w) a copy of the payment history with respect to such Mortgage Loan prior to the Closing Date;
provided, that with respect to any Mortgage Loan which is a Non-Serviced Mortgage Loan on the Closing Date, any assignments in favor of the trustee will be in favor of the trustee under the related Non-Serviced PSA; in each case, to the extent that the originator received such documents in connection with the origination of such Mortgage Loan. In the event any of the items identified above were not included in connection with the origination of such Mortgage Loan, the Diligence File will be required to include a statement to that effect;providedthat the mortgage loan seller will not be required to deliver information that is proprietary to the related originator or mortgage loan seller or any draft documents or privileged or internal communications. The mortgage loan seller may, without any obligation to do so, include such other documents or information as part of the Diligence File that such mortgage loan seller believes
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should be included to enable the asset representations reviewer to perform the Asset Review on such Mortgage Loan;provided that such documents or information are clearly labeled and identified.
Each MLPA will contain certain representations and warranties of the applicable mortgage loan seller with respect to each Mortgage Loan sold by that mortgage loan seller. Those representations and warranties are set forth in Annex D-1, and will be made as of the Closing Date, or as of another date specifically provided in the representation and warranty, subject to certain exceptions to such representations and warranties as set forth in Annex D-2 and Annex D-3.
If any of the documents required to be included in the Mortgage File for any Mortgage Loan is missing from the Mortgage File or defective or if there is a breach of a representation or warranty relating to any Mortgage Loan, and such omission, breach or defect materially and adversely affects the value of the related Mortgage Loan, the value of the related Mortgaged Property or the interests of any Certificateholders in the Mortgage Loan or Mortgaged Property or causes the Mortgage Loan to be other than a “qualified mortgage” within the meaning of Code Section 860G(a)(3), but without regard to the rule of Treasury regulations Section 1.860G-2(f)(2) that causes a defective Mortgage Loan to be treated as a qualified mortgage, or if any of the documents specified under the PSA is not delivered and is certified as missing pursuant to the PSA (a “Material Defect”), the applicable mortgage loan seller will be required to, no later than 90 days following:
(x) such mortgage loan seller’s receipt of notice of the Material Defect from any party to the PSA (a “Breach Notice”), except in the case of the following clause (y); or
(y) in the case of such Material Defect that would cause the Mortgage Loan not to be a “qualified mortgage” within the meaning of Code Section 860G(a)(3), but without regard to the rule of Treasury regulations Section 1.860G-2(f)(2) that causes a defective Mortgage Loan to be treated as a qualified mortgage, the discovery by any party to the PSA of the such Material Defect;providedthat the mortgage loan seller has received notice in accordance with the terms of the PSA,
(1) cure such Material Defect in all material respects, at its own expense,
(2) repurchase the affected Mortgage Loan or REO Loan at the Purchase Price, or
(3) substitute a Qualified Substitute Mortgage Loan (other than with respect to the Whole Loans, as applicable, for which no substitution will be permitted) for such affected Mortgage Loan, and pay a shortfall amount in connection with such substitution, provided that no such substitution may occur on or after the second anniversary of the Closing Date;
provided,however, that the applicable mortgage loan seller will generally have an additional 90-day period to cure such Material Defect (or, failing such cure, to repurchase the affected Mortgage Loan and the related REO Loan or, if applicable, substitute a Qualified Substitute Mortgage Loan (other than with respect to the related Whole Loans, for which no substitution will be permitted)), if such Material Defect is capable of being cured, the mortgage loan seller is diligently proceeding toward that cure, and has delivered to the master servicer, the special servicer, the certificate administrator (who will promptly deliver a copy of such officer’s certificate to the 17g-5 Information Provider), the trustee, the operating advisor, the asset representations reviewer and, prior to the occurrence of a Consultation Termination Event, the Directing Certificateholder, an officer’s certificate that describes the reasons that a cure was not effected within the initial 90-day period. Notwithstanding the foregoing, there will be no such 90-day extension, if such Material Defect would cause the related Mortgage Loan not to be a “qualified mortgage” within the meaning of Code Section 860G(a)(3), but without regard to the rule of Treasury regulations Section 1.860G-2(f)(2) that causes a defective Mortgage Loan to be treated as a qualified mortgage.
No delay in either the discovery of a Material Defect or in providing notice of such Material Defect will relieve the applicable mortgage loan seller of its obligation to repurchase the related Mortgage Loan unless (i) the mortgage loan seller did not otherwise discover or have knowledge of such Material Defect, (ii) such delay is the result of the failure by a party to the PSA to promptly provide a Breach Notice as required by the terms of the PSA after such party has actual knowledge of such defect or breach
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(knowledge will not be deemed to exist by reason of the custodian’s exception report) and such delay precludes the mortgage loan seller from curing such Material Defect and (iii) such Material Defect did not relate to a Mortgage Loan not being a “qualified mortgage” as described in this section. Notwithstanding the foregoing, if a Mortgage Loan is not secured by a Mortgaged Property that is, in whole or in part, a hotel, restaurant (operated by a borrower), healthcare facility, nursing home, assisted living facility, theater or fitness center (operated by a borrower), then the failure to deliver copies of the UCC financing statements with respect to such Mortgage Loan will not be a Material Defect. With respect to each Non-Serviced Mortgage Loan, each Mortgage Loan Seller agrees that any document defect as such term is defined in the related controlling Non-Serviced PSA (other than a defect related to the promissory note for the related Non-Serviced Companion Loan) will constitute a document defect under the related MLPA.
If there is a Material Defect with respect to one or more Mortgaged Properties with respect to a Mortgage Loan, the applicable mortgage loan seller will not be obligated to repurchase the Mortgage Loan if (i) the affected Mortgaged Property may be released pursuant to the terms of any partial release provisions in the related Mortgage Loan documents (and such Mortgaged Property is, in fact, released), (ii) the remaining Mortgaged Property(ies) satisfy the requirements, if any, set forth in the Mortgage Loan documents and the applicable mortgage loan seller provides an opinion of counsel to the effect that such release would not cause an adverse REMIC event to occur and (iii) each applicable Rating Agency has provided a Rating Agency Confirmation.
Notwithstanding the foregoing, in lieu of a mortgage loan seller repurchasing, substituting or curing such Material Defect, to the extent that the mortgage loan seller and the special servicer (with the consent of the Directing Certificateholder in respect of any Mortgage Loan that is not an Excluded Loan) are able to agree upon a cash payment payable by the mortgage loan seller to the issuing entity that would be deemed sufficient to compensate the issuing entity for such Material Defect (a “Loss of Value Payment”), the mortgage loan seller may elect, in its sole discretion, to pay such Loss of Value Payment. In connection with any such determination with respect to any non-Specially Serviced Loan, the master servicer will promptly provide the special servicer, but in any event within the time frame and in the manner provided in the PSA, with the servicing file and other such information to the extent set forth in the PSA in order to permit the special servicer to calculate the Loss of Value Payment as set forth in the PSA. Upon its making such payment, the mortgage loan seller will be deemed to have cured such Material Defect in all respects. A Loss of Value Payment may not be made with respect to any such Material Defect that would cause the applicable Mortgage Loan not to be a “qualified mortgage” within the meaning of Code Section 860G(a)(3), but without regard to the rule of Treasury regulations Section 1.860G-2(f)(2) that causes a defective Mortgage Loan to be treated as a qualified mortgage.
With respect to any Mortgage Loan a, “Purchase Price” equals to the sum of (1) the outstanding principal balance of such Mortgage Loan (or related REO Loan), as of the date of purchase, (2) all accrued and unpaid interest on the Mortgage Loan (or any related REO Loan) at the related Mortgage Rate in effect from time to time (excluding any portion of such interest that represents default interest or Excess Interest on the ARD Loan), to, but not including, the due date immediately preceding or coinciding with the Determination Date for the Collection Period of purchase, (3) all related unreimbursed Servicing Advances plus accrued and unpaid interest on all related Advances at the Reimbursement Rate, Special Servicing Fees (whether paid or unpaid), Workout Fees and any other additional trust fund expenses (except for Liquidation Fees) in respect of such Mortgage Loan and the related REO Loan, if any, (4) solely in the case of a repurchase or substitution by a mortgage loan seller, any unpaid Asset Representations Reviewer Asset Review Fee related to such Mortgage Loan and all reasonable out-of-pocket expenses reasonably incurred or to be incurred by the master servicer, the special servicer, the depositor, the certificate administrator or the trustee in respect of the omission, breach or defect giving rise to the repurchase or substitution obligation, including any expenses arising out of the enforcement of the repurchase or substitution obligation, including, without limitation, legal fees and expenses and any additional trust fund expenses relating to such Mortgage Loan or related REO Loan;provided, however, that such out-of-pocket expenses will not include expenses incurred by investors in instituting an Asset Review Vote Election, in taking part in an Asset Review Vote or in utilizing the dispute resolution provisions described below under “—Dispute Resolution Provisions” and (5) Liquidation Fees, if any, payable with respect to the affected Mortgage Loan (or related REO Loan) (which will not include any
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Liquidation Fees if such affected Mortgage Loan is repurchased prior to the expiration of the additional 90-day period immediately following the initial 90-day period).
A “Qualified Substitute Mortgage Loan” is a substitute mortgage loan (other than with respect to the Whole Loans, for which no substitution will be permitted) replacing a Mortgage Loan with respect to which a Material Defect exists that must, on the date of substitution:
(a) have an outstanding principal balance, after application of all scheduled payments of principal and interest due during or prior to the month of substitution, whether or not received, not in excess of the Stated Principal Balance of the removed Mortgage Loan as of the due date in the calendar month during which the substitution occurs;
(b) have a fixed Mortgage Rate not less than the Mortgage Rate of the removed Mortgage Loan (determined without regard to any prior modification, waiver or amendment of the terms of the removed Mortgage Loan);
(c) have the same due date and a grace period no longer than that of the removed Mortgage Loan;
(d) accrue interest on the same basis as the removed Mortgage Loan (for example, on the basis of a 360-day year and the actual number of days elapsed);
(e) have a remaining term to stated maturity not greater than, and not more than five years less than, the remaining term to stated maturity of the removed Mortgage Loan;
(f) have a then-current loan-to-value ratio equal to or less than the lesser of (i) the loan-to-value ratio for the removed Mortgage Loan as of the Closing Date and (ii) 75%, in each case using a “value” for the Mortgaged Property as determined using an appraisal conducted by a member of the Appraisal Institute (“MAI”) prepared in accordance with the requirements of the FIRREA;
(g) comply as of the date of substitution in all material respects with all of the representations and warranties set forth in the related MLPA;
(h) have an environmental report that indicates no material adverse environmental conditions with respect to the related Mortgaged Property and that will be delivered as a part of the related servicing file;
(i) have a then-current debt service coverage ratio at least equal to the greater of (i) the original debt service coverage ratio of the removed Mortgage Loan as of the Closing Date and (ii) 1.25x;
(j) constitute a “qualified replacement mortgage” within the meaning of Code Section 860G(a)(4) as evidenced by an opinion of counsel (provided at the applicable mortgage loan seller’s expense);
(k) not have a maturity date or an amortization period that extends to a date that is after the date two years prior to the Rated Final Distribution Date;
(l) have comparable prepayment restrictions to those of the removed Mortgage Loan;
(m) not be substituted for a removed Mortgage Loan unless the trustee and the certificate administrator have received a Rating Agency Confirmation from each of the Rating Agencies (the cost, if any, of obtaining such Rating Agency Confirmation to be paid by the applicable mortgage loan seller);
(n) have been approved, so long as a Control Termination Event has not occurred and is not continuing, by the Directing Certificateholder, and during any such time that the Master Servicer is the Enforcing Servicer, the consent of the Special Servicer;
(o) prohibit Defeasance within two years of the Closing Date;
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(p) not be substituted for a removed Mortgage Loan if it would result in the termination of the REMIC status of the Prudential Plaza Loan REMIC or either Trust REMIC or the imposition of tax on the Prudential Plaza Loan REMIC or either Trust REMIC other than a tax on income expressly permitted or contemplated to be received by the terms of the PSA as determined by an opinion of counsel to be paid by the applicable mortgage loan seller;
(q) have an engineering report that indicates no material adverse property condition or deferred maintenance with respect to the related Mortgaged Property with respect to the related Mortgaged Property that will be delivered as a part of the related servicing file; and
(r) be current in the payment of all scheduled payments of principal and interest then due.
In the event that more than one Mortgage Loan is substituted for a removed Mortgage Loan or Mortgage Loans, then (x) the amounts described in clause (a) are required to be determined on the basis of aggregate principal balances and (y) each such proposed Qualified Substitute Mortgage Loan must individually satisfy each of the requirements specified in clauses (b) through (r) of the preceding sentence, except (z) the rates described in clause (b) above and the remaining term to stated maturity referred to in clause (e) above are required to be determined on a weighted average basis,provided that no individual Mortgage Rate (net of the Servicing Fee Rate, the Certificate Administrator/Trustee Fee Rate, the Operating Advisor Fee Rate and the CREFC® Intellectual Property Royalty License Fee Rate) may be lower than the highest fixed Pass-Through Rate (not based on or subject to a cap equal to or based on the WAC Rate) of any class of Principal Balance Certificates having a principal balance then-outstanding. When a Qualified Substitute Mortgage Loan is substituted for a removed Mortgage Loan, the applicable mortgage loan seller will be required to certify that the Mortgage Loan meets all of the requirements of the above definition and send the certification to the trustee, the certificate administrator, the operating advisor and the asset representations reviewer and, prior to the occurrence of a Consultation Termination Event, the Directing Certificateholder.
The foregoing repurchase or substitution obligation or the obligation to pay the Loss of Value Payment will constitute the sole remedy available to the Certificateholders and the trustee under the PSA for any uncured breach of any mortgage loan seller’s representations and warranties regarding the Mortgage Loans or any uncured document defect;provided, however, that if any breach pertains to a representation or warranty that the related Mortgage Loan documents or any particular Mortgage Loan document requires the related borrower to bear the costs and expenses associated with any particular action or matter under such Mortgage Loan document(s), then the applicable mortgage loan seller will be required to cure such breach within the applicable cure period (as the same may be extended) by reimbursing the issuing entity (by wire transfer of immediately available funds) for the reasonable amount of any such costs and expenses incurred by parties to the PSA or the issuing entity that are incurred as a result of such breach and have not been reimbursed by the related borrower and the amount of any fees and expenses of the asset representations reviewer attributable to the Asset Review of such Mortgage Loan;provided,further, that in the event any such costs and expenses exceed $10,000, the applicable mortgage loan seller will have the option to either repurchase or substitute for the related Mortgage Loan as provided above or pay such costs and expenses. The applicable mortgage loan seller will remit the amount of these costs and expenses and upon its making such remittance, the applicable mortgage loan seller will be deemed to have cured the breach in all respects. The applicable mortgage loan seller will be the sole warranting party in respect of the Mortgage Loans sold by that mortgage loan seller to the depositor, and none of its affiliates and no other person will be obligated to repurchase or replace any affected Mortgage Loan or make a Loss of Value Payment in connection with a breach of any representation and warranty or in connection with a document defect if the applicable mortgage loan seller defaults on its obligation to do so.
Dispute Resolution Provisions
The mortgage loan seller will be subject to the dispute resolution provisions described under “Pooling and Servicing Agreement—Dispute Resolution Provisions” to the extent those provisions are triggered with respect to any mortgage loan sold to the depositor by the mortgage loan seller and will be obligated
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under the Mortgage Loan Purchase Agreement to comply with all applicable provisions and to take part in any mediation or arbitration proceedings that may result.
Asset Review Obligations
The mortgage loan seller will be obligated to perform its obligations described under “Pooling and Servicing Agreement—The Asset Representations Reviewer—Asset Review” relating to any Asset Reviews performed by the asset representations reviewer, and the mortgage loan seller will have the rights described under that heading.
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Pooling and Servicing Agreement
General
The servicing and administration of each Mortgage Loan (other than the Non-Serviced Mortgage Loans), any related Serviced Companion Loans and any related REO Properties (including any interest of the holder of any Companion Loan in the REO Property acquired with respect to any Serviced Whole Loan) will be governed by the PSA and the related Intercreditor Agreement.
The Non-Serviced Mortgage Loans, the related Non-Serviced Companion Loan and any related REO Properties (including the issuing entity’s interest in REO Property acquired with respect to a Non-Serviced Whole Loan) will be serviced by the Non-Serviced Master Servicer and the Non-Serviced Special Servicer under the related Non-Serviced PSA in accordance with such Non-Serviced PSA and the related Intercreditor Agreement.
The following summaries describe certain provisions of the PSA relating to the servicing and administration of the Mortgage Loans (other than the Non-Serviced Mortgage Loans), the related Serviced Companion Loans and any related REO Properties. Unless otherwise specifically stated and except where the context otherwise indicates (such as with respect to P&I Advances), discussions in this section or in any other section of this prospectus regarding the servicing and administration of the Mortgage Loans should be read to include the servicing and administration of the related Serviced Companion Loans but not to include the Non-Serviced Mortgage Loans, the related Non-Serviced Companion Loans and any related REO Property. In the case of the Serviced Whole Loan, certain provisions of the related Intercreditor Agreement are described under “Description of the Mortgage Pool—The Whole Loans—U-Haul AREC Portfolio Whole Loan”.
Certain provisions of the Non-Serviced PSAs relating to the servicing and administration of the related Non-Serviced Mortgage Loan, the related Non-Serviced Companion Loan and the related REO Properties and the related Intercreditor Agreement are summarized under “Description of the Mortgage Pool—The Whole Loans—10 Hudson Yards Whole Loan”, “—Westfield San Francisco Centre Whole Loan”, “—Prudential Plaza Whole Loan”, “—Birch Run Premium Outlets Whole Loan”, “—Gas Company Tower & World Trade Center Parking Garage Whole Loan”,“—Vertex Pharmaceuticals HQ Whole Loan”, “—401 South State Street Whole Loan”and “—Servicing of the Non-Serviced Mortgage Loans” below.
In general, (i) the master servicer will be responsible for the servicing and administration of the Mortgage Loans (other than the Non-Serviced Mortgage Loans) and any related Serviced Companion Loans that are not Specially Serviced Loans (except for Special Servicer Decisions, Major Decisions and certain other matters as to which the processing and/or consent or other involvement of the special servicer is required), and (ii) the special servicer will be responsible for the servicing and administration of Specially Serviced Loans and REO Properties and for processing Special Servicer Decisions and Major Decisions.
The PSA requires the master servicer or the special servicer, as applicable, to make reasonable efforts to collect all payments called for under the terms and provisions of the Mortgage Loans (other than any Non-Serviced Mortgage Loan) and the Serviced Companion Loans and to follow the Servicing Standard with respect to such collection procedures. Consistent with the above, the master servicer or the special servicer may, in its discretion, waive any late payment fee or default interest it is entitled to receive in connection with any delinquent Periodic Payment or balloon payment with respect to any Mortgage Loan or Serviced Companion Loan it is servicing.
Assignment of the Mortgage Loans
The depositor will purchase the Mortgage Loans to be included in the issuing entity on or before the Closing Date from each of the mortgage loan sellers pursuant to a separate MLPAs. See “Transaction Parties—The Sponsors and Mortgage Loan Sellers” and “Description of the Mortgage Loan Purchase Agreements”.
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On the Closing Date, the depositor will sell, transfer or otherwise convey, assign or cause the assignment of the Mortgage Loans, without recourse, together with the depositor’s rights and remedies against the mortgage loan sellers under the MLPAs, to the trustee for the benefit of the holders of the certificates. On or prior to the Closing Date, the depositor will require each mortgage loan seller to deliver to the certificate administrator, in its capacity as custodian, the Mortgage Notes and certain other documents and instruments with respect to each Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan. The custodian will hold such documents in the name of the issuing entity for the benefit of the holders of the certificates. The custodian is obligated to review certain documents for each Mortgage Loan within 60 days of the Closing Date and report any missing documents or certain types of document defects to the parties to the PSA and the Directing Certificateholder (so long as no Consultation Termination Event has occurred) and the related mortgage loan seller.
In addition, pursuant to the related MLPA, each mortgage loan seller will be required to deliver (or cause to be delivered) an electronic copy of the Diligence Files for each of its Mortgage Loans to (or as instructed by) the depositor within 60 days following the Closing Date. The depositor will then be required to deliver to the certificate administrator an electronic copy of such Diligence Files to be posted to the secure data room.
Pursuant to the PSA, the depositor will assign to the trustee for the benefit of Certificateholders the representations and warranties made by the mortgage loan sellers to the depositor in the MLPAs and any rights and remedies that the depositor has against the mortgage loan sellers under the MLPAs with respect to any Material Defect. See “—Enforcement of Mortgage Loan Seller’s Obligations Under the MLPA” below and “Description of the Mortgage Loan Purchase Agreements”.
Servicing Standard
The master servicer and the special servicer will each be required to diligently service and administer the Mortgage Loans (excluding the Non-Serviced Mortgage Loans), any related Serviced Companion Loans and the related REO Properties (other than any REO Property related to a Non-Serviced Mortgage Loan), for which it is responsible in accordance with applicable law, the terms of the PSA, the Mortgage Loan documents, and the related Intercreditor Agreements and, to the extent consistent with the foregoing, in accordance with the higher of the following standards of care:
(1) the same manner in which, and with the same care, skill, prudence and diligence with which the master servicer or the special servicer, as the case may be, services and administers similar mortgage loans for other third-party portfolios, and
(2) the same care, skill, prudence and diligence with which the master servicer or special servicer, as the case may be, services and administers similar mortgage loans owned by the master servicer or the special servicer,
as the case may be, with a view to; (A) the timely recovery of all payments of principal and interest under the Mortgage Loans or Serviced Whole Loans or (B) in the case of a Specially Serviced Loan or an REO Property, the maximization of timely recovery of principal and interest on a net present value basis on the Mortgage Loans and any related Serviced Companion Loans, and the best interests of the issuing entity and the certificateholders (as a collective whole as if such Certificateholders constituted a single lender) (and, in the case of any Whole Loan, the best interests of the issuing entity, the Certificateholders and the holder of the related Companion Loan (as a collective whole as if such Certificateholders and the holder or holders of the related Companion Loan constituted a single lender), taking into account thepari passu or subordinate nature of the related Companion Loan) as determined by the master servicer or the special servicer, as the case may be, in its reasonable judgment, in either case giving due consideration to the customary and usual standards of practice of prudent, institutional commercial, multifamily and manufactured housing community mortgage loan servicers, but without regard to any conflict of interest arising from:
(A) any relationship that the master servicer or the special servicer, as the case may be, or any of their respective affiliates, as the case may be, may have with any of the underlying borrowers, the
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sponsors, the mortgage loan sellers, the originators, any party to the PSA or any affiliate of the foregoing;
(B) the ownership of any certificate (or any interest in any Companion Loan, mezzanine loan or subordinate debt relating to a Mortgage Loan) by the master servicer or special servicer, as the case may be, or any of their respective affiliates;
(C) the obligation, if any, of the master servicer to make advances;
(D) 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 PSA generally or with respect to any particular transaction;
(E) the ownership, servicing or management for others of any other mortgage loans, subordinate debt, mezzanine loans or properties not covered by the PSA or held by the issuing entity by the master servicer or special servicer, as the case may be, or any of its affiliates;
(F) any debt that the master servicer or the special servicer, as the case may be, or any of its affiliates, has extended to any underlying borrower or an affiliate of any borrower (including, without limitation, any mezzanine financing);
(G) any option to purchase any Mortgage Loan or the related Companion Loan the master servicer or special servicer, as the case may be, or any of its affiliates, may have; and
(H) any obligation of the master servicer, the special servicer or one of their respective affiliates, to repurchase or substitute for a Mortgage Loan as a mortgage loan seller (if the master servicer or the special servicer or one of their respective affiliates is a mortgage loan seller) (the foregoing, collectively referred to as the “Servicing Standard”).
All net present value calculations and determinations made under the PSA with respect to any Mortgage Loan, Mortgaged Property or REO Property (including for purposes of the definition of “Servicing Standard” set forth above) will be made in accordance with the Mortgage Loan documents or, in the event the Mortgage Loan documents are silent, by using a discount rate (i) for principal and interest payments on the Mortgage Loan or Serviced Companion Loan or sale of a Defaulted Loan, the highest of (1) the rate determined by the master servicer or special servicer, as applicable, that approximates the market rate that would be obtainable by the borrowers on similar non-defaulted debt of the borrowers as of such date of determination, (2) the Mortgage Rate and (3) the yield on 10-year U.S. treasuries as of such date of determination and (ii) for all other cash flows, including property cash flow, the “discount rate” set forth in the most recent appraisal (or updated appraisal) of the related Mortgaged Property.
In the case of a Non-Serviced Mortgage Loan, the master servicer and special servicer will be required to act in accordance with the Servicing Standard with respect to any action required to be taken regarding such Non-Serviced Mortgage Loan pursuant to their respective obligations under the PSA.
Subservicing
The master servicer and the special servicer may delegate and/or assign some or all of their respective servicing obligations and duties with respect to some or all of the Mortgage Loans (other than the Non-Serviced Mortgage Loans) and the Serviced Companion Loans to one or more third-party sub-servicersprovided that the master servicer and the special servicer, as applicable, will not thereby be relieved of any of those obligations or duties under the PSA and will remain responsible for the acts or omissions of any such sub-servicers. A sub-servicer may be an affiliate of the depositor, the master servicer or the special servicer. Notwithstanding the foregoing, the special servicer may not enter into any sub-servicing agreement which provides for the performance by third parties of any or all of its obligations under the PSA without, with respect to any Mortgage Loan prior to the occurrence and continuance of a Control Termination Event, the consent of the Directing Certificateholder, except to the extent necessary for the special servicer to comply with applicable regulatory requirements.
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Each sub-servicing agreement between the master servicer or special servicer and a sub-servicer (a “Sub-Servicing Agreement”) will generally be required to provide that(i) if for any reason the master servicer or special servicer, as applicable, is no longer acting in that capacity (including, without limitation, by reason of a Servicer Termination Event), the trustee or any successor master servicer or special servicer, as applicable, may assume or terminate such party’s rights and obligations under such Sub-Servicing Agreement and (ii) the sub-servicer will be in default under such Sub-Servicing Agreement and such Sub-Servicing Agreement will be terminated (following the expiration of any applicable grace period) if the sub-servicer fails (A) to deliver by the due date any Exchange Act reporting items required to be delivered to the master servicer pursuant to the PSA or such Sub-Servicing Agreement or to the master servicer under any other pooling and servicing agreement that the depositor is a party to, (B) to perform in any material respect any of its covenants or obligations contained in such Sub-Servicing Agreement regarding creating, obtaining or delivering any Exchange Act reporting items required in order for any party to the PSA to perform its obligations under the PSA or under the Exchange Act reporting requirements of any other pooling and servicing agreement that the depositor is a party to or (C) to perform other covenants and obligations set forth in such Sub-Servicing Agreement in accordance with the terms of such Sub-Servicing Agreement. No sub-servicer will be permitted under any Sub-Servicing Agreement to make material servicing decisions, such as loan modifications or determinations as to the manner or timing of enforcing remedies under the Mortgage Loan documents, without the consent of the master servicer or special servicer, as applicable. The master servicer’s consent may also be required for certain other servicing decisions as provided in the related Sub-Servicing Agreement.
Generally, the master servicer will be solely liable for all fees owed by it to any sub-servicer retained by the master servicer, without regard to whether the master servicer’s compensation pursuant to the PSA is sufficient to pay those fees. Each sub-servicer will be required to be reimbursed by the master servicer for certain expenditures which such sub-servicer makes, generally to the same extent the master servicer would be reimbursed under the PSA.
Advances
P&I Advances
On the business day immediately preceding each Distribution Date (the “Master Servicer Remittance Date”), except as otherwise described below, the master servicer will be obligated, unless determined to be non-recoverable as described below, to make advances (each, a “P&I Advance”) out of its own funds or, subject to the replacement of those funds as provided in the PSA, certain funds held in the Collection Account that are not required to be part of the Available Funds for that Distribution Date, in an amount equal to (but subject to reduction as described below) the aggregate of:
(1) all Periodic Payments (net of any applicable Servicing Fees (other than, in the case of any Non-Serviced Mortgage Loan, the servicing fee rate pursuant to the applicable pooling and servicing agreement)) that were due on the Mortgage Loans (including the Non-Serviced Mortgage Loans) and any REO Loan (other than any portion of an REO Loan related to a Companion Loan) during the related Collection Period and not received as of the business day preceding the Master Servicer Remittance Date; and
(2) in the case of each Mortgage Loan delinquent in respect of its balloon payment as of the Master Servicer Remittance Date (including any REO Loan (other than any portion of an REO Loan related to a Companion Loan) as to which the balloon payment would have been past due), an amount equal to its Assumed Scheduled Payment.
The master servicer’s obligations to make P&I Advances in respect of any Mortgage Loan (including the Non-Serviced Mortgage Loans) or REO Loan (other than any portion of a REO Loan related to a Companion Loan) will continue, except if a determination as to non-recoverability is made, through and up to (but not including) the Distribution Date on which liquidation of the Mortgage Loan or disposition of the REO Property, as the case may be, occurs. However, no interest will accrue on any P&I Advance made with respect to a Mortgage Loan unless the related Periodic Payment is received after the related Due Date has passed and any applicable grace period has expired or if the related Periodic Payment is
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received after the Determination Date but on or prior to the Master Servicer Remittance Date. To the extent that the master servicer fails to make a P&I Advance that it is required to make under the PSA, the trustee will be required to make the required P&I Advance in accordance with the terms of the PSA.
If an Appraisal Reduction Amount has been assessed with respect to any Mortgage Loan (or, in the case of any Non-Serviced Whole Loan, an appraisal reduction has been assessed in accordance with the related Non-Serviced PSA and the master servicer has notice of such Appraisal Reduction Amount), then the interest portion of any P&I Advance in respect of that Mortgage Loan for the related Distribution Date will be reduced (there will be no reduction in the principal portion, if any, of such P&I Advance) to equal the product of (x) the amount of the interest portion of the P&I Advance for that Mortgage Loan for the related Distribution Date without regard to this sentence, and (y) a fraction, expressed as a percentage, the numerator of which is equal to the Stated Principal Balance of that Mortgage Loan immediately prior to the related Distribution Date, net of the related Appraisal Reduction Amount (or, in the case of any Whole Loan, the portion of such Appraisal Reduction Amount allocated to the related Mortgage Loan), if any, and the denominator of which is equal to the Stated Principal Balance of that Mortgage Loan immediately prior to the related Distribution Date.
Neither the master servicer nor the trustee will be required to make a P&I Advance for a balloon payment, default interest, late payment charges, yield maintenance charges or prepayment premiums or Excess Interest or with respect to any Companion Loan.
With respect to any Non-Serviced Whole Loan, if any servicer under the Non-Serviced PSA determines that a P&I Advance with respect to the related Non-Serviced Companion Loan, if made, would be non-recoverable, such determination will be binding on the master servicer and the trustee as it relates to any proposed P&I Advance with respect to the related Non-Serviced Mortgage Loan, and the master servicer and the trustee may conclusively rely upon any such determination. Similarly, with respect to any Non-Serviced Mortgage Loan, if the master servicer or special servicer determines that any P&I Advance with respect to such Non-Serviced Mortgage Loan, if made, would be non-recoverable, such determination will not be binding on the related master servicer and related trustee under the related Non-Serviced PSA as such determination relates to any proposed P&I Advance with respect to any related Non-Serviced Companion Loan (unless the related Non-Serviced PSA provides otherwise).
Servicing Advances
In addition to P&I Advances, except as otherwise described under “—Recovery of Advances” below and except in certain limited circumstances described below, the master servicer will also be obligated (subject to the limitations described in this prospectus), to make advances (“Servicing Advances” and, collectively with P&I Advances, “Advances”) in connection with the servicing and administration of any Mortgage Loan (other than the Non-Serviced Mortgage Loan) and related Companion Loan, as applicable, in connection with the servicing and administration of any Mortgaged Property or REO Property, in order to pay delinquent real estate taxes, assessments and hazard insurance premiums and to cover other similar costs and expenses necessary to preserve the priority of or enforce the related Mortgage Loan documents or to protect, lease, manage and maintain the related Mortgaged Property. To the extent that the master servicer fails to make a Servicing Advance that it is required to make under the PSA and the trustee has received notice or otherwise has actual knowledge of this failure, the trustee will be required to make the required Servicing Advance in accordance with the terms of the PSA.
However, neither the master servicer nor the trustee will make any Servicing Advance in connection with the exercise of any cure rights or purchase rights granted to the holder of a Serviced Companion Loan under the related Intercreditor Agreement or the PSA.
The special servicer will have no obligation to make any Servicing Advances. No Servicing Advances will be made with respect to any Serviced Whole Loan if the related Mortgage Loan is no longer held by the issuing entity or if such Serviced Whole Loan is no longer serviced under the PSA and no Servicing Advances will be made for any Non-Serviced Whole Loan under the PSA. Any requirement of the master servicer or the trustee to make an Advance in the PSA is intended solely to provide liquidity for the benefit
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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 or the related Companion Loan.
The master servicer will also be obligated to make Servicing Advances with respect to Serviced Whole Loans. With respect to any Non-Serviced Whole Loan, the applicable servicer under the related Non-Serviced PSA will be obligated to make servicing advances with respect to such Non-Serviced Whole Loan. See “—Servicing of the Non-Serviced Mortgage Loans” below and “Description of the Mortgage Pool—The Whole Loans—10 Hudson Yards Whole Loan”, “—Westfield San Francisco Centre Whole Loan”, “—Prudential Plaza Whole Loan”, “—Birch Run Premium Outlets Whole Loan”, “—Gas Company Tower & World Trade Center Parking Garage Whole Loan”, “—Vertex Pharmaceuticals HQWhole Loan” and “—401 South State Street Whole Loan”.
Nonrecoverable Advances
Notwithstanding the foregoing, no party will be obligated to make any Advance that it determines in its reasonable judgment would, if made, not be recoverable (including recovery of interest on the Advance) out of Related Proceeds (a “Nonrecoverable Advance”). In addition, the special servicer may, at its option, make a determination in accordance with the Servicing Standard that any P&I Advance or Servicing Advance, if made, would be a Nonrecoverable Advance, and if it makes such a determination, must deliver to the master servicer (and, with respect to a Serviced Mortgage Loan, to any master servicer or special servicer under the PSA governing any securitization trust into which the related Serviced Pari Passu Companion Loan is deposited, and, with respect to any Non-Serviced Mortgage Loan, the related master servicer under the related Non-Serviced PSA), the certificate administrator, the trustee, the operating advisor and the 17g-5 Information Provider notice of such determination, which determination may be conclusively relied upon by, and will be binding upon, the master servicer and the trustee. The special servicer will have no such obligation to make an affirmative determination that any P&I Advance or Servicing Advance is, or would be, recoverable, and in the absence of a determination by the special servicer that such an Advance is non-recoverable, each such decision will remain with the master servicer or the trustee, as applicable. If the special servicer makes a determination that only a portion, and not all, of any previously made or proposed P&I Advance or Servicing Advance is non-recoverable, the master servicer and the trustee will have the right to make its own subsequent determination that any remaining portion of any such previously made or proposed P&I Advance or Servicing Advance is non-recoverable.
In making such non-recoverability determination, each person will be entitled to consider (among other things): (a) the obligations of the borrower under the terms of the related Mortgage Loan or Companion Loan, as applicable, as it may have been modified, (b) the related Mortgaged Properties in their “as-is” or then-current conditions and occupancies, as modified by such party’s assumptions regarding the possibility and effects of future adverse change with respect to such Mortgaged Properties, (c) estimated future expenses, and (d) estimated timing of recoveries, and will be entitled to give due regard to the existence of any Nonrecoverable Advances which, at the time of such consideration, the recovery of which are being deferred or delayed by the master servicer or the trustee, as applicable, in light of the fact that Related Proceeds are a source of recovery not only for the Advance under consideration but also a potential source of recovery for such delayed or deferred Advance. In addition, any such person may update or change its recoverability determinations (but not reverse any other person’s determination or prohibit any such other authorized Person from making a determination, that an Advance is non-recoverable) at any time and may obtain at the expense of the issuing entity any analysis, appraisals or market value estimates or other information for such purposes. Absent bad faith, any non-recoverability determination described in this paragraph will be conclusive and binding on the Certificateholders, and may be conclusively relied upon by, and will be binding upon, the master servicer and the trustee. The master servicer and the trustee will be entitled to rely conclusively on any non-recoverability determination of the special servicer. Nonrecoverable Advances will represent a portion of the losses to be borne by the Certificateholders.
Recovery of Advances
The master servicer or the trustee, as applicable, will be entitled to recover (a) any Servicing Advance made out of its own funds from any amounts collected in respect of a Mortgage Loan (or, consistent with
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the related Intercreditor Agreement, a Serviced Whole Loan) as to which such Servicing Advance was made, and (b) any P&I Advance made out of its own funds from any amounts collected in respect of a Mortgage Loan as to which such P&I Advance was made, whether in the form of late payments, insurance and condemnation proceeds, liquidation proceeds or otherwise from the related Mortgage Loan (“Related Proceeds”). Each of the master servicer and the trustee will be entitled to recover any Advance by it that it subsequently determines to be a Nonrecoverable Advance out of general collections relating to the Mortgage Loans on deposit in the Collection Account (first from principal collections andthen from any other collections). Amounts payable in respect of each Serviced Companion Loan pursuant to the related Intercreditor Agreement will not be available for distributions on the certificates or for the reimbursement of Nonrecoverable Advances of principal or interest with respect to the related Mortgage Loan, but will be available, in accordance with the PSA and related Intercreditor Agreement, for the reimbursement of any Servicing Advances with respect to the related Serviced Whole Loan. With respect to a Servicing Advance on a Serviced Whole Loan, the master servicer or the trustee, as applicable, will be entitled to reimbursementfirst, from amounts that would have been allocable to the holder of the related Mortgage Loan and any related Serviced Companion Loan, on apro ratabasis (based on each such loan’s outstanding principal balance), andthen, if the Servicing Advance is a Nonrecoverable Advance, from general collections of the issuing entity;provided that the master servicer will be required, after receiving payment from amounts on deposit in the Collection Account, if any, to (i) promptly notify the holder of the related Companion Loan and (ii) use commercially reasonable efforts to exercise on behalf of the issuing entity the rights of the issuing entity under the related Intercreditor Agreement to obtain reimbursement for apro rata portion of such amount allocable to the related Companion Loans from the holders of such Companion Loans.
If the funds in the Collection Account relating to the Mortgage Loans allocable to principal on the Mortgage Loans are insufficient to fully reimburse the party entitled to reimbursement, then such party as an accommodation may elect, on a monthly basis, at its sole option and discretion to defer reimbursement 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 time as required to reimburse the excess portion from principal for a consecutive period up to 12 months (provided that any such deferral exceeding 6 months will require, prior to the occurrence and continuance of any Control Termination Event, the consent of the Directing Certificateholder) and any election to so defer will be deemed to be in accordance with the Servicing Standard;provided that no such deferral may occur at any time to the extent that amounts otherwise distributable as principal are available for such reimbursement.
In connection with a potential election by the master servicer or the trustee to refrain from the reimbursement of all or a portion of a particular Nonrecoverable Advance during the one month collection period ending on the related Determination Date for any Distribution Date, the master servicer or the trustee will be authorized to wait for principal collections on the Mortgage Loans to be received until the end of such collection period before making its determination of whether to refrain from the reimbursement of all or a portion of a particular Nonrecoverable Advance;provided, however, that if, at any time the master servicer or the trustee, as applicable, elects, in its sole discretion, not to refrain from obtaining such reimbursement or otherwise determines that the reimbursement of a Nonrecoverable Advance during a one month collection period will exceed the full amount of the principal portion of general collections deposited in the Collection Account for such Distribution Date, then the master servicer or the trustee, as applicable, will be required to use reasonable efforts to give the 17g-5 Information Provider 15 days’ notice of such determination for posting on the 17g-5 Information Provider’s website, unless extraordinary circumstances make such notice impractical, and thereafter will be required to deliver copies of such notice to the 17g-5 Information Provider as soon as practical. Notwithstanding the foregoing, failure to give such notice will in no way affect the master servicer’s or the trustee’s election whether to refrain from obtaining such reimbursement.
Each of the master servicer and the trustee 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, together with interest on that Advance, a “Workout-Delayed Reimbursement Amount”) out of principal collections on the Mortgage Loans in the Collection Account.
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Any amount that constitutes all or a portion of any Workout-Delayed Reimbursement Amount may in the future be determined to constitute a Nonrecoverable Advance and thereafter will be recoverable as any other Nonrecoverable Advance.
In connection with its recovery of any Advance, each of the master servicer and the trustee will be entitled to be paid, out of any amounts relating to the Mortgage Loans then on deposit in the Collection Account, interest at the Prime Rate (the “Reimbursement Rate”) accrued on the amount of the Advance from the date made to, but not including, the date of reimbursement. Neither the master servicer nor the trustee will be entitled to interest on P&I Advances that accrues before the related due date has passed and any applicable grace period has expired. The “Prime Rate” will be the prime rate, for any day, set forth inThe Wall Street Journal, New York edition.
See “—Servicing of the Non-Serviced Mortgage Loans”and “Description of the Mortgage Pool—The Whole Loans”for reimbursements of servicing advances made in respect of each Non-Serviced Whole Loan under the related Non-Serviced PSA.
Accounts
The master servicer is required to establish and maintain, or cause to be established and maintained, one or more accounts and subaccounts (collectively, the “Collection Account”) in its own name on behalf of the trustee and for the benefit of the Certificateholders. Upon the later of (i) two Business Days following the master servicer’s receipt of properly identified funds and (ii) the same Business Day that such properly identified funds become available to the master servicer, the master servicer is required to deposit in the Collection Account, all payments and collections due after the Cut-off Date and other amounts received or advanced with respect to the Mortgage Loans (including, without limitation, all proceeds (the “Insurance and Condemnation Proceeds”) received under any hazard, title or other insurance policy that provides coverage with respect to a Mortgaged Property or the related Mortgage Loan or in connection with the full or partial condemnation of a Mortgaged Property (other than proceeds applied to the restoration of the Mortgaged Property or released to the related borrower in accordance with the Servicing Standard (or, if applicable, a special servicer) and/or the terms and conditions of the related Mortgage) and all other amounts received and retained in connection with the liquidation of any Mortgage Loan that is defaulted and any related defaulted Companion Loans or property acquired by foreclosure or otherwise (the “Liquidation Proceeds”)) together with the net operating income (less reasonable reserves for future expenses) derived from the operation of any REO Properties. Notwithstanding the foregoing, the collections on the Whole Loans will be limited to the portion of such amounts that are payable to the holder of the related Mortgage Loan pursuant to the related Intercreditor Agreement.
The master servicer will also be required to establish and maintain a segregated custodial account (the “Serviced Whole Loan Custodial Account”) with respect to each Serviced Whole Loan, which may be a sub-account of the Collection Account, and deposit amounts collected in respect of each Serviced Whole Loan in the related Serviced Whole Loan Custodial Account. The issuing entity will only be entitled to amounts on deposit in a Serviced Whole Loan Custodial Account to the extent these funds are not otherwise payable to the holder of a related Serviced Companion Loan or payable or reimbursable to any party to the PSA. Any amounts in a Serviced Whole Loan Custodial Account to which the issuing entity is entitled will be transferred on a monthly basis to the Collection Account.
With respect to each Distribution Date, the master servicer will be required to disburse from the Collection Account and remit to the certificate administrator for deposit into the Lower-Tier REMIC Distribution Account in respect of the related Mortgage Loans, to the extent of funds on deposit in the Collection Account, on the related Master Servicer Remittance Date, the Available Funds for such Distribution Date and any yield maintenance charges or prepayment premiums received as of the related Determination Date. The certificate administrator is required to establish and maintain various accounts, including a “Lower-Tier REMIC Distribution Account”, and an “Upper-Tier REMIC Distribution Account”, each of which may be sub-accounts of a single account (collectively, the “Distribution Accounts”), in its own name on behalf of the trustee and for the benefit of the Certificateholders.
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On each Distribution Date, the certificate administrator is required to apply amounts on deposit in the Upper-Tier REMIC Distribution Account (which will include all funds that were remitted by the master servicer from the Collection Account), plus, among other things, any P&I Advances less amounts, if any, distributable to the Class V and Class R certificates as set forth in the PSA generally to make distributions of interest and principal from Available Funds to the holders of the Regular Certificates, as described under “Description of the Certificates—Distributions”.
The certificate administrator is also required to establish and maintain an account (the “Interest Reserve Account”) which may be a sub-account of the Distribution Account, in its own name on behalf of the trustee for the benefit of the Certificateholders. On the Master Servicer Remittance Date occurring each February and on any Master Servicer Remittance Date occurring in any January which occurs in a year that is not a leap year (in each case, unless the related Distribution Date is the final Distribution Date), the certificate administrator will be required to deposit amounts remitted by the master servicer or P&I Advances made on the related Mortgage Loans into the Interest Reserve Account during the related interest period, in respect of the Mortgage Loans that accrue interest on an Actual/360 Basis (collectively, the “Actual/360 Loans”), in an amount equal to one day’s interest at the Net Mortgage Rate for each such Actual/360 Loan on its Stated Principal Balance and as of the Distribution Date in the month preceding the month in which the Master Servicer Remittance Date occurs, to the extent a Periodic Payment or P&I Advance or other deposit is made in respect of the Mortgage Loans (all amounts so deposited in any consecutive January (if applicable) and February, “Withheld Amounts”). On the Master Servicer Remittance Date occurring each March (or February, if the related Distribution Date is the final Distribution Date), the certificate administrator will be required to withdraw from the Interest Reserve Account an amount equal to the Withheld Amounts from the preceding January (if applicable) and February, if any, and deposit that amount into the Lower-Tier REMIC Distribution Account.
The certificate administrator is also required to establish and maintain an account (the “Excess Interest Distribution Account”), which may be a sub-account of the Distribution Account, in the name of the trustee for the benefit of the holders of the Class V certificates. Prior to the applicable Distribution Date, the master servicer is required to remit to the certificate administrator for deposit into the Excess Interest Distribution Account an amount equal to the Excess Interest received by the master servicer on or prior to the related Determination Date.
The certificate administrator is also required to establish and maintain an account (the “Prudential Plaza Loan REMIC Residual Interest Distribution Account”), which may be a sub-account of the Distribution Account, in the name of the trustee for the benefit of the holders of the Class R certificates. Prior to the applicable Distribution Date, the master servicer is required to remit to the certificate administrator for deposit into the Prudential Plaza Loan REMIC Residual Interest Distribution Account an amount equal to any amounts received in respect of the Prudential Plaza Loan REMIC Residual Interest by the master servicer on or prior to the related Determination Date.
The certificate administrator may be required to establish and maintain an account (the “Gain-on-Sale Reserve Account”), which may be a sub-account of the Distribution Account, in its own name on behalf of the trustee for the benefit of the Certificateholders. To the extent that any gains are realized on sales of Mortgaged Properties (or, with respect to any Whole Loan, the portion of such amounts that are payable on the related Mortgage Loan pursuant to the related Intercreditor Agreement), such gains will be applied on the applicable Distribution Date as part of Available Funds to all amounts due and payable on the Regular Certificates (including to reimburse for Realized Losses previously allocated to such certificates), and to the extent not so applied, such gains will be held and applied to offset future Realized Losses, if any (as determined by the special servicer). Any remaining amounts will be distributed on the Class R certificates.
Other accounts to be established pursuant to the PSA are one or more segregated custodial accounts (the “REO Account”) for collections from REO Properties. Each REO Account will be maintained by the special servicer in its own name on behalf of the trustee and for the benefit of the Certificateholders.
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The Collection Account, the Serviced Whole Loan Collection Account, the Distribution Account, the Interest Reserve Account, the Excess Interest Distribution Account, the Gain-on-Sale Reserve Account and the REO Account are collectively referred to as the “Securitization Accounts” (but with respect to any Whole Loan, only to the extent of the issuing entity’s interest in the Whole Loan). Each of the foregoing accounts will be held at a depository institution or trust company meeting the requirements of the PSA.
Amounts on deposit in the foregoing accounts may be invested in certain United States government securities and other investments meeting the requirements of the PSA (“Permitted Investments”). Interest or other income earned on funds in the accounts maintained by the master servicer, the certificate administrator or the special servicer, as applicable, if any, will be payable to such person as additional compensation, and such person will be required to bear any losses resulting from their investment of such funds.
Withdrawals from the Collection Account
The master servicer may, from time to time, make withdrawals from the Collection Account (or the applicable subaccount of the Collection Account, exclusive of the Serviced Whole Loan Custodial Account that may be a subaccount of the Collection Account) for any of the following purposes, in each case only to the extent permitted under the PSA and with respect to the Serviced Whole Loan, subject to the terms of the related Intercreditor Agreement, without duplication (the order set forth below not constituting an order of priority for such withdrawals):
| (i) | to remit on each Master Servicer Remittance Date (A) to the certificate administrator for deposit into the Lower-Tier REMIC Distribution Account certain portions of the Available Funds and any prepayment premiums or yield maintenance charges attributable to the Mortgage Loans on the related Distribution Date, (B) to the certificate administrator for deposit into the Excess Interest Distribution Account an amount equal to the Excess Interest received in the applicable one-month period ending on the related Determination Date, if any, or (C) to the certificate administrator 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 and the trustee, as applicable, pursuant to the terms of the PSA for Advances made by any of them and interest on Advances (the master servicer’s, special servicer’s or the trustee’s respective right, as applicable, to reimbursement for items described in this clause (ii) being limited as described above under “—Advances”) (provided that with respect to each Serviced Whole Loan, such reimbursements are subject to the terms of the related Intercreditor Agreement); |
| (iii) | to pay to the master servicer and the applicable special servicer, as compensation, the aggregate unpaid servicing compensation; |
| (iv) | to pay itself any Net Prepayment Interest Excess; |
| (v) | to pay to the operating advisor the Operating Advisor Consulting Fee (but only to the extent actually received from the related borrower) or the Operating Advisor Fee; |
| (vi) | to pay to the asset representations reviewer the unpaid Asset Representations Reviewer Asset Review Fee (to the extent such fee is to be paid by the issuing entity); |
| (vii) | to reimburse the trustee, the applicable special servicer and the master servicer, as applicable, for certain Nonrecoverable Advances or Workout-Delayed Reimbursement Amounts; |
| (viii) | to reimburse the master servicer, the applicable special servicer or the trustee, as applicable, for any unreimbursed expenses reasonably incurred with respect to each related Mortgage Loan that has been repurchased or substituted by such person pursuant to the PSA or otherwise; |
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| (ix) | to reimburse the master servicer or the applicable special servicer for any unreimbursed expenses reasonably incurred by such person in connection with the enforcement of the applicable mortgage loan seller’s obligations under the applicable section of the related MLPA; |
| (x) | to pay for any unpaid costs and expenses incurred by the issuing entity; |
| (xi) | to pay the master servicer and the special servicer, as applicable, as additional servicing compensation, (A) interest and investment income earned in respect of amounts relating to the issuing entity held in the Collection Account and the companion loan distribution account (but only to the extent of the net investment earnings during the applicable one month period ending on the related Distribution Date) and (B) certain penalty charges and default interest; |
| (xii) | to recoup any amounts deposited in the Collection Account in error; |
| (xiii) | to the extent not reimbursed or paid pursuant to any of the above clauses, (A) to reimburse or pay the master servicer, the applicable special servicer, the operating advisor, the asset representations reviewer, the depositor or any of their respective directors, officers, members, managers, employees and agents, unpaid additional expenses of the issuing entity and certain other unreimbursed expenses incurred by such person pursuant to and to the extent reimbursable under the PSA and to satisfy any indemnification obligations of the issuing entity under the PSA and (B) to reimburse or pay any party to the PSA any unpaid expenses specifically reimbursable from the Collection Account under the PSA; |
| (xiv) | to pay for the cost of the opinions of counsel or the cost of obtaining any extension to the time in which the issuing entity is permitted to hold REO Property; |
| (xv) | to pay any applicable federal, state or local taxes imposed on the Prudential Plaza Loan REMIC (in respect of the interest therein represented by the Prudential Plaza Mortgage Loan) or either Trust REMIC, or any of their assets or transactions, together with all incidental costs and expenses, to the extent that none of the master servicer, the special servicer, the certificate administrator or the trustee is liable under the PSA; |
| (xvi) | to pay the CREFC® Intellectual Property Royalty License Fee; |
| (xvii) | to reimburse the certificate administrator out of general collections on the Mortgage Loans and REO Properties for legal expenses incurred by and reimbursable to it by the issuing entity of any administrative or judicial proceedings related to an examination or audit by any governmental taxing authority; |
| (xviii) | to pay the applicable mortgage loan seller or any other person, with respect to each Mortgage Loan, if any, previously purchased or replaced by such person pursuant to the PSA, all amounts received thereon subsequent to the date of purchase or replacement relating to periods after the date of purchase or replacement; and |
| (xix) | to clear and terminate the Collection Account pursuant to a plan for termination and liquidation of the issuing entity. |
No amounts payable or reimbursable to the parties to the PSA out of general collections that do not specifically relate to a Serviced Whole Loan may be reimbursable from amounts that would otherwise be payable to the related Companion Loan.
Certain costs and expenses (such as apro rata share of any related Servicing Advances) allocable to the Mortgage Loan (other than a Non-Serviced Mortgage Loan) that is part of a Serviced Whole Loan may be paid or reimbursed out of payments and other collections on the other Mortgage Loans, subject to the issuing entity’s right to reimbursement from future payments and other collections on the related Companion Loan or from general collections with respect to the securitization of the related Companion
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Loan. If the master servicer makes, with respect to any Serviced Whole Loan, any reimbursement or payment out of the Collection Account to cover the related Serviced Companion Loan’s share of any cost, expense, indemnity, Servicing Advance or interest on such Servicing Advance, or fee with respect to such Serviced Whole Loan, then the master servicer (with respect to non-Specially Serviced Loans) and the special servicer (with respect to Specially Serviced Loans) must use efforts consistent with the Servicing Standard to collect such amount out of collections on such Serviced Companion Loan or, if and to the extent permitted under the related Intercreditor Agreement, from the holder of the related Serviced Companion Loan.
The master servicer will also be entitled to make withdrawals, from time to time, from the Collection Account of amounts necessary for the payments or reimbursements required to be paid to the parties to the applicable Non-Serviced PSA, pursuant to the applicable Intercreditor Agreement and the applicable Non-Serviced PSA. See “—Servicing of the Non-Serviced Mortgage Loans” and “Description of the Mortgage Pool—The Whole Loans”.
If a P&I Advance is made with respect to any Mortgage Loan (other than a Non-Serviced Mortgage Loan) that is part of a Whole Loan, then that P&I Advance, together with interest on such P&I Advance, may only be reimbursed out of future payments and collections on that Mortgage Loan or, as and to the extent described under “—Advances” above, on other Mortgage Loans, but not out of payments or other collections on the related Serviced Companion Loan. Likewise, the Certificate Administrator/Trustee Fee and the Operating Advisor Fee that accrue with respect to any Mortgage Loan (other than a Non-Serviced Mortgage Loan) that is part of a Whole Loan and any other amounts payable to the operating advisor may only be paid out of payments and other collections on such Mortgage Loan and/or the Mortgage Pool generally, but not out of payments or other collections on the related Serviced Companion Loan.
Servicing and Other Compensation and Payment of Expenses
General
The master servicer, special servicer, certificate administrator, trustee, operating advisor and asset representations reviewer will be entitled to payment of certain fees as compensation for services performed under the PSA. Below is a summary of the fees payable to the master servicer, special servicer, certificate administrator, trustee, operating advisor and (under some circumstances) asset representations reviewer from amounts that the issuing entity is entitled to receive or amounts paid by certain third parties. In addition, CREFC® will be entitled to a license fee for use of their names and trademarks, including the CREFC® Investor Reporting Package. Certain additional fees and costs payable by the related borrowers are allocable to the master servicer, special servicer, trustee, and operating advisor, but such amounts are not payable from amounts that the issuing entity is entitled to receive.
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The amounts available for distribution on the certificates on any Distribution Date will generally be net of the following amounts:
Type/Recipient | Amount | Frequency | Source of Payment | |||
| Fees | ||||||
| Master Servicing Fee/master servicer | The Stated Principal Balance of each Mortgage Loan, REO Loan or Serviced Companion Loan multiplied by the Servicing Fee Rate calculated on the same basis as interest accrues on the Mortgage Loan, REO Loan or Serviced Companion Loan. | Monthly | Payment of interest on the related Mortgage Loan, REO Loan or Serviced Companion Loan. | |||
| Additional Master Servicing Compensation/master servicer | Prepayment interest excess (to the extent any excess exceeds the amount of any Prepayment Interest Shortfalls). | From time to time | Any actual prepayment interest excess. | |||
| Additional Master Servicing Compensation/master servicer | 100% of any amounts collected for checks returned for insufficient funds. | From time to time | The related fees. | |||
| Additional Master Servicing Compensation/master servicer | All investment income earned on amounts on deposit in the Collection Account and certain custodial and reserve accounts and fees for insufficient funds on returned checks. | Monthly | The investment income. | |||
| Special Servicing Fee/special servicer | The Stated Principal Balance of each Specially Serviced Loan (including any related Serviced Companion Loan) and REO Loan multiplied by the Special Servicing Fee Rate calculated on the same basis as interest accrues on the Mortgage Loan, REO Loan or Serviced Companion Loan. | Monthly | First out of collections on the related Mortgage Loan and REO Loan and then from general collections in the collection account (and custodial account with respect to a Serviced Companion Loan, if applicable), subject to certain limitations. |
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Type/Recipient | Amount | Frequency | Source of Payment | |||
| Workout Fee/special servicer | 1.0% of each collection of principal and interest on each Corrected Loan (including any related Serviced Companion Loan), subject to a cap described under “—Special Servicing Compensation”. | Monthly | The related collection of principal or interest. | |||
| Liquidation Fee/special servicer | 1.0% of each recovery of Liquidation Proceeds, net of certain expenses related to the liquidation and subject to a cap described, under “—Special Servicing Compensation”. | Upon receipt of Liquidation Proceeds | The related Liquidation Proceeds. | |||
| Additional Servicing Compensation/master servicer and/or special servicer | All late payment fees and Net Default Interest, Modification Fees, assumption application fees, assumption, waiver consent and earnout fees, defeasance fees, review fees, demand fees, beneficiary statement charges and/or other similar items.(1) | From time to time | The related fees. | |||
| Solely payable to the special servicer, all interest or other income earned on deposits in any REO Account. | Monthly | The investment income. | ||||
| Certificate Administrator/Trustee Fee/certificate administrator/trustee | The Certificate Administrator/Trustee Fee Rate multiplied by the Stated Principal Balance of the Mortgage Loans and REO Loans calculated on the same basis as interest accrues on the Mortgage Loans and REO Loans. | Monthly | Payment of interest on the related Mortgage Loan or REO Loan. |
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Type/Recipient | Amount | Frequency | Source of Payment | |||
| Operating Advisor Fee/operating advisor | The Operating Advisor Fee Rate multiplied by the Stated Principal Balance of the Mortgage Loans and the REO Loans (other than any Non-Serviced Mortgage Loans) calculated on the same basis as interest accrued on the Mortgage Loans and REO Loans. | Monthly | Payment of interest on the related Mortgage Loan or REO Loan. | |||
| Operating Advisor Consulting Fee/operating advisor | A fee in connection with each Major Decision for which the operating advisor has consulting rights equal to $10,000 or such lesser amount as the related borrower agrees to pay with respect to any Mortgage Loan or REO Loan. | From time to time | Paid by related borrower. | |||
| Asset Representations Reviewer Asset Review Fee/asset representations reviewer | A reasonable and customary hourly fee, plus any related costs and expenses; provided that such fee will not be greater than the Asset Representations Reviewer Fee Cap | From time to time | Payable by the related mortgage loan seller in connection with each Asset Review; provided, however, that if the related mortgage loan seller is insolvent or fails to pay such amount within 90 days of written request by the asset representations reviewer, such fee will be paid by the trust. |
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Type/Recipient | Amount | Frequency | Source of Payment | |||
| CREFC® Intellectual Property Royalty License Fee | Amount of interest accrued during an Interest Accrual Period at the CREFC® Intellectual Property Royalty License Fee Rate on the same balance, in the same manner and for the same number of days as interest at the applicable Mortgage Rate accrued with respect to each Mortgage Loan during the related Interest Accrual Period. | Monthly | Payment of interest on the related Mortgage Loan. | |||
| Expenses | ||||||
| Reimbursement of Servicing Advances/master servicer/trustee | To the extent of funds available, the amount of any Servicing Advances. | From time to time | Recoveries on the related Mortgage Loan or Serviced Companion Loan, or to the extent that the party making the advance determines it is nonrecoverable, from general collections in the Collection Account (and custodial account with respect to a Serviced Companion Loan, if applicable), subject to certain limitations. | |||
| Interest on Servicing Advances/master servicer/trustee | At Reimbursement Rate. | When Advance is reimbursed | First from late payment charges and default interest on the related Mortgage Loan in excess of the regular interest rate, and then from general collections in the Collection Account (and custodial account with respect to a Serviced Companion Loan, if applicable), subject to certain limitations. |
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Type/Recipient | Amount | Frequency | Source of Payment | |||
| Reimbursement of P&I Advances/master servicer/trustee | To the extent of funds available, the amount of any P&I Advances. | From time to time | Recoveries on the related Mortgage Loan or Serviced Companion Loan, or to the extent that the party making the advance determines it is nonrecoverable, from general collections in the Collection Account (and custodial account with respect to a Serviced Companion Loan, if applicable), subject to certain limitations. | |||
| Interest on P&I Advances/master servicer/trustee | At Reimbursement Rate. | When Advance is reimbursed | First from late payment charges and default interest on the related Mortgage Loan in excess of the regular interest rate, and then from general collections in the Collection Account (and custodial account with respect to a Serviced Companion Loan, if applicable), subject to certain limitations. | |||
| Expenses, including without limitation, indemnification expenses/trustee, certificate administrator, operating advisor, the asset representations reviewer, master servicer and special servicer | Amounts for which the trustee, the certificate administrator, the operating advisor, the asset representations reviewer, the master servicer and the special servicer are entitled to indemnification or reimbursement. | From time to time | General collections in the Collection Account (and custodial account with respect to a Serviced Companion Loan, if applicable), subject to certain limitations, or the Distribution Account. | |||
| Expenses of the issuing entity not Advanced (may include environmental remediation, appraisals, expenses of operating REO Property and any independent contractor hired to operate REO Property) | Based on third party charges. | From time to time | First from income on the related REO Property, if applicable, and then from general collections in the Collection Account (and custodial account with respect to a Serviced Companion Loan, if applicable), subject to certain limitations. |
| (1) | Allocable between the master servicer and the special servicer as provided in the PSA. |
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Pursuant to the PSA, any successor master servicer or special servicer assuming the obligations ofthemaster servicer or special servicer under thePSA generally will be entitled to the compensation to which the master servicer or the special servicer would have been entitledto receive after such successor becomes the master servicer or the special servicer, as applicable. If no successor master servicer or special servicer can be obtained to perform such obligations for such compensation, additional amounts payable to such successormaster servicer or special servicer will be treated as Realized Losses. ThePSA does not provide for any successor trustee to receive compensation in excess of that paid to its predecessor trustee.
“Net Default Interest” with respect to any Mortgage Loan and any Distribution Date, any default interest accrued on such Mortgage Loan during the preceding Collection Period, less amounts required to pay the master servicer, the special servicer or the trustee, as applicable, interest on the related Advances on the related Mortgage Loan at the Reimbursement Rate and to reimburse the issuing entity for certain additional expenses of the trust on the related Mortgage Loan (including Special Servicing Fees, Workout Fees and Liquidation Fees).
Master Servicing Compensation
Pursuant to the PSA, the master servicer will be entitled to withdraw the Master Servicing Fee for the Mortgage Loans from the Collection Account. The “Master Servicing Fee” will be payable monthly and will accrue at a rateper annum (the “Master Servicing Fee Rate”) that is a component of the Servicing Fee Rate. The “Servicing Fee” will be payable monthly and will accrue at a percentage rateper annum (the “Servicing Fee Rate”) equal to the Administrative Cost Rate set forth on Annex A-1 under the heading “Administrative Cost Rate”, less the Certificate Administrator/Trustee Fee Rate, the Operating Advisor Fee Rate and the CREFC® Intellectual Property Royalty License Fee Rate, for each Mortgage Loan and will include the Master Servicing Fee and any fee for primary servicing functions payable to the master servicer or the applicable primary servicer. The Servicing Fee will be retained by the master servicer and any other primary servicer from payments and collections (including insurance proceeds, condemnation proceeds and liquidation proceeds) in respect of each Mortgage Loan and Serviced Companion Loan, and to the extent any Servicing Fee remains unpaid at the liquidation of the related Mortgage Loan, from general collections in the Collection Account.
The master servicer will also be entitled to retain as additional servicing compensation for the Mortgage Loans that it is servicing (together with the Master Servicing Fee, “Servicing Compensation”) (i) all investment income earned on amounts on deposit in the Collection Account with respect to the Mortgage Loans that it is servicing (and with respect to each Serviced Whole Loan, the related separate custodial account) and certain reserve accounts (to the extent consistent with the related Mortgage Loan documents); (ii) to the extent permitted by applicable law and the related Mortgage Loan documents, 100% of any Modification Fees and consent fees (or similar fees) related to any consents, modifications, waivers, extensions or amendments of any Mortgage Loans (and the related Serviced Companion Loans) that are non-Specially Serviced Loans that do not involve a Major Decision or Special Servicer Decision, 50% of any Modification Fees and consent fees (or similar fees) related to any consents, modifications, waivers, extensions or amendments of any Mortgage Loans (and the related Serviced Companion Loans) that are non-Specially Serviced Loans that involve one or more Major Decisions or Special Servicer Decisions (whether or not processed by the special servicer), 100% of any defeasance fees (provided that for the avoidance of doubt, any such defeasance fee will not include the special servicer’s portion of any Modification Fees or waiver fees in connection with a defeasance that the special servicer is entitled to under the PSA), 100% of assumption fees and consent fees with respect to Mortgage Loans (and the related Serviced Companion Loans) which do not involve a Major Decision or Special Servicer Decision, 50% of assumption fees and consent fees with respect to Mortgage Loans (and the related Serviced Companion Loans) which involve a Major Decision or Special Servicer Decision (whether or not processed by the special servicer), 100% of beneficiary statement charges or demand fees (but not including prepayment premiums or yield maintenance charges) on all Mortgage Loans (and the related Serviced Companion Loans) that are non-Specially Serviced Loans, 100% of assumption application fees with respect to Mortgage Loans (and the related Serviced Companion Loans) for which the master servicer is processing the underlying assumption related transaction (whether or not the consent of the
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special servicer is required); (iii) Net Prepayment Interest Excess, if any; (iv) 100% of charges for checks returned for insufficient funds (with respect to any Mortgage Loan or Specially Serviced Loan); (v) Net Default Interest and any late payment fees that accrued during a Collection Period on any Mortgage Loans (and the related Serviced Companion Loans, if applicable) that are non-Specially Serviced Loans to the extent collected by the issuing entity and remaining after application thereof to reimburse interest on Advances with respect to such Mortgage Loan and to reimburse the issuing entity for certain expenses of the issuing entity relating to such Mortgage Loan and (vi) 50% of any fee paid in connection with any Major Decision or Special Servicer Decision for a non-Specially Serviced Loan (regardless of whether the master servicer or the special servicer processes the related request). If a Mortgage Loan is a Specially Serviced Loan, the special servicer will be entitled to the full amount of any and all Modification Fees, or assumption fees or any other fees, as described below under “—Special Servicing Compensation”.
Notwithstanding anything to the contrary, the master servicer and the special servicer will each be entitled to charge reasonable review fees in connection with any borrower request.
With respect to any of the fees as to which both the master servicer and the special servicer are entitled to receive a portion thereof, the master servicer and the special servicer will each have the right, but not any obligation, to reduce or elect not to charge its respective portion of such fee;provided that (A) neither the master servicer nor the special servicer will have the right to reduce or elect not to charge the portion of any such fee due to the other and (B) to the extent either the master servicer or the special servicer exercises its right to reduce or elect not to charge its respective portion in any such fee, the party that reduced or elected not to charge its respective portion of such fee will not have any right to share in any part of the other party’s portion of such fee. If the master servicer decides not to charge any fee, the special servicer will nevertheless be entitled to charge its portion of the related fee to which the special servicer would have been entitled if the master servicer had charged a fee and the master servicer will not be entitled to any of such fee charged by the special servicer.
If the master servicer resigns or is terminated as the master servicer, then it will be entitled to retain the related excess servicing strip, except to the extent that any portion of such excess servicing strip is needed to compensate any replacement master servicer for assuming the duties of the master servicer, as the master servicer under the PSA. In the event that the master servicer resigns or is terminated as a primary servicer, it will be entitled to retain its primary servicing fee with respect to those underlying mortgage loans for which it is primary servicer, except to the extent that any such portion of such primary servicing fee is needed to compensate any replacement primary servicer for assuming the duties of the master servicer as a primary servicer under the PSA. The initial master servicer will be entitled to transfer any such excess servicing strip and/or primary servicing fees that may be retained by it in connection with its resignation or termination.
In connection with the Master Servicer Prepayment Interest Shortfall amount, the master servicer will be obligated to reduce its Servicing Compensation as provided under “Description of the Certificates—Prepayment Interest Shortfalls”.
The master servicer will pay all of its overhead expenses incurred in connection with its responsibilities under the PSA (subject to reimbursement to the extent and as described in the PSA).
Special Servicing Compensation
Pursuant to the PSA, the special servicer will be entitled to certain fees for the Mortgage Loans that it is special servicing including the Special Servicing Fee, the Workout Fee and the Liquidation Fee. The special servicer will not be entitled to retain any portion of the Excess Interest paid on any ARD Loan.
The “Special Servicing Fee” will accrue with respect to each Specially Serviced Loan and REO Loan at a rate equal to 0.25%per annum of the Stated Principal Balance of such Specially Serviced Loan or REO Loan, as applicable.
A “Workout Fee” will in general be payable with respect to each Corrected Loan and will be payable by the issuing entity out of each collection of interest and principal (including scheduled payments,
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prepayments (provided that a repurchase or substitution by a mortgage loan seller of a Mortgage Loan due to a Material Defect will not be considered a prepayment for purposes of this definition), balloon payments and payments at maturity, but excluding late payment charges, Excess Interest and default interest) received on the related Specially Serviced Loan that becomes a Corrected Loan, for so long as it remains a Corrected Loan, in an amount equal to the lesser of (1) 1.0% of each such collection of interest and principal and (2) $1,000,000 in the aggregate with respect to any particular workout of a Specially Serviced Loan;provided that no Workout Fee will be payable by the issuing entity with respect to any Corrected Loan if and to the extent that the Corrected Loan became a Specially Serviced Loan under clause (iii) of the definition of “Specially Serviced Loan” and no event of default actually occurs, unless the Mortgage Loan or Serviced Companion Loan is modified by the special servicer in accordance with the terms of the PSA or the Mortgage Loan subsequently qualifies as a Specially Serviced Loan for a reason other than under clause (iii) of the definition of “Specially Serviced Loan”;provided,further that if a Mortgage Loan or Serviced Companion Loan becomes a Specially Serviced Loan only because of an event described in clause (i) of the definition of “Specially Serviced Loan” and the related collection of principal and interest is received within 3 months following the related maturity date as a result of the related Mortgage Loan or Serviced Companion Loan being refinanced or otherwise repaid in full, the special servicer will not be entitled to collect a Workout Fee out of the proceeds received in connection with such workout if such fee would reduce the amount available for distributions to Certificateholders, but the special servicer may collect from the related borrower and retain (x) a workout fee, (y) such other fees as are provided for in the related Mortgage Loan documents and (z) other appropriate fees in connection with such workout. In addition, notwithstanding the foregoing, the total amount of Workout Fees payable by the issuing entity with respect to a Corrected Loan and with respect to any particular workout (assuming, for the purposes of this calculation, that such Corrected Loan continues to perform throughout its term in accordance with the terms of the related workout) will be reduced by the amount of any and all related Offsetting Modification Fees received by the special servicer as additional servicing compensation relating to that Corrected Loan;provided that the special servicer will be entitled to collect such Workout Fees from the issuing entity until such time it has been fully paid such reduced amount. In addition, the Workout Fee will be subject to the cap described below.
The Workout Fee with respect to any such Corrected Loan will cease to be payable if such Corrected Loan again becomes a Specially Serviced Loan or if the related Mortgaged Property later becomes an REO Property;provided that a new Workout Fee will become payable if and when such Mortgage Loan or Serviced Whole Loan again becomes a Corrected Loan.
If the special servicer is terminated (other than for cause) or resigns with respect to any or all of its servicing duties, it will retain the right to receive any and all Workout Fees payable with respect to each Corrected Loan during the period that it had responsibility for servicing such Specially Serviced Loan when it became a Corrected Loan (or for any Specially Serviced Loan that had not yet become a Corrected Loan because as of the time that the special servicer is terminated the borrower has not made three consecutive monthly debt service payments and subsequently the Specially Serviced Loan becomes a Corrected Loan) at the time of such termination or resignation (and the successor special servicer will not be entitled to any portion of such Workout Fees), in each case until the Workout Fee for any such Corrected Loan ceases to be payable in accordance with the preceding paragraph.
A “Liquidation Fee” will be payable by the issuing entity to the special servicer, except as otherwise described below, with respect to (i) each Specially Serviced Loan or REO Loan, (ii) each Mortgage Loan repurchased by a mortgage loan seller or (iii) each defaulted mortgage loan that is a Non-Serviced Mortgage Loan sold by the special servicer in accordance with the Agreement, in each case, as to which the special servicer obtains a full, partial or discounted payoff from the related borrower, a loan purchaser or mortgage loan seller, as applicable, and, except as otherwise described below, with respect to any Specially Serviced Loan or REO Property as to which the special servicer recovered any proceeds (“Liquidation Proceeds”). The Liquidation Fee will be payable from the related payment or proceeds in an amount equal to the lesser of (1) 1.0% of such payment or proceeds (exclusive of any portion of such amount that represents penalty charges) and (2) $1,000,000;provided that the total amount of a Liquidation Fee payable by the issuing entity with respect to any Specially Serviced Loan, REO Loan or Mortgage Loan in connection with any particular liquidation (or partial liquidation) will be reduced by the
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amount of any and all related Offsetting Modification Fees received by the special servicer as additional servicing compensation relating to that Specially Serviced Loan, REO Loan or Mortgage Loan. In addition, the Liquidation Fee will be subject to the cap described below.
Notwithstanding anything to the contrary described above, no Liquidation Fee will be payable based on, or out of, Liquidation Proceeds received in connection with:
| · | the purchase of any defaulted Mortgage Loan by the special servicer or the Directing Certificateholder or any Companion Loan Holder or any of their affiliates if within 90 days after the transfer of the defaulted Mortgage Loan to special servicing, |
| · | the purchase of all of the Mortgage Loans and all property acquired in respect of any Mortgage Loan by the Sole Certificateholder, the Certificateholder owning a majority of the percentage interest of the then Controlling Class, the special servicer or the master servicer in connection with the termination of the issuing entity, |
| · | a repurchase or replacement of a Mortgage Loan by a mortgage loan seller due to a breach of a representation or warranty or a document defect in the mortgage file prior to the expiration of certain cure periods (including any applicable extension thereof) set forth in the PSA, |
| · | with respect to any Mortgage Loan that is subject to mezzanine indebtedness the purchase of such Mortgage Loan by the holder of the related mezzanine loan within 90 days after the first time that such holder’s option to purchase such Mortgage Loan becomes exercisable, |
| · | with respect to a Serviced Companion Loan that is subject to another securitization, (A) a repurchase or replacement of such Serviced Companion Loan by the applicable mortgage loan seller due to a breach of a representation or warranty or a document defect under the related Non-Serviced PSA for the trust that owns such Serviced Companion Loan prior to the expiration of the cure period (including any applicable extension thereof) set forth therein, or (B) a purchase of the Serviced Companion Loan pursuant to a clean-up call or similar liquidation under the related Non-Serviced PSA for the trust that owns such Serviced Companion Loan, |
| · | a Loss of Value Payment by a mortgage loan seller, if such payment is made prior to the expiration of certain cure periods (including any applicable extension thereof) set forth in the PSA, and |
| · | if a Mortgage Loan or Serviced Whole Loan becomes a Specially Serviced Loan only because of an event described in clause (i) of the definition of “Specially Serviced Loan” as a result of a payment default at maturity and the related Liquidation Proceeds are received within three (3) months following the related maturity date as a result of the related Mortgage Loan or Serviced Whole Loan being refinanced or otherwise repaid in full (provided that the special servicer may collect from the related borrower and retain (x) a liquidation fee, (y) such other fees as are provided for in the related Mortgage Loan documents and (z) other appropriate fees in connection with such liquidation). |
If, however, Liquidation Proceeds are received with respect to any Specially Serviced Loan as to which the special servicer is properly entitled to a Workout Fee, such Workout Fee will be payable based on and out of the portion of such Liquidation Proceeds that constitute principal and/or interest. The special servicer, however, will only be entitled to receive a Liquidation Fee or a Workout Fee, but not both, with respect to Liquidation Proceeds received on any Mortgage Loan or Specially Serviced Loan.
If the special servicer resigns or is terminated, and prior or subsequent to such resignation or termination, either (A) a Specially Serviced Loan was liquidated or modified pursuant to an action plan submitted by the initial special servicer and approved (or deemed approved) by the Directing Certificateholder or the special servicer has determined to grant a forbearance, or (B) a Specially Serviced Loan being monitored by the special servicer subsequently became a Corrected Loan, then in
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either such event the special servicer (and not the successor special servicer) will be paid the related Workout Fee or Liquidation Fee, as applicable.
The total amount of Workout Fees and Liquidation Fees that are payable by the issuing entity with respect to each Mortgage Loan, Serviced Whole Loan or REO Loan throughout the period such Mortgage Loan or the Mortgage Loan relating to such Serviced Whole Loan (or REO Loan) is an asset of the issuing entity will be subject to an aggregate cap of $1,000,000. For the purposes of determining whether any such cap has been reached with respect to a special servicer and a Mortgage Loan, Serviced Whole Loan or REO Loan, only the Workout Fees and Liquidation Fees paid to such special servicer with respect to such Mortgage Loan, Serviced Whole Loan or REO Loan will be taken into account, and any Workout Fees or Liquidation Fees for any other Mortgage Loans, Serviced Whole Loans or REO Loans will not be taken into account (and any Workout Fees or Liquidation Fees paid to a predecessor or successor special servicer will also not be taken into account).
In addition, the special servicer will also be entitled to retain, as additional servicing compensation:
| · | 100% of any Modification Fees and consent fees (or similar fees) related to Specially Serviced Loans, |
| · | 50% of any Modification Fees and consent fees (or similar fees) related to any consents, modifications, waivers, extensions or amendments of any Mortgage Loans (and the related Serviced Companion Loans) that are non-Specially Serviced Loans that involve one or more Major Decisions or Special Servicer Decisions (whether or not processed by the special servicer), |
| · | 100% of any assumption fees on Specially Serviced Loans, |
| · | 50% of assumption fees with respect to Mortgage Loans (and the related Serviced Companion Loans) that are non-Specially Serviced Loans that involve a Major Decision or Special Servicer Decision (whether or not processed by the special servicer), |
| · | 100% of assumption application fees received with respect to the Mortgage Loans (and the related Serviced Companion Loans) for which the special servicer is processing the underlying assumption related transaction), |
| · | 100% of beneficiary statement charges or demand fees (but not including prepayment premiums or yield maintenance charges) on Specially Serviced Loans, |
| · | any interest or other income earned on deposits in the REO Accounts, and |
| · | Net Default Interest and any late payment fees that accrued during a Collection Period on any Specially Serviced Loan to the extent collected by the issuing entity and remaining after application thereof during such Collection Period to reimburse interest on Advances with respect to such Specially Serviced Loan and to reimburse the issuing entity for certain expenses of the issuing entity with respect to such Specially Serviced Loan;provided,however, that with respect to a Mortgage Loan that has a related Serviced Companion Loan, Net Default Interest and late payment fees will be allocated as provided in and subject to the terms of the related intercreditor agreement and the applicable pooling and servicing agreement. |
“Modification Fees” means, with respect to any Mortgage Loan or Serviced Companion Loan, any and all fees with respect to a modification, restructure, extension, waiver or amendment that modifies, restructures, extends, amends or waives any term of the related Mortgage Loan documents (as evidenced by a signed writing) agreed to by the master servicer or the special servicer (other than all assumption fees, consent fees, assumption application fees, defeasance fees and similar fees). For each modification, restructure, extension, waiver or amendment in connection with the working out of a Specially Serviced Loan, the Modification Fees collected from the related borrower will be subject to a cap of 1% of the outstanding principal balance of such Mortgage Loan or Serviced Companion Loan on the closing date of the related modification, restructure, extension, waiver or amendment (prior to giving
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effect to such modification, restructure, extension, waiver or amendment);provided that no aggregate cap exists in connection with the amount of Modification Fees which may be collected from the borrower with respect to any Specially Serviced Loan or REO Loan.
“Sole Certificateholder” is any Certificateholder (or Certificateholders,providedthey act in unanimity) holding 100% of the then-outstanding certificates (including certificates with Certificate Balances that have been actually or notionally reduced by any Realized Losses or Appraisal Reduction Amounts, but excluding the Class V and Class R certificates) or an assignment of the Voting Rights thereof;provided that the Certificate Balances of the Notional Amounts of the Class X-A, Class X-B and Class X-C certificates and the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class A-M, Class B, Class C and Class D certificates have been reduced to zero;provided,further, that if the Certificateholders of the Class X-D, Class X-E and Class X-F certificates have assigned all of the Voting Rights of the Class X-D, Class X-E and Class X-F certificates to the Holder of 100% of the then-outstanding Class E, Class F and Class G certificates, then “Sole Certificateholder” means the Certificateholder of 100% of the Class E, Class F and Class G certificates.
“Offsetting Modification Fees” means, with respect to any Mortgage Loan, Serviced Whole Loan or REO Loan and with respect to any Workout Fee or Liquidation Fee payable by the issuing entity, any and all Modification Fees collected by the special servicer as additional servicing compensation, but only to the extent that (1) such Modification Fees were earned and collected by the special servicer (A) in connection with the workout or liquidation (including partial liquidation) of a Specially Serviced Loan or REO Loan as to which the subject Workout Fee or Liquidation Fee became payable or (B) in connection with any workout of a Specially Serviced Loan that closed within the prior 18 months (determined as of the closing day of the workout or liquidation as to which the subject Workout Fee or Liquidation Fee became payable) and (2) such Modification Fees were earned in connection with a modification, restructure, extension, waiver or amendment of such Mortgage Loan, Serviced Whole Loan or REO Loan at a time when such Mortgage Loan, Serviced Whole Loan or REO Loan was a Specially Serviced Loan.
The PSA will provide that the special servicer and its affiliates will be prohibited from receiving or retaining any compensation or any other remuneration (including, without limitation, in the form of commissions, brokerage fees, rebates, or as a result of any other fee-sharing arrangement) from any person (including, without limitation, the issuing entity, any borrower, any manager, any guarantor or indemnitor in respect of a Mortgage Loan or Whole Loan and any purchaser of any Mortgage Loan, Serviced Companion Loan or REO Property) in connection with the disposition, workout or foreclosure of any Mortgage Loan (or Serviced Whole Loan, if applicable), the management or disposition of any REO Property, or the performance of any other special servicing duties under the PSA, other than Permitted Special Servicer/Affiliate Fees and compensation and other remuneration expressly provided for in the PSA.
“Permitted Special Servicer/Affiliate Fees” means any commercially reasonable treasury management fees, banking fees, customary title agent fees and insurance commissions or fees and appraisal fees received or retained by the special servicer or any of its affiliates in connection with any services performed by such party with respect to any Mortgage Loan, Serviced Whole Loan or REO Property.
Disclosable Special Servicer Fees
The PSA will provide that, with respect to each Collection Period, the special servicer must deliver or cause to be delivered to the master servicer within 2 business days following the Determination Date, and the master servicer will deliver, to the extent it has received, to the certificate administrator, without charge and on the same day as the master servicer is required to deliver the CREFC® Investor Reporting Package for such Distribution Date, an electronic report which discloses and contains an itemized listing of any Disclosable Special Servicer Fees received by the special servicer or any of its affiliates during the related Collection Period. Such report may omit any such information that has previously been delivered to the certificate administrator by the master servicer or the special servicer.
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“Disclosable Special Servicer Fees” means, with respect to any Mortgage Loan (other than any Non-Serviced Mortgage Loan), Serviced Whole Loan or REO Property, any compensation and other remuneration (including, without limitation, in the form of commissions, brokerage fees, rebates, and as a result of any other fee-sharing arrangement) received or retained by the special servicer or any of its affiliates that is paid by any person (including, without limitation, the issuing entity, any borrower, any manager, any guarantor or indemnitor in respect of a Mortgage Loan (other than any Non-Serviced Mortgage Loan) or Serviced Whole Loan and any purchaser of any Mortgage Loan (other than any Non-Serviced Mortgage Loan), Serviced Whole Loan or REO Property) in connection with the disposition, workout or foreclosure of any Mortgage Loan (other than any Non-Serviced Mortgage Loan) or Serviced Whole Loan, if applicable, the management or disposition of any REO Property, and the performance by the special servicer or any such affiliate of any other special servicing duties under the PSA;providedthat any compensation and other remuneration that the master servicer or the certificate administrator is permitted to receive or retain pursuant to the terms of the PSA in connection with its respective duties in such capacity as master servicer or certificate administrator under the PSA will not be Disclosable Special Servicer Fees.
Certificate Administrator and Trustee Compensation
As compensation for the performance of its routine duties, the trustee and certificate administrator will be paid a fee (collectively, the “Certificate Administrator/Trustee Fee”). The Certificate Administrator/Trustee Fee will be payable monthly from amounts received in respect of interest on each Mortgage Loan and REO Loan (prior to application of such interest payments to make payments on the certificates) and will accrue at a rate (the “Certificate Administrator/Trustee Fee Rate”), equal to 0.00850%per annum, and will be computed on the same accrual basis as interest accrues on the related Mortgage Loan and based on the Stated Principal Balance of the related Mortgage Loan or REO Loan as of the Due Date in the immediately preceding Collection Period. The Certificate Administrator/Trustee Fee will be paid to the certificate administrator and the certificate administrator will be required to remit to the trustee the trustee fee in accordance with the terms of the PSA from the Certificate Administrator/Trustee Fee. In addition, the trustee and certificate administrator will each be entitled to recover from the issuing entity all reasonable unanticipated expenses and disbursements incurred or made by such party in accordance with any of the provisions of the PSA, but not including routine expenses incurred in the ordinary course of performing its duties as trustee or certificate administrator, as applicable, under the PSA, and not including any expense, disbursement or advance as may arise from its willful misconduct, negligence, fraud or bad faith.
Operating Advisor Compensation
An operating advisor fee (the “Operating Advisor Fee”) will be payable to the operating advisor monthly from amounts received with respect to each Mortgage Loan and REO Loan (excluding the Non-Serviced Mortgage Loans) and will accrue at a rate equal to the applicable Operating Advisor Fee Rate with respect to each such Mortgage Loan or REO Loan on the Stated Principal Balance of the related Mortgage Loan or REO Loan and will be calculated on the same interest accrual basis as the related Mortgage Loan or REO Loan and prorated for any partial periods.
The “Operating Advisor Fee Rate” for each Interest Accrual Period is aper annumrate equal to (i) 0.00440% with respect to all Mortgage Loans (except the Non-Serviced Mortgage Loans and the U-Haul AREC Portfolio Mortgage Loan); and (ii) 0.00850% with respect to the U-Haul AREC Portfolio Mortgage Loan.
An Operating Advisor Consulting Fee will be payable to the operating advisor with respect to each Major Decision on which the operating advisor has consultation rights. The “Operating Advisor Consulting Fee” will be a fee for each such Major Decision equal to $10,000 (or, such lesser amount as the related borrower agrees to pay) with respect to any Mortgage Loan;providedthat the operating advisor may in its sole discretion reduce the Operating Advisor Consulting Fee with respect to any Major Decision.
Each of the Operating Advisor Fee and the Operating Advisor Consulting Fee will be payable from funds on deposit in the Collection Account out of amounts otherwise available to make distributions on
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the certificates, but with respect to the Operating Advisor Consulting Fee only to the extent that such fee is actually received from the related borrower. If the operating advisor has consultation rights with respect to a Major Decision, the PSA will require the master servicer or the special servicer, as applicable, to use commercially reasonable efforts consistent with the Servicing Standard to collect the applicable Operating Advisor Consulting Fee from the related borrower in connection with such Major Decision, but only to the extent not prohibited by the related loan documents; but in no event may take any enforcement action with respect to the collection of such Operating Advisor Consulting Fee other than requests for collection. The master servicer or special servicer, as applicable, will each be permitted to waive or reduce the amount of any such Operating Advisor Consulting Fee payable by the related borrower if it determines that such full or partial waiver is in accordance with the Servicing Standardprovidedthat the master servicer or the special servicer, as applicable, will be required to consult on a non-binding basis with the operating advisor prior to any such waiver or reduction.
Similar fees and/or fee provisions to those described above will be (or are expected to be) payable to the applicable operating advisor (if any) under each Non-Serviced PSA with respect to the related Non-Serviced Mortgage Loan, although there may be differences in the calculations of such fees.
Asset Representations Reviewer Compensation
With respect to each Delinquent Loan that is subject to an Asset Review, the asset representations reviewer will be entitled to a fee that is a reasonable and customary hourly fee charged by the asset representations reviewer for similar consulting assignments at the time of such review and any related costs and expenses;providedthat the total payment to the asset representations reviewer will not be greater than the Asset Representations Reviewer Fee Cap (the “Asset Representations Reviewer Asset Review Fee”).
With respect to an individual Asset Review Trigger and the Mortgage Loans that are Delinquent Loans and are subject to an Asset Review (the “Subject Loans”), the “Asset Representations Reviewer Fee Cap” will equal the sum of: (i) $9,500 multiplied by the number of Subject Loans, plus (ii) $1,500 per Mortgaged Property relating to the Subject Loans in excess of one Mortgaged Property per Subject Loan, plus (iii) $2,000 per Mortgaged Property relating to a Subject Loan subject to a ground lease, plus (iv) $1,000 per Mortgaged Property relating to a Subject Loan subject to a franchise agreement, hotel management agreement or hotel license agreement, subject, in the case of each ofclauses (i)through (iv), to adjustments on the basis of the year-end Consumer Price Index for All Urban Consumers, or other similar index if the Consumer Price Index for All Urban Consumers is no longer calculated, taking into account the Consumer Price Index for All Urban Consumers, or other similar index if the Consumer Price Index for All Urban Consumers is no longer calculated for the year of the Closing Date and for the year of the occurrence of the Asset Review.
Similar fees and/or fee provisions to those described above will be (or are expected to be) payable to the applicable asset representations reviewer (if any) under each Non-Serviced PSA with respect to the related Non-Serviced Mortgage Loan, although there may be differences in the calculations of such fees.
The related mortgage loan seller with respect to each Delinquent Loan that is subject to an Asset Review will be required to pay the portion of the Asset Representations Reviewer Asset Review Fee attributable to the Delinquent Loan contributed by it, as allocated on the basis of the hourly charges and costs and expenses incurred with respect to its related Delinquent Loans;providedthat if the total charge for the asset representations reviewer on an hourly fee plus costs and expenses basis would exceed the Asset Representations Reviewer Fee Cap, each mortgage loan seller’s required payment will be reducedpro rataaccording to its proportion of the total charges until the aggregate amount owed by all mortgage loan sellers is equal to the Asset Representations Reviewer Fee Cap;provided,however, that if the related mortgage loan seller is insolvent or fails to pay such amount within 90 days of written request by the asset representations reviewer, such fee will be paid by the trust following delivery by the asset representations reviewer of evidence reasonably satisfactory to the master servicer or the special servicer, as applicable, of such insolvency or failure to pay such amount;provided,further, that notwithstanding any payment of such fee by the issuing entity to the asset representations reviewer, such fee will remain an obligation of the related mortgage loan seller and the master servicer or the special
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servicer, as applicable, will be required, to the extent consistent with the Servicing Standard, to pursue remedies against such mortgage loan seller in order to seek recovery of such amounts from such mortgage loan seller or its insolvency estate. The Asset Representations Reviewer Asset Review Fee with respect to a Delinquent Loan is required to be included in the Purchase Price for any Mortgage Loan that was the subject of a completed Asset Review and that is repurchased by the related mortgage loan seller.
CREFC® Intellectual Property Royalty License Fee
CREFC® Intellectual Property Royalty License Fee will be paid to CREFC® on a monthly basis.
“CREFC® Intellectual Property Royalty License Fee” with respect to each Mortgage Loan and REO Loan (other than the portion of an REO Loan related to any Serviced Companion Loan) and for any Distribution Date is the amount accrued during the related Interest Accrual Period at the CREFC® Intellectual Property Royalty License Fee Rate on the Stated Principal Balance of such Mortgage Loan, REO Loan as of the close of business on the Distribution Date in such Interest Accrual Period;provided that such amounts will be computed for the same period and on the same interest accrual basis respecting which any related interest payment due or deemed due on the related Mortgage Loan or REO Loan is computed and will be prorated for partial periods. The CREFC® Intellectual Property Royalty License Fee is a fee payable to CREFC® for a license to use the CREFC® Investor Reporting Package in connection with the servicing and administration, including delivery of periodic reports to the Certificateholders, of the issuing entity pursuant to the PSA. No CREFC® Intellectual Property Royalty License Fee will be paid on any Companion Loan.
“CREFC® Intellectual Property Royalty License Fee Rate” with respect to each Mortgage Loan is a rate equal to 0.0005%per annum.
Appraisal Reduction Amounts
After an Appraisal Reduction Event has occurred with respect to a Mortgage Loan (other than a Non-Serviced Mortgage Loan) or a Serviced Whole Loan, an Appraisal Reduction Amount is required to be calculated. An “Appraisal Reduction Event” will occur on the earliest of:
| (i) | the date on which such Mortgage Loan or Serviced Whole Loan becomes a Modified Mortgage Loan (as defined below), |
| (ii) | the 90th day following the occurrence of any uncured delinquency in Periodic Payments with respect to such Mortgage Loan or Serviced Whole Loan, |
| (iii) | receipt of notice that the related borrower has filed a bankruptcy petition or the date on which a receiver is appointed and continues in such capacity in respect of a Mortgaged Property securing such Mortgage Loan or Serviced Whole Loan or the 60th day after the related borrower becomes the subject of involuntary bankruptcy proceedings and such proceedings are not dismissed in respect of a Mortgaged Property securing such Mortgage Loan or Serviced Whole Loan, |
| (iv) | the date on which the Mortgaged Property securing such Mortgage Loan or Serviced Whole Loan becomes an REO Property, and |
| (v) | a payment default has occurred with respect to the related balloon payment;provided, however, if (A) the related borrower is diligently seeking a refinancing commitment (and delivers a statement to that effect to the master servicer within 30 days after the default, whowill be required to promptly deliver a copy to the special servicer, the operating advisor and the directing certificateholder (but only for so long as no Consultation Termination Event has occurred)), (B) the related borrower continues to make its Assumed Scheduled Payment, (C) no other Appraisal Reduction Event has occurred with respect to that Mortgage Loan or Serviced Whole Loan, and (D) for so long as no Control Termination Event has occurred and |
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is continuing, the Directing Certificateholder consents, an Appraisal Reduction Event will not occur until 60 days beyond the related maturity date, unless extended by the special servicer in accordance with the Mortgage Loan documents or the PSA; andprovided,further, if the related borrower has delivered to the master servicer, who will be required to promptly deliver a copy to the special servicer, the operating advisor and the directing certificateholder (but only for so long as no Consultation Termination Event has occurred), on or before the 60th day after the related maturity date, a refinancing commitment reasonably acceptable to the special servicer, and the borrower continues to make its Assumed Scheduled Payments (and no other Appraisal Reduction Event has occurred with respect to that Mortgage Loan or Serviced Whole Loan), an Appraisal Reduction Event will not occur until the earlier of (1) 120 days beyond the related maturity date (or extended maturity date) and (2) the termination of the refinancing commitment.
A “Modified Mortgage Loan” is any Specially Serviced Loan which has been modified by the special servicer in a manner that: (a) reduces or delays the amount or timing of any payment of principal or interest due thereon (other than, or in addition to, bringing current Periodic Payments with respect to such Mortgage Loan or Serviced Whole Loan); (b) except as expressly contemplated by the related mortgage, results in a release of the lien of the mortgage on any material portion of the related Mortgaged Property without a corresponding principal prepayment in an amount not less than the fair market value (as-is) of the property to be released; or (c) in the reasonable good faith judgment of the special servicer, otherwise materially impairs the value of the security for such Mortgage Loan or Serviced Companion Loan or reduces the likelihood of timely payment of amounts due thereon.
No Appraisal Reduction Event may occur at any time when the Certificate Balances of all classes of Subordinate Certificates have been reduced to zero.
The “Appraisal Reduction Amount” for any Distribution Date and for any Mortgage Loan (other than any Non-Serviced Mortgage Loan) or any Serviced Whole Loan as to which any Appraisal Reduction Event has occurred, will be an amount, calculated by the master servicer (and, prior to the occurrence of a Consultation Termination Event, in consultation with the Directing Certificateholder and, after the occurrence and during the continuance of a Control Termination Event, in consultation with the operating advisor), as of the first Determination Date that is at least 10 business days following the date the master servicer receives from the special servicer the related appraisal or the special servicer’s Small Loan Appraisal Estimate equal to the excess of:
(a) the Stated Principal Balance of that Mortgage Loan or the Stated Principal Balance of the applicable Serviced Whole Loan, as the case may be, over
(b) the excess of:
| (i) | the sum of: |
| · | 90% of the appraised value of the related Mortgaged Property as determined (A) by one or more MAI appraisals obtained by the special servicer with respect to that Mortgage Loan or Serviced Whole Loan with an outstanding principal balance equal to or in excess of $2,000,000 (the costs of which will be paid by the master servicer as a Servicing Advance), minus such downward adjustments as the special servicer may make (without implying any obligation to do so) based upon its review of the appraisals and any other information it deems relevant, or (B) by an internal valuation performed by the special servicer with respect to any Mortgage Loan or Serviced Whole Loan with an outstanding principal balance less than $2,000,000; |
| · | all escrows, letters of credit and reserves in respect of that Mortgage Loan or Serviced Whole Loan as of the date of calculation; and |
| · | all insurance and casualty proceeds and condemnation awards that constitute collateral for the related Mortgage Loan or Serviced Whole Loan; over |
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| (ii) | the sum as of the Due Date occurring in the month of the date of determination of: |
| · | to the extent not previously advanced by the master servicer or the trustee, all unpaid interest due on that Mortgage Loan or Serviced Whole Loan at aper annum rate equal to the Mortgage Rate; |
| · | all P&I Advances on the related Mortgage Loan and all Servicing Advances on the related Mortgage Loan or Serviced Whole Loan not reimbursed from the proceeds of such Mortgage Loan or Serviced Whole Loan and interest on those Advances at the Reimbursement Rate in respect of that Mortgage Loan or Serviced Whole Loan; |
| · | 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 (including any capitalized interest whether or not then due and payable) with respect to such Mortgage Loan, Serviced Whole Loan (which tax, premiums, ground rents and other amounts have not been the subject of an Advance by the master servicer or the trustee, as applicable); and |
| · | any other unpaid additional expenses of the issuing entity in respect of such Mortgage Loan or Serviced Whole Loan. |
Each Serviced Whole Loan will be treated as a single Mortgage Loan for purposes of calculating an Appraisal Reduction Amount with respect to the Mortgage Loan and Companion Loan, as applicable, that comprise such Serviced Whole Loan. Any Appraisal Reduction Amount in respect of any Serviced Whole Loan with a Pari Passu Companion Loan will be allocated in accordance with the related Intercreditor Agreement or, if no allocation is specified in the related Intercreditor Agreement, then,pro rata, between the related Serviced Mortgage Loan and the related Serviced Pari Passu Companion Loan based upon their respective Stated Principal Balances.
The special servicer will be required to, with respect to a Mortgage Loan having a Stated Principal Balance of $2,000,000 or higher, order an appraisal, and with respect to a Mortgage Loan having a Stated Principal Balance of less than $2,000,000, order an appraisal or conduct a valuation (such valuation, a “Small Loan Appraisal Estimate”), within 60 days of the occurrence of an Appraisal Reduction Event (or in the case of an Appraisal Reduction Event occurring by reason of clause (ii) of the definition thereof, within thirty (30) days of the Appraisal Reduction Event) (other than with respect to a Non-Serviced Whole Loan). On the first Determination Date occurring on or after the tenth business day following the date the master servicer receives from the special servicer the related appraisal or the special servicer’s Small Loan Appraisal Estimate, the master servicer will be required to calculate and report to the special servicer, the trustee, the certificate administrator, the operating advisor and, prior to the occurrence of any Consultation Termination Event, the Directing Certificateholder (for so long as no Consultation Termination Event has occurred), the Appraisal Reduction Amount, taking into account the results of such appraisal or valuation and receipt of information reasonably requested by the master servicer from the special servicer, to the extent such information is in the possession of the special servicer, necessary to calculate the Appraisal Reduction Amount. Such report will also be forwarded by the master servicer, to the extent the related Serviced Companion Loan has been included in a securitization transaction, to the master servicer of such securitization into which the related Serviced Companion Loan has been sold, or to the holder of any related Serviced Companion Loan by the master servicer.
In the event that the special servicer has not received any required MAI appraisal within 60 days after the Appraisal Reduction Event (or, in the case of an appraisal in connection with an Appraisal Reduction Event described in clause (ii) of the definition of Appraisal Reduction Event above, within 30 days), the Appraisal Reduction Amount will be deemed to be an amount equal to 25% of the current Stated Principal Balance of the related Mortgage Loan (or Serviced Whole Loan) until an MAI appraisal is received by the special servicer. The Appraisal Reduction Amount is calculated as of the first Determination Date that is at least ten (10) business days after the special servicer’s delivery of such MAI appraisal or Small Loan Appraisal Estimate to the master servicer. The special servicer, upon reasonable request, will be required
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to deliver to the master servicer any information in the special servicer’s possession reasonably required to determine, redetermine, calculate or recalculate any Appraisal Reduction Amount.
Other than with respect to a Non-Serviced Mortgage Loan, contemporaneously with the earliest of (i) the effective date of any modification of the maturity date or extended maturity date, Mortgage Rate, principal balance or amortization terms of any Mortgage Loan or Serviced Whole Loan or any other term thereof, any extension of the maturity date or extended maturity date of a Mortgage Loan or Serviced Whole Loan or consent to the release of any Mortgaged Property or REO Property from the lien of the related Mortgage other than pursuant to the terms of the Mortgage Loan or Serviced Whole Loan; (ii) the occurrence of an Appraisal Reduction Event; (iii) a default in the payment of a balloon payment for which an extension has not been granted; or (iv) the date on which the special servicer, consistent with the Servicing Standard, requests an Updated Appraisal, the special servicer will be required to use commercially reasonable efforts to obtain an Updated Appraisal (or a letter update for an existing appraisal which is less than two years old) of the Mortgaged Property or REO Property, as the case may be, from an independent MAI appraiser (an “Updated Appraisal”) or a Small Loan Appraisal Estimate, as applicable, in each case within 60 days of such request,provided that, the special servicer will not be required to obtain an Updated Appraisal or Small Loan Appraisal Estimate of any Mortgaged Property with respect to which there exists an appraisal or Small Loan Appraisal Estimate which is less than 9 months old.
For so long as a Mortgage Loan or Serviced Whole Loan is a Specially Serviced Loan, the special servicer is required within 30 days of the end of each 9-month period following the related Appraisal Reduction Event to use commercially reasonable efforts to order an appraisal (which may be an update of a prior appraisal), the cost of which will be paid by the master servicer as a Servicing Advance (or to the extent it would be a Nonrecoverable Advance, an expense of the issuing entity paid out of the Collection Account), or to conduct an internal valuation, as applicable. Based upon the appraisal or valuation and receipt of information reasonably requested by the master servicer from the special servicer, to the extent such information is in the possession of the special servicer, necessary to calculate the Appraised Reduction Amount, the master servicer is required to determine or redetermine, as applicable, and report to the special servicer, the trustee, the certificate administrator, the operating advisor and, prior to the occurrence of a Consultation Termination Event, the Directing Certificateholder, the calculated or recalculated amount of the Appraisal Reduction Amount with respect to the Mortgage Loan or Serviced Whole Loan, as applicable. Such report will also be forwarded to the holder of any related Companion Loan by the master servicer. With respect to any Mortgage Loan, prior to the occurrence of a Consultation Termination Event, the special servicer will consult with the Directing Certificateholder, with respect to any appraisal, valuation or downward adjustment in connection with an Appraisal Reduction Amount. Notwithstanding the foregoing, the special servicer will not be required to obtain an appraisal or valuation with respect to a Mortgage Loan or Serviced Whole Loan that is the subject of an Appraisal Reduction Event to the extent the special servicer has obtained an appraisal or valuation with respect to the related Mortgaged Property within the 9-month period prior to the occurrence of the Appraisal Reduction Event. Instead, the master servicer may use the prior appraisal or valuation in calculating any Appraisal Reduction Amount with respect to the Mortgage Loan or Serviced Whole Loan.
Each Non-Serviced Mortgage Loan is subject to the provisions in the related Non-Serviced PSA relating to appraisal reductions that are similar, but not necessarily identical, to the provisions described above. The existence of an appraisal reduction under the related Non-Serviced PSA in respect of any Non-Serviced Mortgage Loan will proportionately reduce the master servicer’s or the trustee’s, as the case may be, obligation to make P&I Advances on a Non-Serviced Mortgage Loan and will generally have the effect of reducing the amount otherwise available for distributions to the Certificateholders. Pursuant to the related Non-Serviced PSA, each Non-Serviced Mortgage Loan will be treated together with each related Non-Serviced Companion Loan as a single Mortgage Loan for purposes of calculating an appraisal reduction amount with respect to the loans that comprise such Non-Serviced Whole Loan. Any appraisal reduction calculated with respect to any Non-Serviced Whole Loan will generally be allocated to the related Non-Serviced Mortgage Loan and the Non-Serviced Companion Loan, on apro rata basis based upon their respective outstanding principal balances.
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If any Mortgage Loan (other than any Non-Serviced Mortgage Loan) or any Serviced Whole Loan previously subject to an Appraisal Reduction Amount that becomes a Corrected Loan, and with respect to which no other Appraisal Reduction Event has occurred and is continuing, the Appraisal Reduction Amount and the related Appraisal Reduction Event will cease to exist.
As a result of calculating one or more Appraisal Reduction Amounts (and, in the case of any Whole Loan, to the extent allocated in the related Mortgage Loan), 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 G certificates,second, to the Class F certificates,third, to the Class E certificates,fourth, to the Class D certificates,fifth, to the Class C certificates,sixth, to the Class B certificates,seventh, to the Class A-M certificates, andfinally,pro rata based on their respective interest entitlements, to the Senior Certificates). See “Pooling and Servicing Agreement—Advances”.
As of the first Determination Date following a Mortgage Loan (other than a Non-Serviced Mortgage Loan) becoming an AB Modified Loan, the master servicer will be required to calculate whether a Collateral Deficiency Amount exists with respect to such AB Modified Loan, taking into account the most recent appraisal obtained by the special servicer with respect to such Mortgage Loan, and all other information relevant to a Collateral Deficiency Amount determination. Upon obtaining knowledge or receipt of notice by the master servicer that a Non-Serviced Mortgage Loan has become an AB Modified Loan, the master servicer will be required to (i) promptly request from the related Non-Serviced Master Servicer, Non-Serviced Special Servicer and Non-Serviced Trustee the most recent appraisal with respect to such AB Modified Loan, in addition to all other information reasonably required by the master servicer to calculate whether a Collateral Deficiency Amount exists with respect to such AB Modified Loan, and (ii) as of the first Determination Date following receipt by the master servicer of the appraisal and any other information set forth in the immediately preceding clause (i) that the master servicer reasonably expects to receive, calculate whether a Collateral Deficiency Amount exists with respect to such AB Modified Loan, taking into account the most recent appraisal obtained by the Non-Serviced Special Servicer with respect to such Outside Serviced Mortgage Loan, and all other information relevant to a Collateral Deficiency Amount determination. Upon obtaining knowledge or receipt of notice by any other party to the Pooling and Servicing Agreement that a Non-Serviced Mortgage Loan has become an AB Modified Loan, such party will be required to promptly notify the master servicer thereof. The special servicer, upon reasonable prior written request, will provide the master servicer with information in its possession that is reasonably required to calculate or recalculate any Collateral Deficiency Amount. None of the special servicer, the trustee or the certificate administrator will calculate or verify any Collateral Deficiency Amount.
A “Cumulative Appraisal Reduction Amount” as of any date of determination for any Mortgage Loan, is equal to the sum of (i) all Appraisal Reduction Amounts then in effect, and (ii) with respect to any AB Modified Loan, any Collateral Deficiency Amount then in effect. The certificate administrator will be entitled to conclusively rely on the master servicer’s calculation or determination of any Cumulative Appraisal Reduction Amount.
“AB Modified Loan” means any Corrected Loan (1) that became a Corrected Loan (which includes for purposes of this definition any Non-Serviced Mortgage Loan that became a “corrected loan” (or any term substantially similar thereto) pursuant to the related Non-Serviced PSA) due to a modification thereto that resulted in the creation of an A/B note structure (or similar structure) and as to which the new junior note(s) did not previously exist or the principal amount of the new junior note(s) was previously part of either an A note held by the Issuing Entity or the original unmodified Mortgage Loan and (2) as to which an Appraisal Reduction Amount is not in effect.
“Collateral Deficiency Amount” means, with respect to any AB Modified Loan as of any date of determination, the excess of (i) the Stated Principal Balance of such AB Modified Loan (taking into account the related junior note(s) included therein), over (ii) the sum of (in the case of a Whole Loan, solely to the extent allocable to the subject Mortgage Loan) (x) the most recent Appraised Value for the related Mortgaged Property or Mortgaged Properties, plus (y) solely to the extent not reflected or taken into account in such Appraised Value and to the extent on deposit with, or otherwise under the control of,
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the lender as of the date of such determination, any capital or additional collateral contributed by the related borrower at the time the Mortgage Loan became (and as part of the modification related to) such AB Modified Loan for the benefit of the related Mortgaged Property or Mortgaged Properties (provided, that in the case of an Non-Serviced Mortgage Loan, the amounts set forth in this clause (y) will be taken into account solely to the extent relevant information is received by the master servicer) , plus (z) any other escrows or reserves (in addition to any amounts set forth in the immediately preceding clause (y)) held by the lender in respect of such AB Modified Loan as of the date of such determination. The certificate administrator will be entitled to conclusively rely on the master servicer’s calculation or determination of any Collateral Deficiency Amount.
For purposes of determining the Non-Reduced Certificates, the Controlling Class and the occurrence of a Control Termination Event, Appraisal Reduction Amounts allocated to a related Mortgage Loan will be allocated to each class of Principal Balance Certificates in reverse sequential order to notionally reduce the Certificate Balance thereof until the related Certificate Balance of each such class is reduced to zero (i.e.,first, to the Class G certificates,second, to the Class F certificates,third, to the Class E certificates,fourth, to the Class D certificates,fifth, to the Class C certificates,sixth, to the Class B certificates,seventh, to the Class A-M certificates, andfinally,pro rata based on their respective interest entitlements, to the Senior Certificates). In addition, for purposes of determining the Controlling Class and the occurrence of a Control Termination Event, Collateral Deficiency Amounts allocated to a related AB Modified Loan will be allocated to each class of Control Eligible Certificates in reverse sequential order to notionally reduce the Certificate Balance thereof until the related Certificate Balance of each such class is reduced to zero (i.e.,first, to Class G certificates,second, to the Class F certificates, andthird, to the Class E certificates). For the avoidance of doubt, for purposes of determining the Controlling Class and the occurrence of a Control Termination Event, any Class of Control Eligible Certificates will be allocated both applicable Appraisal Reduction Amounts and applicable Collateral Deficiency Amounts (the sum of which will constitute the applicable “Cumulative Appraisal Reduction Amount”), as described in this paragraph.
With respect to (i) any Appraisal Reduction Amount calculated for purposes of determining the Non-Reduced Certificates and (ii) any Appraisal Reduction Amount or Collateral Deficiency Amount calculated for purposes of determining the Controlling Class and the occurrence of a Control Termination Event, the appraised value of the related Mortgaged Property will be determined on an “as-is” basis. The master servicer will be required to promptly notify the certificate administrator of (i) any Appraisal Reduction Amount, (ii) any Collateral Deficiency Amount, and (iii) any resulting Cumulative Appraisal Reduction Amount, and the certificate administrator will be required to promptly post notice of such Appraisal Reduction Amount, Collateral Deficiency Amount and/or Cumulative Appraisal Reduction Amount, as applicable, to the certificate administrator’s website.
Any class of Control Eligible Certificates, the Certificate Balance of which (taking into account the application of any Appraisal Reduction Amounts or Collateral Deficiency Amounts to notionally reduce the Certificate Balance of such class) has been reduced to less than 25% of its initial Certificate Balance, is referred to as an “Appraised-Out Class”. The holders of the majority (by Certificate Balance) of an Appraised-Out Class will have the right, at their sole expense, to require the special servicer to order a supplemental appraisal of any Mortgage Loan (or Serviced Whole Loan) for which an Appraisal Reduction Event has occurred or as to which there exists a Collateral Deficiency Amount (such holders, the “Requesting Holders”). The special servicer will use its reasonable efforts to obtain an appraisal prepared on an “as-is” basis by an MAI appraiser reasonably acceptable to the special servicer within 60 days from receipt of the Requesting Holders’ written request. Upon receipt of such supplemental appraisal, the special servicer will be required to determine, in accordance with the Servicing Standard, whether, based on its assessment of such supplemental appraisal, any recalculation of the applicable Appraisal Reduction Amount or Collateral Deficiency Amount is warranted and, if so warranted, the master servicer will recalculate such Appraisal Reduction Amount or Collateral Deficiency Amount, as applicable, based upon such supplemental appraisal and receipt of information reasonably requested by the master servicer from the special servicer, to the extent such information is in the possession of the special servicer, to make such recalculation. If required by any such recalculation, the applicable Appraised-Out Class will be reinstated as the Controlling Class and each other Appraised-Out Class will,
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if applicable, have its related Certificate Balance notionally restored to the extent required by such recalculation of the Appraisal Reduction Amount or Collateral Deficiency Amount, if applicable.
In addition, the Requesting Holders of any Appraised-Out Class will have the right, at their sole expense, to require the special servicer to order an additional appraisal of any Mortgage Loan (other than a Non-Serviced Mortgage Loan) for which an Appraisal Reduction Event has occurred or as to which there exists a Collateral Deficiency Amount if an event has occurred at, or with regard to, the related Mortgaged Property or Mortgaged Properties that would have a material effect on its appraised value, and the special servicer is required to use reasonable efforts to obtain an appraisal from an MAI appraiser reasonably acceptable to the special servicer within 60 days from receipt of the Requesting Holders’ written request;provided that the special servicer will not be required to obtain such appraisal if it determines in accordance with the Servicing Standard that no events at, or with regard to, the related Mortgaged Property or Mortgaged Properties have occurred that would have a material effect on the Appraised Value of the related Mortgaged Property or Mortgaged Properties. The right of the holders of an Appraised-Out Class to require the special servicer to order an additional appraisal as described in this paragraph will be limited to no more frequently than once in any 9-month period with respect to any Mortgage Loan.
Any Appraised-Out Class for which the Requesting Holders are challenging the master servicer’s Appraisal Reduction Amount or Collateral Deficiency Amount determination may not exercise any direction, control, consent and/or similar rights of the Controlling Class until such time, if any, as such class is reinstated as the Controlling Class; the rights of the Controlling Class will be exercised by the most senior Control Eligible Certificates, if any, during such period.
With respect to each Non-Serviced Mortgage Loan, the related directing certificateholder will be subject to provisions similar to those described above. See “Description of the Mortgage Pool—The Whole Loans—10 Hudson Yards Whole Loan”, “—Westfield San Francisco Centre Whole Loan”, “—Prudential Plaza Whole Loan”, “—Birch Run Premium Outlets Whole Loan”, “—Gas Company Tower & World Trade Center Parking Garage Whole Loan”, “—Vertex Pharmaceuticals HQ Whole Loan”, “—401 South State Street Whole Loan” and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
Maintenance of Insurance
In the case of each Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan, as applicable (but excluding any Mortgage Loan as to which the related Mortgaged Property has become an REO Property and any Non-Serviced Mortgage Loan), the master servicer will be required to use commercially reasonable efforts consistent with the Servicing Standard to cause the related borrower to maintain the following insurance coverage (including identifying the extent to which such borrower is maintaining insurance coverage and, if such borrower does not so maintain, the master servicer will be required to itself cause to be maintained) for the related Mortgaged Property: (a) except where the Mortgage Loan documents permit a borrower to rely on self-insurance provided by a tenant, a fire and casualty extended coverage insurance policy that does not provide for reduction due to depreciation, in an amount that is at least equal to the lesser of the full replacement cost of the improvements securing the Mortgage Loan or Serviced Whole Loan, as applicable, or the Stated Principal Balance of the Mortgage Loan or the Serviced Whole Loan, as applicable, but, in any event, in an amount sufficient to avoid the application of any co-insurance clause, and (b) all other insurance coverage as is required (including, but not limited to, coverage for acts of terrorism), subject to applicable law, under the related Mortgage Loan documents.
Notwithstanding the foregoing,
| (i) | the master servicer will not be required to maintain any earthquake or environmental insurance policy on any Mortgaged Property unless the trustee has an insurable interest and such insurance policy was (x) in effect at the time of the origination of such Mortgage Loan or the Serviced Whole Loan, as applicable, or (y) required by the related Mortgage Loan documents and is available at commercially reasonable rates;providedthat the master |
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servicer will be required to require the related borrower to maintain such insurance in the amount, in the case of clause (x), maintained at origination, and in the case of clause (y), required by such Mortgage Loan or Serviced Whole Loan, in each case, to the extent such amounts are available at commercially reasonable rates and to the extent the trustee has an insurable interest;
| (ii) | if and to the extent that any Mortgage Loan document grants the lender thereunder any discretion (by way of consent, approval or otherwise) as to the insurance provider from whom the related borrower is to obtain the requisite insurance coverage, the master servicer must (to the extent consistent with the Servicing Standard) require the related borrower to obtain the requisite insurance coverage from qualified insurers that meet the required ratings set forth in the PSA; |
| (iii) | the master servicer will have no obligation beyond using its reasonable efforts consistent with the Servicing Standard to enforce those insurance requirements against any borrower;providedthat this will not limit the master servicer’s obligation to obtain and maintain a force-placed insurance policy as set forth in the PSA; |
| (iv) | except as provided below, in no event will the master servicer be required to cause the borrower to maintain, or itself obtain, insurance coverage to the extent that the failure of such borrower to maintain insurance coverage is an Acceptable Insurance Default (as determined by the special servicer subject to the discussion under “—The Directing Certificateholder” and “—The Operating Advisor” below in this prospectus); |
| (v) | to the extent the master servicer itself is required to maintain insurance that the borrower does not maintain, the master servicer will not be required to maintain insurance other than what is available on a force-placed basis at commercially reasonable rates, and only to the extent the issuing entity as lender has an insurable interest thereon; and |
| (vi) | any explicit terrorism insurance requirements contained in the related Mortgage Loan documents are required to be enforced by the master servicer in accordance with the Servicing Standard (unless the special servicer with the consent of, if no Control Termination Event has occurred and is continuing, the Directing Certificateholder, has consented to a waiver (including a waiver to permit the master servicer to accept insurance that does not comply with specific requirements contained in the Mortgage Loan documents) in writing of that provision in accordance with the Servicing Standard);providedthat the special servicer will be required to promptly notify the master servicer in writing of such waiver. |
With respect to each REO Property, the special servicer will generally be required to use reasonable efforts, consistent with the Servicing Standard, to maintain with an insurer meeting certain criteria set forth in the PSA (subject to the right of the special servicer to direct the master servicer to make a Servicing Advance for the costs associated with coverage that the special servicer determines to maintain, in which case the master servicer will be required to make that Servicing Advance (subject to the recoverability determination and Servicing Advance procedures described above under “—Advances” in this prospectus)) to the extent reasonably available at commercially reasonable rates and to the extent the trustee has an insurable interest (a) a fire and casualty extended coverage insurance policy, which does not provide for reduction due to depreciation, in an amount that is at least equal to the lesser of the full replacement value of the Mortgaged Property or the Stated Principal Balance of the Mortgage Loan (other than a Non-Serviced Mortgage Loan), REO Loan or Serviced Whole Loan, as applicable (or such greater amount of coverage required by the related Mortgage Loan documents (unless such amount is not available or if no Control Termination Event has occurred and is continuing, the Directing Certificateholder), but, in any event, in an amount sufficient to avoid the application of any co-insurance clause, (b) a comprehensive general liability insurance policy with coverage comparable to that which would be required under prudent lending requirements and in an amount not less than $1,000,000 per occurrence and (c) to the extent consistent with the Servicing Standard, a business interruption or rental loss insurance covering revenues or rents for a period of at least 12 months. However, the special servicer will not be required in any event to maintain or obtain insurance coverage described in this
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paragraph beyond what is reasonably available at a commercially reasonable rates and consistent with the Servicing Standard.
If either (x) the master servicer or the special servicer obtains and maintains, or causes to be obtained and maintained, a blanket policy or master force-placed policy insuring against hazard losses on all of the Mortgage Loans (other than any Non-Serviced Mortgage Loan) and the Serviced Whole Loans and the REO Properties, as applicable, as to which it is the master servicer or the special servicer, as the case may be, then, to the extent such policy (i) is obtained from an insurer meeting certain criteria set forth in the PSA, and (ii) provides protection equivalent to the individual policies otherwise required or (y) the master servicer or special servicer, as applicable, meetings the ratings requirements of the Rating Agencies set forth in the PSA, and the master servicer or the special servicer self-insures for its obligation to maintain the individual policies otherwise required, then the master servicer or special servicer, as the case may be, will conclusively be deemed to have satisfied its obligation to cause hazard insurance to be maintained on the related Mortgaged Properties or REO Properties, as applicable. Such a blanket or master force-placed policy may contain a deductible clause (not in excess of a customary amount), in which case the master servicer or the special servicer, as the case may be, that maintains such policy will be required, if there has not been maintained on any Mortgaged Property securing a Mortgage Loan (other than a Non-Serviced Mortgage Loan) or REO Property thereunder a hazard insurance policy complying with the requirements described above, and there has been one or more losses that would have been covered by such an individual policy, to promptly deposit into the Collection Account (or, with respect to a Serviced Whole Loan, the related separate custodial account), from its own funds, the amount not otherwise payable under the blanket or master force-placed policy in connection with such loss or losses because of such deductible clause to the extent that any such deductible exceeds the deductible limitation that pertained to the related Mortgage Loan or the related Serviced Whole Loan (or, in the absence of any such deductible limitation, the deductible limitation for an individual policy which is consistent with the Servicing Standard).
With respect to the payment of insurance premiums and delinquent tax assessments, in the event that the master servicer determines that a Servicing Advance of such amounts would not be recoverable, that master servicer will be required to notify the trustee, the certificate administrator and the special servicer of such determination. Upon receipt of such notice, the master servicer (with respect to any Mortgage Loan or Serviced Whole Loan that is not a Specially Serviced Loan) and the special servicer (with respect to any Specially Serviced Loan or REO Property) will be required to determine (with the reasonable assistance of the master servicer) whether or not payment of such amount (i) is necessary to preserve the related Mortgaged Property and (ii) would be in the best interests of the Certificateholders (and in the case of a Serviced Companion Loan, the holder of the related Serviced Companion Loan, as a collective whole as if such Certificateholders and Serviced Companion Loan holder constituted a single lender). If the master servicer or the special servicer determines that such payment (i) is necessary to preserve the related Mortgaged Property and (ii) would be in the best interests of the Certificateholders and, in the case of any Serviced Companion Loan, the related Serviced Companion Loan noteholders, the special servicer (in the case of a determination by the special servicer) will be required to direct the master servicer to make such payment, who will then be required to make such payment from the Collection Account (or, with respect to a Serviced Whole Loan, the related custodial account) to the extent of available funds.
No pool insurance policy, special hazard insurance policy, bankruptcy bond, repurchase bond or certificate guarantee insurance will be maintained with respect to the Mortgage Loans or any Serviced Whole Loan, nor will any Mortgage Loan be subject to Federal Housing Administration insurance.
“Acceptable Insurance Default” means, with respect to any Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan, any default arising by reason of the failure of the related borrower to maintain standard extended coverage casualty insurance or other insurance that covers acts of terrorism, as to which the special servicer has determined, in accordance with the Servicing Standard and, unless a Control Termination Event has occurred and is continuing, with the consent of the Directing Certificateholder, that either (i) such insurance is not available at commercially reasonable rates and the subject hazards are not at the time commonly insured against for properties
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similar to the Mortgaged Property and located in or around the geographic region in which such Mortgaged Property is located (but only by reference to such insurance that has been obtained by such owners at current market rates), or (ii) such insurance is not available at any rate;provided that the Directing Certificateholder will not have more than 30 days to respond to the special servicer’s request for such consent;provided,further, that upon the special servicer’s determination, consistent with the Servicing Standard, that exigent circumstances do not allow the special servicer to consult with the Directing Certificateholder, the special servicer will not be required to do so.
Modifications, Waivers and Amendments
The PSA will permit (a) as to Mortgage Loans that are non-Specially Serviced Loans and actions that do not involve Major Decisions or Special Servicer Decisions (other than the items listed in clause (e)(i) and clause (e)(ii) of Special Servicer Decisions, which the master servicer will process, subject to special servicer consent or deemed consent as provided in the PSA), the master servicer or (b)(i) with respect to any Specially Serviced Loan or (ii) as to Major Decisions or Special Servicer Decisions (other than the items listed in clause (e)(i) and clause (e)(ii) of Special Servicer Decisions, which the master servicer will process, subject to special servicer consent or deemed consent as provided in the PSA) irrespective of whether such Mortgage Loan is a Specially Serviced Loan, the special servicer, in each case subject to the rights of the Directing Certificateholder, and after consultation with the operating advisor to the extent described under “—The Operating Advisor” in this prospectus, to modify, waive or amend any term of any Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Companion Loan if such modification, waiver or amendment (c)(i) is consistent with the Servicing Standard and (ii) would not constitute a “significant modification” of such Mortgage Loan or Serviced Companion Loan pursuant to Treasury regulations Section 1.860G-2(b) and would not otherwise (A) cause the Prudential Plaza Loan REMIC or either Trust REMIC to fail to qualify as a REMIC or (B) result in the imposition of a tax upon the Prudential Plaza Loan REMIC or either Trust REMIC or the issuing entity (including but not limited to the tax on “prohibited transactions” as defined in Code Section 860F(a)(2) and the tax on contributions to a REMIC set forth in Code Section 860G(d), but not including the tax on “net income from foreclosure property” under Code Section 860G(c)).
Notwithstanding the foregoing, the master servicer and special servicer may mutually agree as provided in the PSA that the master servicer will process any of the foregoing matters that are Major Decisions or Special Servicer Decisions with respect to any non-Specially Serviced Loan.
In connection with (i) the release of a Mortgaged Property or any portion of a Mortgaged Property from the lien of the related Mortgage or (ii) the taking of a Mortgaged Property or any portion of a Mortgaged Property by exercise of the power of eminent domain or condemnation, if the Mortgage Loan documents require the special servicer to calculate (or to approve the calculation of the related borrower of) the loan to value ratio of the remaining Mortgaged Property or Mortgaged Properties or the fair market value of the real property constituting the remaining Mortgaged Property or Mortgaged Properties, for purposes of REMIC qualification of the related Mortgage Loan, then such calculation will exclude the value of personal property and going concern value, if any.
In no event, however, may the master servicer or the special servicer extend the maturity of any Mortgage Loan, Serviced Whole Loan or Specially Serviced Loan to a date occurring later than the earlier of (A) five years prior to the Rated Final Distribution Date and (B) if the Mortgage Loan, Serviced Whole Loan or Specially Serviced Loan is secured solely or primarily by a ground lease (or, with respect to a leasehold interest that is a space lease or an air rights lease, such space lease or air rights lease), the date 20 years prior to the expiration of the term of such ground lease (or, with respect to a leasehold interest that is a space lease or an air rights lease, such space lease or air rights lease) (or 10 years prior to the expiration of such lease if the master servicer or the special servicer, as applicable, gives due consideration to the remaining term of the ground lease (or, with respect to a leasehold interest that is a space lease or an air rights lease, such space lease or air rights lease) and such extension is in the best interest of the Certificateholders and if a Serviced Companion Loan is involved, the holder of the related Serviced Companion Loan (as a collective whole as if such Certificateholders and Serviced Companion
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Loan holder constituted a single lender) and, if no Control Termination Event has occurred and is continuing, with the consent of the Directing Certificateholder.
In addition, neither the master servicer nor the special servicer may permit any borrower to add or substitute any collateral for an outstanding Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan, which collateral constitutes real property, unless the master servicer or the special servicer, as applicable, receives a Rating Agency Confirmation.
The consent of the special servicer is required to any modification, waiver or amendment that is a Major Decision or a Special Servicer Decision with regard to any Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan that is not a Specially Serviced Loan, and the special servicer will process (unless the special servicer and the master servicer mutually agree that the master servicer will process, as further described below) and consent to or refuse consent to, as applicable, all Major Decisions and Special Servicer Decisions. The special servicer will also be required to obtain the consent of the Directing Certificateholder, and will be required to consult with the operating advisor in connection with any such modification, waiver, amendment, consent or other action, to the extent described under “—The Directing Certificateholder” and “—The Operating Advisor”. With respect to any non-Specially Serviced Loan (other than a Non-Serviced Mortgage Loan), the following actions will be subject to the special servicer’s processing and consent or, if mutually agreed to by the special servicer and the master servicer, the master servicer will be required to process such request subject to the consent of the special servicer as further described below (each of the following, a “Special Servicer Decision”):
(a) approving leases, lease modifications or amendments or any requests for subordination, non-disturbance and attornment agreements for leases in excess of the lesser of (i) 30,000 square feet and (ii) 30% of the net rentable area at the related Mortgaged Property;
(b) approving any waiver regarding the receipt of financial statements (other than any waiver affecting the timing of receipt thereof; provided that such waiver does not involve permitting delivery of financial statements less than quarterly and more than 60 days after the end of the calendar quarter);
(c) approving annual budgets for the related Mortgaged Property that provide for (i) increases in operating expenses in an amount equal to more than 110% of the amounts budgeted therefor for the prior year or (ii) payments to affiliates of the related borrower (excluding affiliated managers paid at fee rates agreed to at the origination of the related Mortgage Loan or Serviced Whole Loan);
(d) approving material rights-of-way and material easements, and consent to subordination of the related Mortgage Loan or Serviced Whole Loan to such material rights-of-way or easements;
(e) agreeing to any modification, waiver, consent or amendment of the related Mortgage Loan or Serviced Whole Loan in connection with a defeasance if such proposed modification, waiver, consent or amendment is with respect to (i) a waiver of a mortgage loan event of default (but excluding non-monetary events of default other than defaults relating to transfers of interest in the borrower or the existing collateral or material modifications of the existing collateral), (ii) a modification of the type of defeasance collateral required under the Mortgage Loan or Serviced Whole Loan documents other than direct, non-callable obligations of the United States would be permitted or (iii) a modification that would permit a principal prepayment instead of defeasance if the applicable loan documents do not otherwise permit such principal prepayment;provided that the foregoing is not otherwise a Major Decision;
(f) in circumstances where no lender discretion is permitted other than confirming that the conditions in the applicable Mortgage Loan documents have been satisfied, any requests to incur additional debt in accordance with the terms of the Mortgage Loan documents;
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(g) any requests for the disbursement of earnouts or holdback amounts with respect to (i) any Specially Serviced Loan that is not otherwise a Major Decision and (ii) the Mortgage Loans set forth in the PSA;
(h) approving any proposed modification or waiver of any material provision in the related loan documents governing the type, nature or amount of insurance coverage required to be obtained and maintained by the related borrower;
(i) approving any casualty insurance settlements or condemnation settlements, and determining whether to apply casualty proceeds or condemnation awards to the reduction of the debt rather than to the restoration of the Mortgaged Property; and
(j) agreeing to any modification or amendment to any ground lease or any subordination, non-disturbance and attornment agreement relating to any ground lease or any entry into a new ground lease with respect to a Mortgaged Property or determining whether to cure any default by a borrower under a ground lease;
provided,however, that with respect to clause (e) of this definition (1) the master servicer will be required to evaluate and process requests for any modifications described in sub-clauses (i) and (ii) of such clause (e) and obtain the consent or deemed consent of the special servicer as provided in the PSA and (2) the special servicer will be required to evaluate and process and/or consent to requests for any modifications described in sub-clause (iii) of such clause (e).
Upon receiving a request for any matter described in this section that constitutes a Special Servicer Decision or a Major Decision with respect to a Mortgage Loan (other than any Non-Serviced Mortgage Loan) that is not a Specially Serviced Loan, the master servicer will be required to forward such request to the special servicer and, unless the master servicer and the special servicer mutually agree that the master servicer will process such request, the special servicer will be required to process such request and the master servicer will have no further obligation with respect to such request or the Special Servicer Decision or Major Decision. In addition, the master servicer will be required to provide the special servicer with any notice that it receives relating to a default by the borrower under a ground lease where the collateral for the Mortgage Loan is the ground lease, and the special servicer will determine in accordance with the Servicing Standard whether to cure any borrower defaults relating to ground leases.
Notwithstanding the foregoing, the master servicer and special servicer may mutually agree as provided in the PSA that the master servicer will process any of the foregoing matters (as well as any Major Decision) with respect to any non-Specially Serviced Loan (other than a Non-Serviced Mortgage Loan). If the master servicer and special servicer mutually agree that the master servicer will process a Special Servicer Decision, the master servicer will be required to obtain the special servicer’s prior consent to such Special Servicer Decision.
The special servicer is also required to obtain the consent of the Directing Certificateholder, and will be required to consult with the operating advisor in connection with any modification, waiver or amendment with regard to any Specially Serviced Loan to the extent described under “—The Directing Certificateholder” and “—The Operating Advisor” in this prospectus. When the special servicer’s consent is required and the master servicer is recommending approval with respect to any non-Specially Serviced Loan (other than a Non-Serviced Mortgage Loan), the master servicer will be required to forward to the special servicer the written request from the borrower for modification, waiver or amendment, accompanied by the master servicer’s recommendation and analysis and the master servicer is required to provide the special servicer with any and all information in the master servicer’s possession that the special servicer may reasonably request to process or to grant or withhold such consent. When the special servicer’s consent is required under the PSA, such consent will be deemed given 15 business days (or, in connection with an Acceptable Insurance Default, 90 days) after receipt (unless earlier objected to) by the special servicer from the master servicer of the master servicer’s written analysis and recommendation with respect to such proposed Major Decision or Special Servicer Decision together with such other information reasonably required by the special servicer and reasonably available to the master servicer. With respect to all Specially Serviced Loans and non-Specially Serviced Loans, the special
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servicer will be required to obtain, prior to consenting to such a proposed action of the master servicer, and prior to itself taking such a Major Decision, the written consent of the Directing Certificateholder, which consent will be deemed given 10 business days (or, in connection with an Acceptable Insurance Default, 30 days) after receipt (unless earlier objected to) by the Directing Certificateholder of the master servicer’s and/or special servicer’s, as applicable, written analysis and recommendation with respect to such waiver together with such other information reasonably requested by the Directing Certificateholder.
The master servicer or the special servicer, as applicable, is required to notify the trustee, the certificate administrator, the Directing Certificateholder (other than during the period when a Consultation Termination Event has occurred and is continuing), the operating advisor (only if a Control Termination Event has occurred and is continuing), the depositor and the 17g-5 Information Provider (who will promptly post such notice to the 17g-5 Information Provider’s website), in writing, of any modification, waiver, material consent or amendment of any term of any Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Companion Loan and the date of the modification and deliver a copy to the custodian for deposit in the related mortgage file, an original counterpart of the agreement relating to such modification, waiver, material consent or amendment, promptly (and in any event within 10 business days) following the execution of the agreement.
Any modification, extension, waiver or amendment of the payment terms of a Serviced Whole Loan will be required to be structured so as to be consistent with the allocation and payment priorities in the related Mortgage Loan documents and intercreditor agreement, if any, such that neither the issuing entity as holder of the Mortgage Loan nor a holder of any related Serviced Companion Loan gains a priority over the other such holder that is not reflected in the related Mortgage Loan documents and intercreditor agreement.
Any modification, waiver or amendment with respect to a Serviced Whole Loan may be subject to the consent of one or more holders of a related Serviced Companion Loan and the special servicer as described under “Description of the Mortgage Pool—The Whole Loans”.
See also “—The Directing Certificateholder” and “—The Operating Advisor” for a description of the Directing Certificateholder’s and the operating advisor’s rights with respect to modifications, waivers and amendments and reviewing and approving the Asset Status Report.
Mortgage Loans with “Due-on-Sale” and “Due-on-Encumbrance” Provisions
The special servicer will be responsible for determining whether to enforce any “due-on-sale” clauses contained in the Mortgage Loan documents or to provide its consent to any assumption and for the handling of all related processing and documentation, or, if mutually agreed to by the master servicer and the special servicer, the master servicer will be required to process such request subject to the consent of the special servicer. The special servicer will not be required to enforce any such “due-on-sale” clauses and in connection therewith will not be required to (1) accelerate the payments on that Mortgage Loan and any related Companion Loan, as applicable, or (2) withhold its consent to any sale or transfer, if (x) such provision is not exercisable under applicable law or if the special servicer determines that the enforcement of such provision is reasonably likely to result in meritorious legal action by the borrower or (y) the special servicer determines, in accordance with the Servicing Standard, that granting such consent would be likely to result in a greater recovery, on a present value basis (discounting at the related Mortgage Rate or other applicable discount rate), than would enforcement of such clause. If the special servicer determines that (i) granting such consent would be likely to result in a greater recovery, (ii) such provisions are not legally enforceable, or (iii) that the conditions to sale or transfer have been satisfied, the master servicer or the special servicer is authorized to take or enter into an assumption agreement from or with the proposed transferee as obligor thereon and to release the original borrower;provided that (a) the credit status of the prospective transferee is in compliance with the Servicing Standard and criteria and the terms of the related Mortgage and (b) the special servicer has received a Rating Agency Confirmation (and, if the affected Mortgage Loan is part of a Serviced Whole Loan, a Rating Agency Confirmation with respect to any commercial mortgage pass-through certificates backed by any related Serviced Companion Loan) from Moody’s, Fitch and DBRS with respect to any Mortgage Loan that (A)
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represents more than 5% of the aggregate Stated Principal Balance of the Mortgage Loans then outstanding and has a Stated Principal Balance of at least $10,000,000, (B) has a Stated Principal Balance that is more than $35,000,000, (C) represents one of the 10 largest Mortgage Loans based on Stated Principal Balance and has a Stated Principal Balance of at least $10,000,000 or (D) is a Mortgage Loan as to which the related Serviced Companion Loan represents one of the 10 largest mortgage loans in the related other securitization (provided that the special servicer will be entitled to reasonably rely upon the written notification provided by the master servicer, special servicer, trustee or certificate administrator of such other securitization as to whether such Serviced Companion Loan is one of the 10 largest mortgage loans in such other securitization). To the extent not precluded by the Mortgage Loan documents, the special servicer may not approve an assumption or substitution without requiring the related borrower to pay any fees owed to the Rating Agencies associated with the approval of such assumption or substitution. However, in the event that the related borrower is required but fails to pay such fees, such fees will be an expense of the issuing entity;provided that in the case of a Serviced Whole Loan the special servicer or the master servicer, as applicable, will be required, after receiving payment from amounts on deposit in the Collection Account, if any, to (i) promptly notify the holder of the related Pari Passu Companion Loan and (ii) use commercially reasonable efforts to exercise on behalf of the issuing entity the rights of the issuing entity under the related Intercreditor Agreement to obtain reimbursement for apro rata portion of such amount allocable to such Serviced Pari Passu Companion Loans from the holders of such Serviced Pari Passu Companion Loans. No assumption agreement may contain any terms that are different from any term of any Mortgage or related Note, except pursuant to the provisions described under “—Modifications, Waivers and Amendments” above and “—Realization Upon Mortgage Loans” below.
The special servicer will be responsible for determining whether to enforce any “due-on-encumbrance” clauses contained in the Mortgage Loan documents or to provide its consent to any loan or encumbrance and for the handling of all related processing and documentation, or, if mutually agreed to by the master servicer and the special servicer, the master servicer will be required to process such request subject to the consent of the special servicer. The special servicer will not be required to enforce any such “due-on-encumbrance” clauses and in connection therewith will not be required to (1) accelerate the payments on that Mortgage Loan and any related Companion Loan, as applicable, or (2) withhold its consent to any lien or encumbrance, if the special servicer (A) determines, in accordance with the Servicing Standard, that such enforcement would not be in the best interests of the issuing entity or the holder of any Serviced Companion Loan, if applicable, or that the conditions to further encumbrance have been satisfied (other than in the case of a Non-Serviced Mortgage Loan) and (B) receives a prior Rating Agency Confirmation (including a Rating Agency Confirmation with respect to any commercial mortgage pass-through certificates backed by any related Serviced Companion Loan) from Moody’s, Fitch and DBRS with respect to any Mortgage Loan that (A) represents more than 2% of the aggregate Stated Principal Balance of the Mortgage Loans then outstanding and has a Stated Principal Balance of at least $10,000,000, (B) has a Stated Principal Balance that is more than $20,000,000, (C) represents one of the 10 largest Mortgage Loans based on Stated Principal Balance and has a Stated Principal Balance of at least $10,000,000, (D) has an aggregate loan-to-value ratio (including any existing and proposed additional debt) that is equal to or greater than 85%, (E) has an aggregate debt service coverage ratio (in each case, determined based upon the aggregate of the Stated Principal Balance of the related Mortgage Loan, any existing additional debt and the principal amount of the proposed additional lien) that is less than 1.20x, or (F) is a Mortgage Loan as to which the related Serviced Companion Loan represents one of the 10 largest mortgage loans in the related other securitization (provided that the special servicer will be entitled to reasonably rely upon the written notification provided by the master servicer, special servicer, trustee or certificate administrator of the applicable other securitization as to whether such Serviced Companion Loan is one of the 10 largest mortgage loans in such other securitization);provided that with respect to clauses (A), (B), (C), (D), (E) and (F), such Mortgage Loan must also have a Stated Principal Balance of at least $10,000,000 for the requirement of a Rating Agency Confirmation to apply. To the extent not precluded by the Mortgage Loan documents, the special servicer may not approve the creation of any lien or other encumbrance without requiring the related borrower to pay any fees owed to the Rating Agencies associated with the approval of such lien or encumbrance. However, in the event that the related borrower is required but fails to pay such fees, such fees will be an expense of the issuing entity;provided that in the case of a Serviced Whole Loan the special servicer or the master servicer, as
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applicable, will be required, after receiving payment from amounts on deposit in the Collection Account, if any, to (i) promptly notify the holder of the related Pari Passu Companion Loan and (ii) use commercially reasonable efforts to exercise on behalf of the issuing entity the rights of the issuing entity under the related Intercreditor Agreement to obtain reimbursement for apro rataportion of such amount allocable to such Serviced Pari Passu Companion Loans from the holders of such Serviced Pari Passu Companion Loans. Neither the master servicer nor the special servicer will be responsible for enforcing a “due-on-sale” or a “due-on-encumbrance” clause with respect to any Non-Serviced Mortgage Loan.
Notwithstanding the foregoing, without any other approval or consent, the master servicer (for non-Specially Serviced Loans) or the special servicer (for Specially Serviced Loans) may grant and process a borrower’s request for (i) consent to subject the related Mortgaged Property to an immaterial easement, right of way or similar agreement for utilities, access, parking, public improvements or another purpose, (ii) consent to subordination of the related Mortgage Loan to such easement, right of way or similar agreement, and (iii) consent to any other matter that is not a Major Decision or Special Servicer Decision. In any such case, the master servicer or the special servicer, as applicable, will be entitled to 100% of the related fees.
Inspections
The master servicer will be required to perform (at its own expense) or cause to be performed (at its own expense), physical inspections of each Mortgaged Property relating to a Mortgage Loan (other than the Mortgaged Property securing a Non-Serviced Mortgage Loan, which is subject to inspection pursuant to the related Non-Serviced PSA, and other than a Specially Serviced Loan) with a Stated Principal Balance of (A) $2,000,000 or more at least once every 12 months (commencing in 2017) and (B) less than $2,000,000 at least once every 24 months, in each case commencing in the calendar year 2018 unless a physical inspection has been performed by the special servicer within the previous 12 months and the master servicer has no knowledge of a material change in the Mortgaged Property since such physical inspection;provided,further,however, that if any scheduled payment becomes more than 60 days delinquent on the related Mortgage Loan, the special servicer is required to inspect or cause to be inspected the related Mortgaged Property as soon as practicable after the Mortgage Loan becomes a Specially Serviced Loan and annually thereafter for so long as the Mortgage Loan remains a Specially Serviced Loan (the cost of which inspection, to the extent not paid by the related borrower, will be reimbursedfirst from default interest and late charges constituting additional compensation of the special servicer on the related Mortgage Loan (but with respect to a Serviced Whole Loan, only amounts available for such purpose under the related Intercreditor Agreement) andthen from the Collection Account as an expense of the issuing entity, and in the case of a Serviced Whole Loan, as an expense of the holders of the related Mortgage Loan and Serviced Pari Passu Companion Loan,pro rataandpari passu, to the extent provided in the related Intercreditor Agreement. The special servicer or the master servicer, as applicable, will be required to prepare or cause to be prepared a written report of the inspection describing, among other things, the condition of and any damage to the Mortgaged Property to the extent evident from the inspection and specifying the existence of any vacancies in the Mortgaged Property of which it has knowledge and deems material, of any sale, transfer or abandonment of the Mortgaged Property of which it has knowledge or that is evident from the inspection, of any adverse change in the condition of the Mortgaged Property of which the preparer of such report has knowledge or that is evident from the inspection, and that the preparer of such report deems material, or of any material waste committed on the Mortgaged Property to the extent evident from the inspection.
Copies of the inspection reports referred to above that are delivered to the certificate administrator will be posted to the certificate administrator’s website for review by Privileged Persons pursuant to the PSA. See “Description of the Certificates—Reports to Certificateholders; Certain Available Information”.
Collection of Operating Information
With respect to each Mortgage Loan that requires the borrower to deliver operating statements, the special servicer or the master servicer, as applicable, is also required to use reasonable efforts to collect and review the annual operating statements beginning with calendar year end 2016 of the related Mortgaged Property. Most of the Mortgage Loan documents obligate the related borrower to deliver
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annual property operating statements. However, we cannot assure you that any operating statements required to be delivered will in fact be delivered, nor is the special servicer or the master servicer likely to have any practical means of compelling the delivery in the case of an otherwise performing Mortgage Loan.
Special Servicing Transfer Event
The Mortgage Loans (other than any Non-Serviced Mortgage Loan), any related Companion Loans and any related REO Properties will be serviced by the special servicer under the PSA in the event that the servicing responsibilities of the master servicer are transferred to the special servicer as described below. Such Mortgage Loans and related Companion Loans (including those loans that have become REO Properties) serviced by the special servicer are referred to in this prospectus collectively as the “Specially Serviced Loans”. The master servicer will be required to transfer its servicing responsibilities to the special servicer with respect to any Mortgage Loan (including any related Companion Loan) for which the master servicer is responsible for servicing:
| (i) | either (x) with respect to any Mortgage Loan or Serviced Companion Loan, other than a balloon loan, a payment default has occurred on such Mortgage Loan or Serviced Companion Loan at its maturity date or, if the maturity date of such Mortgage Loan or Serviced Companion Loan has been extended in accordance with the PSA, a payment default occurs on such Mortgage Loan or Serviced Companion Loan at its extended maturity date or (y) with respect to a balloon loan, a payment default has occurred with respect to the related balloon payment; provided that if (A) the related borrower is diligently seeking a refinancing commitment, letter of intent or otherwise binding application for refinancing from an acceptable lender or signed purchase agreement (and delivers a statement to that effect to the master servicer or the special servicer, who will be required to promptly deliver a copy to the special servicer (in the case of receipt by the master servicer), the master servicer (in the case of receipt by the special servicer) the operating advisor, the Directing Certificateholder (but only for so long as no Consultation Termination Event has occurred and is continuing), within 30 days after the default), (B) the related borrower continues to make its Assumed Scheduled Payment, (C) no other Servicing Transfer Event has occurred with respect to that Mortgage Loan or Serviced Companion Loan and (D) for so long as no Control Termination Event has occurred and is continuing, the Directing Certificateholder consents, a Servicing Transfer Event will not occur until 60 days beyond the related maturity date, unless extended by the special servicer in accordance with the Mortgage Loan documents, the PSA and any related Intercreditor Agreement;provided, further, if the related borrower has delivered to the master servicer or the special servicer, who will be required to promptly delivered a copy to the special servicer (in the case of receipt by the master servicer), the master servicer (in the case of receipt by the special servicer), the operating advisor, the Directing Certificateholder (but only for so long as no Consultation Termination Event has occurred and is continuing), on or before the 60th day after the related maturity date, a refinancing commitment, letter of intent or otherwise binding application for refinancing from an acceptable lender or signed purchase agreement reasonably acceptable to the special servicer, and the borrower continues to make its Assumed Scheduled Payments (and no other Servicing Transfer Event has occurred with respect to that Mortgage Loan or Serviced Companion Loan), a Servicing Transfer Event will not occur until the earlier of (1) 120 days beyond the related maturity date or extended maturity date and (2) the termination of the refinancing commitment; |
| (ii) | any Monthly Payment (other than a balloon payment or any other payment due under clause (i)(x) above in this definition) or any amount due on a monthly basis as an escrow payment or reserve funds, is 60 days or more delinquent; |
| (iii) | the master servicer or the special servicer (and, in the case of a determination by the special servicer, for so long as no Control Termination Event has occurred and is continuing, with the consent of the Directing Certificateholder, and, with respect to any Serviced Whole Loan, in consultation with the related Serviced Companion Loan noteholders to the extent provided for |
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in the related intercreditor agreement) determines in its reasonable business judgment, exercised in accordance with the Servicing Standard, that (x) a default consisting of a failure to make a payment of principal or interest is reasonably foreseeable or there is a significant risk of such default or (y) any other default that is likely to impair the use or marketability of the related Mortgaged Property or the value of the Mortgaged Property as security for the Mortgage Loan or, if applicable, Serviced Companion Loan, is reasonably foreseeable or there is a significant risk of such default, which monetary or other default, in either case, would likely continue unremedied beyond the applicable grace period (or, if no grace period is specified, for a period of 60 days) and is not likely to be cured by the related borrower within 60 days or, except as provided inclause (i)(y) above, in the case of a balloon payment, for at least 30 days;
| (iv) | the related borrower has become the subject of 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, 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; |
| (v) | 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 of or relating to all or substantially all of its property; |
| (vi) | the related borrower admits in writing its inability to pay its debts generally as they become due, files a petition to take advantage of any applicable insolvency or reorganization statute, makes an assignment for the benefit of its creditors, or voluntarily suspends payment of its obligations; |
| (vii) | a default, of which the master servicer or the special servicer has notice (other than a failure by such related borrower to pay principal or interest) and that in the opinion of the master servicer or the special servicer (and, in the case of the special servicer, for so long as no Control Termination Event has occurred and is continuing, with the consent of the Directing Certificateholder, and with respect to any Serviced Whole Loan, in consultation with the related Serviced Companion Loan noteholders to the extent provided for in the related Intercreditor Agreement) materially and adversely affects the interests of the Certificateholders or any holder of a Serviced Companion Loan, if applicable, occurs and remains unremedied for the applicable grace period specified in the Mortgage Loan documents for such Mortgage Loan or Serviced Companion Loan (or if no grace period is specified for those defaults which are capable of cure, 60 days); or |
| (viii) | the master servicer or special servicer receives notice of the foreclosure or proposed foreclosure of any lien on the related Mortgaged Property (each ofclause (i) through (viii), a “Servicing Transfer Event”). |
However, the master servicer will be required to continue to (x) receive payments on the Mortgage Loans (and any related Serviced Companion Loan) (including amounts collected by the special servicer), (y) make certain calculations with respect to the Mortgage Loans and any related Serviced Companion Loan and (z) make remittances and prepare certain reports to the Certificateholders with respect to the Mortgage Loans and any related Serviced Companion Loan. Additionally, the master servicer will continue to receive the Servicing Fee in respect of the Mortgage Loans (and any related Serviced Companion Loan) at the Servicing Fee Rate.
If the related Mortgaged Property is acquired in respect of any Mortgage Loan (and any related Serviced Companion Loan) (upon acquisition, an “REO Property”) whether through foreclosure, deed-in-lieu of foreclosure or otherwise, the special servicer will continue to be responsible for its operation and management. If any Serviced Companion Loan becomes specially serviced, then the related Mortgage Loan will also become a Specially Serviced Loan. If any Mortgage Loan becomes a Specially Serviced
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Loan, then the related Serviced Companion Loan will also become a Specially Serviced Loan. The master servicer will have no responsibility for the performance by the special servicer of its duties under the PSA. Any Mortgage Loan (excluding any Non-Serviced Mortgage Loan), that is or becomes a cross-collateralized Mortgage Loan and is cross-collateralized with a Specially Serviced Loan will become a Specially Serviced Loan.
A Mortgage Loan or Serviced Whole Loan will cease to be a Specially Serviced Loan (each, a “Corrected Loan”) (A) with respect to the circumstances described in clauses (i) and (ii) above, when the borrower thereunder has brought the Mortgage Loan or Serviced Companion Loan current and thereafter made three consecutive full and timely Periodic Payments, including pursuant to any workout of the Mortgage Loan or Serviced Companion Loan, (B) with respect to the circumstances described in clause (iii), (iv), (v), (vi) and (viii) above, when such circumstances cease to exist in the good faith judgment of the special servicer or (C) with respect to the circumstances described in clause (vii) above, when such default is cured (as determined by the special servicer in accordance with the Servicing Standard) or waived by the special servicer;provided, in each case, that at that time no circumstance exists (as described above) that would cause the Mortgage Loan or Serviced Companion Loan to continue to be characterized as a Specially Serviced Loan. If any Specially Serviced Loan becomes a Corrected Loan, the special servicer will be required to transfer servicing of such Corrected Loan to the master servicer.
Asset Status Report
The special servicer will be required to prepare a report (an “Asset Status Report”) for each Mortgage Loan (other than the Non-Serviced Mortgage Loans) and, if applicable, any Serviced Whole Loan that becomes a Specially Serviced Loan not later than 30 days after the servicing of such Mortgage Loan is transferred to the special servicer. Each Asset Status Report will be required to be delivered in electronic form to:
| · | the Directing Certificateholder (but only for so long as no Consultation Termination Event has occurred and is continuing); |
| · | with respect to any related Serviced Companion Loan, to the extent the related Serviced Companion Loan has been included in a securitization transaction, to the master servicer of such securitization into which the related Serviced Companion Loan has been sold or to the holder of the related Serviced Companion Loan; |
| · | the operating advisor (but only after the occurrence and during the continuance of a Control Termination Event); |
| · | the master servicer; and |
| · | the 17g-5 Information Provider, which will be required to post such report to the 17g-5 Information Provider’s website. |
A summary of each Asset Status Report will be provided to the certificate administrator and the trustee.
An Asset Status Report prepared for each Specially Serviced Loan will be required to include, among other things, the following information:
| · | summary of the status of such Specially Serviced Loan and any negotiations with the related borrower; |
| · | a discussion of the legal and environmental considerations reasonably known to the special servicer, consistent with the Servicing Standard, that are applicable to the exercise of remedies and to the enforcement of any related guaranties or other collateral for the related Specially Serviced Loan and whether outside legal counsel has been retained; |
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| · | the most current rent roll and income or operating statement available for the related Mortgaged Property; |
| · | (A) the special servicer’s recommendations on how such Specially Serviced Loan might be returned to performing status (including the modification of a monetary term, and any workout, restructure or debt forgiveness) and returned to the master servicer for regular servicing or foreclosed or otherwise realized upon (including any proposed sale of a Defaulted Loan or REO Property), (B) a description of any such proposed or taken actions, and (C) the alternative courses of action that were or are being considered by the special servicer in connection with the proposed or taken actions; |
| · | the status of any foreclosure actions or other proceedings undertaken with respect to the Specially Serviced Loan, any proposed workouts and the status of any negotiations with respect to such workouts, and an assessment of the likelihood of additional defaults under the related Mortgage Loan or Serviced Whole Loan; |
| · | a description of any amendment, modification or waiver of a material term of any ground lease (or any space lease or air rights lease, if applicable) or franchise agreement; |
| · | the decision that the special servicer made, or intends or proposes to make, including a narrative analysis setting forth the special servicer’s rationale for its proposed decision, including its rejection of the alternatives; |
| · | an analysis of whether or not taking such proposed action is reasonably likely to produce a greater recovery on a present value basis than not taking such action, setting forth (x) the basis on which the special servicer made such determination and (y) the net present value calculation and all related assumptions; |
| · | the appraised value of the related Mortgaged Properties (and a copy of the last obtained appraisal of such Mortgaged Property) together with a description of any adjustments to the valuation of such Mortgaged Property made by the special servicer together with an explanation of those adjustments; and |
| · | such other information as the special servicer deems relevant in light of the Servicing Standard. |
If no Control Termination Event has occurred and is continuing, the Directing Certificateholder will have the right to disapprove the Asset Status Report prepared by the special servicer with respect to a Specially Serviced Loan within 10 business days after receipt of the Asset Status Report. If the Directing Certificateholder does not disapprove an Asset Status Report within 10 business days or if the special servicer makes a determination, in accordance with the Servicing Standard, that the disapproval by the Directing Certificateholder (communicated to the special servicer within ten business days) is not in the best interest of all the Certificateholders,the special servicer will be required to implement the recommended action as outlined in the Asset Status Report. If the Directing Certificateholder disapproves the Asset Status Report within the 10 business day period and the special servicer has not made the affirmative determination described above, the special servicer will be required to revise the Asset Status Report as soon as practicable thereafter, but in no event later than 30 days after the disapproval. The special servicer will be required to continue to revise the Asset Status Report until the Directing Certificateholder fails to disapprove the revised Asset Status Report or until the special servicer makes a determination, in accordance with the Servicing Standard, that the disapproval is not in the best interests of the Certificateholders;provided that, if the Directing Certificateholder has not approved the Asset Status Report for a period of 60 business days following the first submission of an Asset Status Report, the special servicer may act upon the most recently submitted form of Asset Status Report, if consistent with the Servicing Standard.
If a Control Termination Event has occurred and is continuing, the special servicer will be required to promptly deliver each Asset Status Report prepared in connection with a Specially Serviced Loan to the operating advisor (and for so long as no Consultation Termination Event has occurred, the Directing
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Certificateholder). The operating advisor will be required to provide comments to the special servicer in respect of the Asset Status Report, if any, within ten (10) business days following the later of (i) receipt of such Asset Status Report or (ii) such related additional information reasonably requested by the operating advisor, and propose possible alternative courses of action to the extent it determines such alternatives to be in the best interest of the Certificateholders (including any Certificateholders that are holders of the Control Eligible Certificates), as a collective whole. The special servicer will be obligated to consider such alternative courses of action and any other feedback provided by the operating advisor (and so long as no Consultation Termination Event has occurred, the Directing Certificateholder) in connection with the special servicer’s preparation of any Asset Status Report. The special servicer will revise the Asset Status Report as it deems necessary to take into account any input and/or comments from the operating advisor (and so long as no Consultation Termination Event has occurred, the Directing Certificateholder), to the extent the special servicer determines that the operating advisor’s and/or Directing Certificateholder’s input and/or recommendations are consistent with the Servicing Standard and in the best interest of the Certificateholders as a collective whole (or, with respect to a Serviced Whole Loan, the best interest of the Certificateholders and the holders of the related Companion Loan, as a collective whole (taking into account thepari passu or subordinate nature of such Companion Loan)).
The special servicer will not be required to take or to refrain from taking any action because of an objection or comment by the operating advisor or a recommendation of the operating advisor.
After the occurrence and during the continuance of a Control Termination Event but prior to the occurrence of a Consultation Termination Event, each of the Directing Certificateholder and the operating advisor will be entitled to consult with the special servicer and propose alternative courses of action and provide other feedback in respect of any Asset Status Report. After the occurrence of a Consultation Termination Event, the Directing Certificateholder will have no right to consult with the special servicer with respect to Asset Status Reports and the special servicer will only be obligated to consult with the operating advisor with respect to any Asset Status Report as described above. The special servicer may choose to revise the Asset Status Report as it deems reasonably necessary in accordance with the Servicing Standard to take into account any input and/or recommendations of the operating advisor or the Directing Certificateholder during the applicable periods described above, but is under no obligation to follow any particular recommendation of the operating advisor or the Directing Certificateholder.
With respect to each Non-Serviced Mortgage Loan, the directing certificateholder under the related Non-Serviced PSA will have approval and consultation rights with respect to any asset status report prepared by the related Non-Serviced Special Servicer with respect to such Non-Serviced Whole Loan under the related Non-Serviced PSA that are similar to the approval and consultation rights of the Directing Certificateholder with respect to the Mortgage Loans and the Serviced Whole Loans. See
“—Servicing of the Non-Serviced Mortgage Loans”.
Realization Upon Mortgage Loans
If a payment default or material non-monetary default on a Mortgage Loan (other than a Non-Serviced Mortgage Loan) has occurred, then, pursuant to the PSA, the special servicer, on behalf of the trustee, may, in accordance with the terms and provisions of the PSA, at any time institute foreclosure proceedings, exercise any power of sale contained in the related Mortgage, obtain a deed in lieu of foreclosure, or otherwise acquire title to the related Mortgaged Property, by operation of law or otherwise. The special servicer is not permitted, however, to cause the trustee to acquire title to any Mortgaged Property, have a receiver of rents appointed with respect to any Mortgaged Property or take any other action with respect to any Mortgaged Property that would cause the trustee, for the benefit of the Certificateholders, or any other specified person to be considered to hold title to, to be a “mortgagee-in-possession” of, or to be an “owner” or an “operator” of such Mortgaged Property within the meaning of certain federal environmental laws, unless the special servicer has determined in accordance with the Servicing Standard, based on an updated environmental assessment report prepared by a person who regularly conducts environmental audits and performed within six months prior to any such acquisition of title or other action (which report will be an expense of the issuing entity subject to the terms of the PSA) that:
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(a) 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 Certificateholders (and with respect to any Serviced Whole Loan, the Serviced Companion Loan Holders), as a collective whole as if such Certificateholders and, if applicable, Serviced Companion Loan Holders constituted a single lender, to take such actions as are necessary to bring such Mortgaged Property in compliance with such laws, and
(b) 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 Certificateholders (and with respect to any Serviced Whole Loan, the Serviced Companion Loan Holders), as a collective whole as if such Certificateholders and, if applicable, Serviced Companion Loan Holders constituted a single lender, to take such actions with respect to the affected Mortgaged Property.
Such requirement precludes enforcement of the security for the related Mortgage Loan until a satisfactory environmental site assessment is obtained (or until any required remedial action is taken), but will decrease the likelihood that the issuing entity will become liable for a material adverse environmental condition at the Mortgaged Property. However, we cannot assure you that the requirements of the PSA will effectively insulate the issuing entity from potential liability for a materially adverse environmental condition at any Mortgaged Property.
If title to any Mortgaged Property is acquired by the issuing entity (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 IRS grants (or has not denied) a qualifying extension of time to sell the property or (2) the special servicer, the certificate administrator and the trustee receive an opinion of independent counsel to the effect that the holding of the property by the Lower-Tier REMIC longer than the above-referenced three year period will not result in the imposition of a tax on either Trust REMIC or cause either Trust 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 PSA, 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 administer any Mortgaged Property acquired by the issuing entity in a manner which does not cause such Mortgaged Property to fail to qualify as “foreclosure property” within the meaning of Code Section 860G(a)(8) at all times, and that the sale of the property does not result in the receipt by the issuing entity of any income from nonpermitted assets as described in Code Section 860F(a)(2)(B). If the Lower-Tier REMIC acquires title to any Mortgaged Property, the special servicer, on behalf of the Lower-Tier REMIC, will retain, at the expense of the issuing entity, 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 more than 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 PSA.
In general, the special servicer will be obligated to cause any Mortgaged Property acquired as an REO Property to be operated and managed in a manner that would, in its reasonable judgment and in accordance with the Servicing Standard, maximize the issuing entity’s net after-tax proceeds from such property. Generally, none of the Prudential Plaza Loan REMIC or the Lower-Tier REMIC will be taxable on income received with respect to a Mortgaged Property acquired by the issuing entity 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
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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 issuing entity 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 hospitality property, or rental income attributable to personal property leased in connection with a lease of real property if the rent attributable to personal property exceeds 15% of the total net rent for the taxable year. Any of the foregoing types of income may instead constitute “net income from foreclosure property”, which would be taxable to the Prudential Plaza Loan REMIC or the Lower-Tier REMIC, as applicable, at the highest marginal federal corporate rate (currently 35%) and may also be subject to state or local taxes. The PSA 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 issuing entity 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 proceeds available for distribution to holders of certificates. See “Material Federal Income Tax Considerations—Taxes That May Be Imposed on a REMIC—Prohibited Transactions”.
Under the PSA, the special servicer is required to establish and maintain one or more REO Accounts, to be held on behalf of the trustee for the benefit of the Certificateholders and with respect to a Serviced Whole Loan, the Serviced Companion Loan Holder, for the retention of revenues and insurance proceeds derived from each REO Property. The special servicer is required to use the funds in the REO Account to pay for the proper operation, management, maintenance and disposition of any REO Property, but only to the extent of amounts on deposit in the REO Account relate to such REO Property. To the extent that amounts in the REO Account in respect of any REO Property are insufficient to make such payments, the master servicer is required to make a Servicing Advance, unless it determines such Servicing Advance would be nonrecoverable. On the later of the date that is (x) on or prior to each Determination Date or (y) 2 business days after such amounts are received and properly identified and determined to be available, the special servicer is required to remit to the master servicer for deposit all amounts received in respect of each REO Property during such Collection Period, net of any amounts withdrawn to make any permitted disbursements, to the Collection Account;provided that the special servicer may retain in the REO Account permitted reserves.
Sale of Defaulted Loans and REO Properties
If the special servicer determines in accordance with the Servicing Standard that it would be in the best economic interests of the Certificateholders or, in the case of a Serviced Whole Loan, Certificateholders and any holder of the related Serviced Companion Loan (as a collective whole as if such Certificateholders and Serviced Companion Loan Holder constituted a single lender) to attempt to sell a Defaulted Loan (other than a Non-Serviced Mortgage Loan) and any related Serviced Companion Loan as described below, the special servicer will be required to use reasonable efforts to solicit offers for each Defaulted Loan on behalf of the Certificateholders and the holder of any related Serviced Companion Loan in such manner as will be reasonably likely to realize a fair price. In the case of certain Non-Serviced Mortgage Loans, under certain limited circumstances permitted under the related Intercreditor Agreement, to the extent that such Non-Serviced Mortgage Loan is not sold together with the related Non-Serviced Companion Loan by the special servicer for the related Non-Serviced Whole Loan, the special servicer will be entitled to sell (with the consent of the Directing Certificateholder if no Control Termination Event has occurred and is continuing) such Non-Serviced Mortgage Loan if it determines in accordance with the Servicing Standard that such action would be in the best interests of the
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Certificateholders (and will be entitled to a Liquidation Fee in connection with such sale). The special servicer is required to accept the first cash offer received from any person that constitutes a fair price for the Defaulted Loan. If multiple offers are received during the period designated by the special servicer for receipt of offers, the special servicer is required to select the highest offer. The special servicer is required to give the trustee, the certificate administrator, the master servicer, the operating advisor and (other than in respect of any Excluded Loan) the Directing Certificateholder not less than 10 business days’ prior written notice of its intention to sell any such Defaulted Loan. Neither the trustee nor any of its affiliates may make an offer for or purchase any Defaulted Loan. “Defaulted Loan” means a Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan (i) that is delinquent at least 60 days in respect of its Periodic Payments or more than 60 days delinquent in respect of its balloon payment, if any, in either case such delinquency to be determined without giving effect to any grace period permitted by the related Mortgage or Mortgage Note and without regard to any acceleration of payments under the related Mortgage and Mortgage Note or (ii) as to which the master servicer or special servicer has, by written notice to the related borrower, accelerated the maturity of the indebtedness evidenced by the related Mortgage Note.
The special servicer will be required to determine whether any cash offer constitutes a fair price for any Defaulted Loan if the highest offeror is a person other than an Interested Person. In determining whether any offer from a person other than an Interested Person constitutes a fair price for any Defaulted Loan, the special servicer will be required to take into account (in addition to the results of any appraisal, updated appraisal or narrative appraisal that it may have obtained pursuant to the PSA within the prior 9 months), among other factors, the period and amount of the occupancy level and physical condition of the related Mortgaged Property and the state of the local economy.
If the highest offeror is an Interested Person (provided that the trustee may not be a offeror), then the trustee will be required to determine whether the cash offer constitutes a fair price;provided that no offer from an Interested Person will constitute a fair price unless (i) the offer is the highest offer received, and (ii) if the offer is less than the applicable Purchase Price, then at least two other offers are received from independent third parties. In determining whether any offer received from an Interested Person represents a fair price for any such Defaulted Loan, the trustee will be supplied with and will be required to rely on the most recent appraisal or updated appraisal conducted in accordance with the PSA within the preceding 9-month period or, in the absence of any such appraisal, on a new appraisal. Except as provided in the following paragraph, the cost of any appraisal will be covered by, and will be reimbursable as, a Servicing Advance.
Notwithstanding anything contained in the preceding paragraph to the contrary, if the trustee is required to determine whether a cash offer by an Interested Person constitutes a fair price, the trustee may (at its option and at the expense of the Interested Person) designate an independent third party expert in real estate or commercial mortgage loan matters with at least 5 years’ experience in valuing or investing in loans similar to the subject Mortgage Loan or Serviced Whole Loan, as the case may be, that has been selected with reasonable care by the trustee to determine if such cash offer constitutes a fair price for such Mortgage Loan or Serviced Whole Loan. If the trustee designates such a third party to make such determination, the trustee will be entitled to rely conclusively upon such third party’s determination. The reasonable costs of all appraisals, inspection reports and broker opinions of value incurred by any such third party pursuant to this paragraph will be covered by the Interested Person;providedthat the trustee will not engage a third party expert whose fees exceed a commercially reasonable amount as determined by the trustee.
The special servicer is required to use reasonable efforts to solicit offers for each REO Property on behalf of the Certificateholders and the related Companion Loan Holder(s) (if applicable) and to sell each REO Property in the same manner as with respect to a Defaulted Loan.
Notwithstanding any of the foregoing paragraphs, the special servicer will not be required to accept the highest cash offer for a Defaulted Loan or REO Property if the special servicer determines (in consultation with the Directing Certificateholder (unless a Consultation Termination Event exists) and, in the case of a Serviced Whole Loan or an REO Property related to a Serviced Whole Loan, the related Companion Loan Holder(s)), in accordance with the Servicing Standard, that rejection of such offer would
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be in the best interests of the Certificateholders and, in the case of a sale of a Serviced Whole Loan or an REO Property related to a Serviced Whole Loan, the related Companion Loan Holder(s) (as a collective whole as if such Certificateholders and, if applicable, the related Companion Loan Holder(s) constituted a single lender), and the special servicer may accept a lower offer (from any person other than itself or an affiliate) if it determines, in its reasonable and good faith judgment, that acceptance of such offer would be in the best interests of the Certificateholders and, in the case of a Serviced Whole Loan or an REO Property related to a Serviced Whole Loan, the related Companion Loan Holder(s) (as a collective whole as if such Certificateholders and, if applicable, the related Companion Loan Holder(s) constituted a single lender).
An “Interested Person” is the depositor, the master servicer, the special servicer, the operating advisor, the asset representations reviewer, the Excluded Special Servicer, if any, the certificate administrator, the trustee, the Directing Certificateholder, any sponsor, any borrower, any holder of a related mezzanine loan, any manager of a Mortgaged Property, any independent contractor engaged by the special servicer or any known affiliate of any of the preceding entities, and, with respect to a Whole Loan if it is a Defaulted Loan, the depositor, the master servicer, the special servicer (or any independent contractor engaged by such special servicer), or the trustee for the securitization of a Companion Loan, and each related Companion Loan Holder or its representative, any holder of a related mezzanine loan, or any known affiliate of any such party described above.
With respect to the Serviced Whole Loan, pursuant to the terms of the related Intercreditor Agreement(s), if such Serviced Whole Loan becomes a Defaulted Loan, and if the special servicer determines to sell the related Mortgage Loan in accordance with the discussion in this “—Sale of Defaulted Loans and REO Properties” section, then the special servicer will be required to sell the related Pari Passu Companion Loan together with such Mortgage Loan as one whole loan. The special servicer will not be permitted to sell the related Mortgage Loan together with the related Pari Passu Companion Loan if such Serviced Whole Loan becomes a Defaulted Loan without the consent of the holder of the related Pari Passu Companion Loan, unless the special servicer complies with certain notice and delivery requirements set forth in the PSA. See “Description of the Mortgage Pool—The Whole Loans—U-Haul AREC Portfolio Whole Loan”.
In addition, with respect to each Non-Serviced Mortgage Loan, if such Mortgage Loan has become a defaulted Mortgage Loan under the related Non-Serviced PSA, the Non-Serviced Special Servicer will generally have the right to sell such Mortgage Loan together with the related Companion Loan as notes evidencing one whole loan. The issuing entity, as the holder of the Non-Serviced Mortgage Loans, will have the right to consent to such sale if the required notices and information regarding such sale are not provided to the special servicer in accordance with the related Intercreditor Agreement. The Directing Certificateholder will be entitled to exercise such consent right so long as a Control Termination Event has not occurred and is continuing, and if a Control Termination Event has occurred and is continuing, the special servicer will exercise such consent rights. See “Description of the Mortgage Pool—The Whole Loans—10 Hudson Yards Whole Loan”, “—Westfield San Francisco Centre Whole Loan”, “—Prudential Plaza Whole Loan”,“—Birch Run Premium Outlets Whole Loan”,“—Gas Company Tower & World Trade Center Parking Garage Whole Loan”, “—Vertex Pharmaceuticals HQ Whole Loan” and “—401 South State Street Whole Loan”.
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 Servicing Advances, (iii) accrued and unpaid interest on all Advances and (iv) additional expenses of the issuing entity) incurred with respect to the Mortgage Loan, the issuing entity 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
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distributable on the certificates will be further reduced by interest payable to the master servicer, the special servicer or trustee on these Advances.
The Directing Certificateholder
General
Subject to the rights of the holder of the related Companion Loan under the related Intercreditor Agreement as described under “—Rights of Holders of Companion Loans” below, for so long as a Control Termination Event has not occurred and is not continuing, the Directing Certificateholder will be entitled to advise (1) the special servicer, with respect to all Specially Serviced Loans (other than any Excluded Loan) and (2) the special servicer, with respect to non-Specially Serviced Loans (other than any Excluded Loan), as to all matters for which the master servicer must obtain the consent or deemed consent of the special servicer (e.g., the Major Decisions) and will have the right to replace the special servicer with or without cause and have certain other rights under the PSA, each as described below. With respect to any Mortgage Loan (other than any Excluded Loan), upon the occurrence and continuance of a Control Termination Event, the Directing Certificateholder will have certain consultation rights only, and upon the occurrence of a Consultation Termination Event, the Directing Certificateholder will not have any consent or consultation rights, as further described below.
The “Directing Certificateholder” will be the Controlling Class Certificateholder (or its representative) selected by more than 50% of the Controlling Class Certificateholders, by Certificate Balance, as determined by the certificate registrar from time to time; provided, however, that
(1) absent that selection, or
(2) until a Directing Certificateholder is so selected, or
(3) upon receipt of a notice from a majority of the Controlling Class Certificateholders, by Certificate Balance, that a Directing Certificateholder is no longer designated, the Controlling Class Certificateholder that represents that it owns the largest aggregate Certificate Balance of the Controlling Class (or its representative) will be the Directing Certificateholder;
provided, however, that in the case of this clause (3), in the event no one holder represents that it owns the largest aggregate Certificate Balance of the Controlling Class, then there will be no Directing Certificateholder until appointed in accordance with the terms of the PSA.
The certificate administrator and the other parties to the PSA will be entitled to assume that the identity of the Directing Certificateholder has not changed until such parties receive written notice of a replacement of the Directing Certificateholder from a party holding the requisite interest in the Controlling Class, or the resignation of the then-current Directing Certificateholder.
The initial Directing Certificateholder is expected to be RREF III Debt AIV, LP, or its affiliate.
A “Controlling Class Certificateholder” is each holder (or Certificate Owner, if applicable) of a certificate of the Controlling Class as determined by the certificate registrar from time to time, upon request by any party to the PSA.
The “Controlling Class” will be, as of any time of determination, the most subordinate class of Control Eligible Certificates then outstanding that has an aggregate Certificate Balance (as notionally reduced by any Cumulative Appraisal Reduction Amounts allocable to such class) at least equal to 25% of the initial Certificate Balance of that class. The Controlling Class as of the Closing Date will be Class G certificates;provided that if, at any time, the Certificate Balances of all Control Eligible Certificates, as notionally reduced by any Appraisal Reduction Amounts (but without regard to any Collateral Deficiency Amount) allocable to such classes, have been reduced to zero, the Controlling Class will be the most subordinate Class of Control Eligible Certificates that has a principal balance greater than zero;provided, further that if at any time the Certificate Balance of the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4,
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Class A-M, Class B, Class C and Class D certificates have been reduced to zero as a result of the allocation of principal payments on the Mortgage Loans, then the “Controlling Class” will be the most subordinate class of Control Eligible Certificates that has an aggregate Certificate Balance greater than zero without regard to the application of Appraisal Reduction Amounts (or any Collateral Deficiency Amount) to notionally reduce the Certificate Balance of such Class.
The “Control Eligible Certificates” will be any of the Class E, Class F and Class G certificates.
The master servicer, the special servicer, the trustee or the operating advisor, may from time to time request that the certificate administrator provide the name of the then-current Directing Certificateholder for any applicable Mortgage Loan or Serviced Whole Loan. Upon such request, the certificate administrator will be required to promptly (but in no event more than 5 Business Days following such request) provide the name of the then-current Directing Certificateholder to the master servicer, the special servicer, the trustee or the operating advisor, but only to the extent the certificate administrator has actual knowledge of the identity of the then-current Directing Certificateholder;provided, that if the certificate administrator does not have actual knowledge of the identity of the then-current Directing Certificateholder, then the certificate administrator will be required to promptly (but in no event more than 5 Business Days following such request) (i) determine which Class is the Controlling Class and (ii) request from the Controlling Class Certificateholders the identity of the Directing Certificateholder. Any expenses incurred in connection with obtaining such information will be at the expense of the requesting party, except that if (i) such expenses arise in connection with an event as to which the Directing Certificateholder (or controlling class representative) has review, consent or consultation rights with respect to an action taken by, or report prepared by, the requesting party pursuant to the PSA or in connection with a request made by the operating advisor in connection with its obligation under the PSA to deliver a copy of its Operating Advisor Annual Report to the controlling class representative and (ii) the requesting party has not been notified of the identity of the Directing Certificateholder (or controlling class representative) or reasonably believes that the identity of the Directing Certificateholder (or controlling class representative) has changed, then such expenses will be at the expense of the Trust. The master servicer, the special servicer, the trustee and the operating advisor, will be entitled to conclusively rely on any such information so provided.
To the extent the master servicer or the special servicer has written notice of any change in the identity of a Directing Certificateholder or the list of Certificateholders (or Certificate Owners, if applicable) of the Controlling Class, then the master servicer or the special servicer, as applicable, will be required to promptly notify the trustee, the certificate administrator, the operating advisor, the master servicer and the special servicer thereof, who may rely conclusively on such notice from the master servicer or the special servicer, as applicable.
In the event that no Directing Certificateholder has been appointed or identified to the master servicer or the special servicer, as applicable, and the master servicer or special servicer, as applicable, has attempted to obtain such information from the certificate administrator and no such entity has been identified to the master servicer or the special servicer, as applicable, then until such time as the new Directing Certificateholder is identified, the master servicer or the special servicer, as applicable, will have no duty to consult with, provide notice to, or seek the approval or consent of any such Directing Certificateholder as the case may be.
The Class E certificateholders that are the Controlling Class Certificateholders may waive its rights as the Controlling Class Certificateholders as described “—Control Termination Event and Consultation Termination Event” below.
Major Decisions
Except as otherwise described under “—Servicing Override” below and subject to the rights of the holder of the related Companion Loan under the related Intercreditor Agreement as described under “—Rights of Holders of Companion Loans” below, (a) the master servicer will not be permitted to take any of the following actions unless it has obtained the consent of the special servicer and (b) prior to the occurrence and continuance of a Control Termination Event, the special servicer will not be permitted to
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take any of the following actions and the special servicer will not be permitted to consent to the master servicer’s taking any of the following actions, as to which the Directing Certificateholder has objected in writing within ten business days (or thirty (30) days with respect to clause (j) below) after receipt of the written recommendation and analysis together with such other information reasonably requested by the Directing Certificateholder (provided that if such written objection has not been received by the special servicer within such ten-business-day (or 30-day) period, the Directing Certificateholder will be deemed to have approved such action) (each of the following, a “Major Decision”):
(a) any proposed or actual foreclosure upon or comparable conversion (which may include acquisitions of an REO Property) of the ownership of properties securing such of the Mortgage Loans (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan as come into and continue in default;
(b) any modification, consent to a modification or waiver of any monetary term or material non-monetary term (including, without limitation, the timing of payments and acceptance of discounted payoffs but excluding late payment charges or default interest) of a Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan or any extension of the maturity date of any Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan;
(c) any sale of a Defaulted Mortgage Loan (that is not a Non-Serviced Mortgage Loan), an REO Property (in each case, other than in connection with the termination of the issuing entity as described under “Pooling and Servicing Agreement—Termination; Retirement of Certificates” in this prospectus) for less than the applicable Purchase Price;
(d) any determination to bring an REO Property into compliance with applicable environmental laws or to otherwise address hazardous material located at an REO Property;
(e) any release of collateral or any acceptance of substitute or additional collateral for a Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan or any consent to either of the foregoing, other than as required pursuant to the specific terms of the related Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan and for which there is no lender discretion;
(f) any waiver of a “due-on-sale” or “due-on-encumbrance” clause with respect to a Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan or any consent to such a waiver or consent to a transfer of the Mortgaged Property or interests in the borrower or consent to the incurrence of additional debt, other than any such transfer or incurrence of debt as may be effected without the consent of the lender under the related loan agreement;
(g) any property management company changes for which the lender is required to consent or approve under the Mortgage Loan documents (with respect to a Mortgage Loan or Serviced Whole Loan (i) with a Stated Principal Balance greater than $2,500,000 or (ii) where the successor property manager is affiliated with the borrower) or franchise changes for which the lender is required to consent or approve under the Mortgage Loan Documents (with respect to any Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan;
(h) releases of any amount from any escrow accounts, reserve accounts or letters of credit, held as performance escrows or reserves, other than those required pursuant to the specific terms of the related Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan and for which there is no lender discretion;
(i) any acceptance of an assumption agreement releasing a borrower from liability under a Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan other than pursuant to the specific terms of such Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan and for which there is no lender discretion;
(j) any determination of an Acceptable Insurance Default;
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(k) the determination of the special servicer pursuant to clause (iii) or clause (vii) of the definition of “Specially Serviced Loan”;
(l) any acceleration of a Mortgage Loan or Serviced Whole Loan following a default or an event of default with respect to a Mortgage Loan (other than a Non-Serviced Mortgage Loan) or such Serviced Whole Loan, any initiation of judicial, bankruptcy or similar proceedings under the related Mortgage Loan documents or with respect to the related mortgagor or Mortgaged Property; and
(m) any modification, waiver or amendment of an intercreditor agreement, co-lender agreement, participation agreement or similar agreement with any mezzanine lender, holder of a Companion Loan or other subordinate debt holder related to a Mortgage Loan (including a Non-Serviced Mortgage Loan, to the extent consent rights with respect to such modification, waiver or amendment are granted to the holder of the Companion Loan or other subordinate debt under the related agreement) or such Serviced Whole Loan, or an action to enforce rights with respect thereto, in each case, in a manner that materially and adversely affects the holders of the Control Eligible Certificates;
provided,further, that if the master servicer or the special servicer determines that immediate action is necessary to protect the interests of the Certificateholders and, with respect to any applicable Serviced Whole Loan, the holders of any related Serviced Companion Loan (as a collective whole as if such Certificateholders and Serviced Companion Loan holders constituted a single lender) and the special servicer has made a reasonable effort to contact the Directing Certificateholder, the master servicer or the special servicer, as the case may be, may take any such action without waiting for the Directing Certificateholder’s response.
Subject to the terms and conditions of this section, including, without limitation, the proviso set forth at the conclusion of the immediately preceding paragraph, (a) the special servicer will process all requests for any matter that constitutes a “Major Decision” with respect to any Specially Serviced Loan and any non-Specially Serviced Loan (other than a Non-Serviced Mortgage Loan) and (b) the master servicer will process all requests for any matter that constitutes a “Major Decision” with respect to any non-Specially Serviced Loan (other than a Non-Serviced Mortgage Loan) if the master servicer and the special servicer have mutually agreed to have the master servicer process such request. Upon receiving a request for any matter that constitutes a Major Decision, the master servicer will be required to forward such request to the special servicer and, unless the master servicer and the special servicer mutually agree that the master servicer will process such request, the special servicer will be required to process such request and the master servicer will have no further obligation with respect to such request or the related Major Decision.
Asset Status Report
So long as a Control Termination Event has not occurred and is not continuing, the Directing Certificateholder will have the right to disapprove the Asset Status Report prepared by the special servicer with respect to a Specially Serviced Loan. If a Consultation Termination Event has occurred, the Directing Certificateholder will have no right to consult with the special servicer with respect to the Asset Status Reports. See “—Asset Status Report” above.
Replacement of Special Servicer
Solong as a Control Termination Event has not occurred and is not continuing, the Directing Certificateholder will have the right to replace the special servicer with or without cause as described under “—Replacement of Special Servicer Without Cause” and “—Termination of Servicer and Special Servicer for Cause—Servicer Termination Events” below.
Control Termination Event and Consultation Termination Event
Ifa Control Termination Event has occurred and is continuing, but for so long as no Consultation Termination Event has occurred, the special servicer will not be required to obtain the consent of the Directing Certificateholder with respect to any of the Major Decisions or Asset Status Reports, but will be
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required to consult with the Directing Certificateholder in connection with any Major Decision or Asset Status Report (or any other matter for which the consent of the Directing Certificateholder would have been required or for which the Directing Certificateholder would have the right to direct the master servicer or the special servicer if no Control Termination Event had occurred and was continuing) and to consider alternative actions recommended by the Directing Certificateholder in respect of such Major Decision or Asset Status Report (or such other matter). Such consultation will not be binding on the special servicer. In the event the special servicer receives no response from the Directing Certificateholder within 10 days following its written request for input on any required consultation, the special servicer will not be obligated to consult with the Directing Certificateholder on the specific matter;provided,however, that the failure of the Directing Certificateholder to respond will not relieve the special servicer from consulting with the Directing Certificateholder on any future matters with respect to the applicable Mortgage Loan or Serviced Whole Loan or any other Mortgage Loan. With respect to any Excluded Special Servicer Loan (that is not also an Excluded Loan), if any, the Directing Certificateholder (prior to the occurrence and continuance of a Control Termination Event) will be required to select an Excluded Special Servicer with respect to such Excluded Special Servicer Loan. After the occurrence and during the continuance of a Control Termination Event or if at any time the applicable Excluded Special Servicer Loan is also an Excluded Loan, the resigning special servicer will be required to select the related Excluded Special Servicer.
In addition, if a Control Termination Event has occurred and is continuing, the special servicer will also be required to consult with the operating advisor in connection with any Major Decision (and such other matters that are subject to consultation rights of the operating advisor pursuant to the PSA) and to consider alternative actions recommended by the operating advisor in respect of such Major Decision;provided that such consultation is on a non-binding basis. In the event the special servicer receives no response from the operating advisor within 10 days following the later of (i) its written request for input on any required consultation and (ii) delivery of all such additional information reasonably requested by the operating advisor related to the subject matter of such consultation, the special servicer will not be obligated to consult with the operating advisor on the specific matter;provided,however, that the failure of the operating advisor to respond will not relieve the special servicer from consulting with the operating advisor on any future matters with respect to the applicable Mortgage Loan or Serviced Whole Loan or any other Mortgage Loan. Notwithstanding anything to the contrary contained in this prospectus, with respect to any Excluded Loan, the special servicer or the related Excluded Special Servicer, as applicable, will be required to consult with the operating advisor, on a non-binding basis, in connection with the related transactions involving proposed Major Decisions and consider alternative actions recommended by the operating advisor, in respect thereof, in accordance with the procedures set forth in the PSA for consulting with the operating advisor.
If a Consultation Termination Event has occurred, no class of certificates will act as the Controlling Class, and the Directing Certificateholder will have no consultation or consent rights under the PSA and will have no right to receive any notices, reports or information (other than notices, reports or information required to be delivered to all Certificateholders) or any other rights as Directing Certificateholder under the PSA. The special servicer will nonetheless be required to consult with only the operating advisor in connection with Major Decisions, asset status reports and other material special servicing actions to the extent set forth in the PSA, and no Controlling Class Certificateholder will be recognized or have any right to approve or be consulted with respect to asset status reports or material special servicer actions.
A “Control Termination Event” will occur when (i) the Class E certificates have a Certificate Balance (taking into account the application of any Cumulative Appraisal Reduction Amounts to notionally reduce the Certificate Balance of such class) of less than 25% of the initial Certificate Balance of that class or (ii) a holder of the Class E certificates is the majority Controlling Class Certificateholder and has irrevocably waived its right, in writing, to exercise any of the rights of the Controlling Class Certificateholder and such rights have not been reinstated to a successor controlling class certificateholder as described below;providedthat a Control Termination Event will not be deemed to be continuing in the event the Certificate Balances of all Classes of Principal Balance Certificates other than the Control Eligible Certificates have been reduced to zero. With respect to Excluded Loans, a Control Termination Event will be deemed to exist.
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A “Consultation Termination Event” will occur when (i) there is no class of Control Eligible Certificates that has a then-outstanding Certificate Balance at least equal to 25% of the initial Certificate Balance of that class, in each case, without regard to the application of any Cumulative Appraisal Reduction Amounts; or (ii) a holder of the Class E certificates is the majority Controlling Class Certificateholder and has irrevocably waived its right, in writing, to exercise any of the rights of the Controlling Class Certificateholder and such rights have not been reinstated to a successor controlling class certificateholder pursuant to the terms of the PSA;provided, that no Consultation Termination Event resulting solely from the operation of clause (ii) will be deemed to have existed or be in continuance with respect to a successor holder of Class E certificates that has not irrevocably waived its right to exercise any of the rights of the Controlling Class Certificateholder;providedthat a Consultation Termination Event will not be deemed to be continuing in the event the Certificate Balances of all Classes of Principal Balance Certificates other than the Control Eligible Certificates have been reduced to zero. With respect to Excluded Loans, a Consultation Termination Event will be deemed to exist.
At any time that the Controlling Class Certificateholder is the holder of a majority of the Class E certificates and the Class E certificates are the Controlling Class, it may waive its right (a) to appoint the Directing Certificateholder and (b) to exercise any of the Directing Certificateholder’s rights set forth in the PSA by irrevocable written notice delivered to the depositor, certificate administrator, master servicer, special servicer and operating advisor. During such time, the special servicer will be required to consult with only the operating advisor in connection with asset status reports and material special servicing actions to the extent set forth in the PSA, and no Controlling Class Certificateholder will be recognized or have any right to replace the special servicer or approve or be consulted with respect to asset status reports or material special servicer actions. Any such waiver will remain effective until such time as the Controlling Class Certificateholder sells or transfers all or a portion of its interest in the certificates to an unaffiliated third party if such unaffiliated third party then holds the majority of the Controlling Class after giving effect to such transfer. Following any such sale or transfer of the Class E certificates, the successor Class E Certificateholder that is the Controlling Class Certificateholder will be reinstated as, and will again have the rights of, the Controlling Class Certificateholder without regard to any prior waiver by the predecessor certificateholder that was the Controlling Class Certificateholder. The successor Class E certificateholder that is the Controlling Class Certificateholder will also have the right to irrevocably waive its right to appoint the Directing Certificateholder and to exercise any of the rights of the Controlling Class Certificateholder. In the event of any transfer of the Class E certificates by a Controlling Class Certificateholder that had irrevocably waived its rights as described in this paragraph, the successor Controlling Class Certificateholder that purchased such Class E certificates, even if it does not waive its rights as described in the preceding sentence, will not have any consent rights with respect to any Mortgage Loan that became a Specially Serviced Loan prior to such successor Controlling Class Certificateholder’s purchase of Class E certificates and had not become a Corrected Loan prior to such purchase until such Mortgage Loan becomes a Corrected Loan.
For a description of certain restrictions on any modification, waiver or amendment to the Mortgage Loan documents, see “—Modifications, Waivers and Amendments” above.
Servicing Override
In the event that the master servicer or the special servicer, as applicable, determines that immediate action with respect to any Major Decision (or any other matter requiring consent of the Directing Certificateholder, prior to the occurrence and continuance of a Control Termination Event in the PSA (or any matter requiring consultation with the Directing Certificateholder or the operating advisor)) is necessary to protect the interests of the Certificateholders (and, with respect to a Serviced Whole Loan, the interest of the Certificateholders and the holders of the related Serviced Companion Loan), as a collective whole (taking into account the subordinate orpari passu nature of any Companion Loans), the master servicer or the special servicer, as the case may be, may take any such action without waiting for the Directing Certificateholder’s response (or without waiting to consult with the Directing Certificateholder or the operating advisor, as the case may be);provided that the special servicer or master servicer, as applicable provides the Directing Certificateholder (or the operating advisor, if applicable) with prompt
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written notice following such action including a reasonably detailed explanation of the basis for such action.
In addition, neither the master servicer nor the special servicer (i) will be required to take or refrain from taking any action pursuant to instructions or objections from the Directing Certificateholder or (ii) may follow any advice or consultation provided by the Directing Certificateholder or the holder of a Serviced Pari Passu Companion Loan (or its representative) that would (1) cause it to violate any applicable law, the related Mortgage Loan documents, any related Intercreditor Agreement, the PSA, including the Servicing Standard, or the REMIC provisions of the Code, (2) expose the master servicer, the special servicer, the certificate administrator, the operating advisor, the asset representations reviewer, the issuing entity or the trustee to liability, (3) materially expand the scope of responsibilities of the master servicer or the special servicer, as applicable, under the PSA or (4) cause the master servicer or the special servicer, as applicable, to act, or fail to act, in a manner which in the reasonable judgment of the master servicer or the special servicer, as applicable, is not in the best interests of the Certificateholders.
Rights of Holders of Companion Loans
With respect to each Non-Serviced Whole Loan, the Directing Certificateholder will not be entitled to exercise the rights described above, but such rights, or rights substantially similar to those rights, will be exercisable by the directing certificateholder under the related Non-Serviced PSA. The issuing entity, as the holder of the Non-Serviced Mortgage Loans, has consultation rights with respect to certain major decisions relating to the Non-Serviced Whole Loans and, so long as a Control Termination Event has not occurred and is not continuing, the Directing Certificateholder will be entitled to exercise such consultation rights of the issuing entity pursuant to the terms of the related Intercreditor Agreement. In addition, so long as a Control Termination Event has not occurred and is not continuing, the Directing Certificateholder may have certain consent rights in connection with a sale of a Non-Serviced Whole Loan, that has become a Defaulted Loan under certain circumstances described under “—Sale of Defaulted Loans and REO Properties”. See also “Description of the Mortgage Pool—The Whole Loans—10 Hudson Yards Whole Loan”, “—Westfield San Francisco Centre Whole Loan”, “—Prudential Plaza Whole Loan”, “—Birch Run Premium Outlets Whole Loan”,“—Gas Company Tower & World Trade Center Parking Garage Whole Loan”, “—Vertex Pharmaceuticals HQ Whole Loan” and “—401 South State Street Whole Loan”and “Pooling and Servicing Agreement—Servicing of the Non-Serviced Mortgage Loans”.
With respect to a Serviced Pari Passu Mortgage Loan that is subject to a Pari Passu Companion Loan, the holder of the Pari Passu Companion Loan has consultation rights with respect to certain major decisions. See “Description of the Mortgage Pool—The Whole Loans—U-Haul AREC Portfolio Whole Loan””.
Limitation on Liability of Directing Certificateholder
The Directing Certificateholder will not be liable to the issuing entity or the Certificateholders for any action taken, or for refraining from the taking of any action or for errors in judgment. However, the Directing Certificateholder will not be protected against any liability to the Controlling Class Certificateholders that would otherwise be imposed by reason of willful misconduct, bad faith or negligence in the performance of duties or by reason of reckless disregard of obligations or duties owed to the Controlling Class Certificateholders.
Each Certificateholder will acknowledge and agree, by its acceptance of its certificates, that the Directing Certificateholder:
(a) may have special relationships and interests that conflict with those of holders of one or more classes of certificates;
(b) may act solely in the interests of the holders of the Controlling Class (or, in the case of a Whole Loan, in the interests of one or more Companion Loan Noteholders);
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(c) does not have any liability or duties to the holders of any class of certificates other than the Controlling Class;
(d) may take actions that favor the interests of the holders of the Controlling Class (or, in the case of a Whole Loan, in the interests of one or more Companion Loan Noteholders) over the interests of the holders of one or more other classes of certificates; and
(e) will have no liability whatsoever (other than to a Controlling Class Certificateholder) for having so acted as set forth in (a) – (d) above, and no Certificateholder may take any action whatsoever against the Directing Certificateholder or any director, officer, employee, agent or principal of the Directing Certificateholder for having so acted.
The taking of, or refraining from taking, any action by the master servicer or the special servicer in accordance with the direction of or approval of the Directing Certificateholder, which does not violate the terms of any Mortgage Loan, any law or the accepted servicing practices or the provisions of the PSA or the related Intercreditor Agreement, will not result in any liability on the part of the master servicer or the special servicer.
The Operating Advisor
General
The operating advisor will act solely as a contracting party to the extent, and in accordance with the standard of care, set forth in the PSA, and will have no fiduciary duty to any party. The operating advisor’s duties will be limited to its specific duties under the PSA, and the operating advisor will have no duty or liability to any particular class of certificates or any Certificateholder. The operating advisor is not the special servicer or a sub-servicer and will not be charged with changing the outcome on any particular Specially Serviced Loan. By purchasing a certificate, potential investors acknowledge and agree that there could be multiple strategies to resolve any Specially Serviced Loan and that the goal of the operating advisor’s participation is to provide additional input relating to the special servicer’s compliance with the Servicing Standard in making its determinations as to which strategy to execute.
Potential investors should note that the operating advisor is not an “advisor” for any purpose other than as specifically set forth in the PSA and is not an advisor to any person, including without limitation any Certificateholder. For the avoidance of doubt, the operating advisor is not an “investment adviser” within the meaning of the Investment Advisers Act of 1940, as amended. See “Risk Factors—Other Risks Relating to the Certificates—Your Lack of Control Over the Issuing Entity and the Mortgage Loans Can Impact Your Investment”.
Notwithstanding the foregoing, the operating advisor will generally have no obligations or consultation rights under the PSA for this transaction with respect to any Non-Serviced Whole Loan (each of which will be serviced pursuant to the related Non-Serviced PSA) or any related REO Properties. However, Park Bridge Lender Services is also the operating advisor under the COMM 2016-DC2 Pooling and Servicing Agreement, the COMM 2015-CCRE26 Pooling and Servicing Agreement and the CGCMT 2016-P4 Pooling and Servicing Agreement and is expected to be the operating advisor under the WFCM 2016-BNK1 Pooling and Servicing Agreement and, in each such capacity, will have certain obligations and consultation rights with respect to the related Non-Serviced Special Servicer pursuant to the COMM 2016-DC2 Pooling and Servicing Agreement, the COMM 2015-CCRE26 Pooling and Servicing Agreement, the CGCMT 2016-P4 Pooling and Servicing Agreement and/or the WFCM 2016-BNK1 Pooling and Servicing Agreement that are substantially similar to those of the operating advisor under the PSA. See “—Servicing of the Non-Serviced Mortgage Loans”below.
Duties of Operating Advisor While No Control Termination Event Has Occurred and Is Continuing
With respect to each Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan, unless a Control Termination Event has occurred and is continuing, the operating advisor’s
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obligations will be limited to the following, and generally will not involve an assessment of specific actions of the special servicer:
(a) promptly reviewing information available to Privileged Persons on the certificate administrator’s website that is relevant to the operating advisor’s obligations under the PSA;
(b) promptly reviewing each Final Asset Status Report; and
(c) reviewing any Appraisal Reduction Amount and net present value calculations used in the special servicer’s determination of what course of action to take in connection with the workout or liquidation of a Specially Serviced Loan (after they have been finalized); however the operating advisor may not opine on, or otherwise call into question, such Appraisal Reduction Amount calculations and/or net present value calculations (except that if the operating advisor discovers a mathematical error contained in such calculations, then the operating advisor will be required to notify the special servicer and the Directing Certificateholder of such error).
The operating advisor will have no specific involvement with respect to collateral substitutions, assignments, workouts, modifications, consents, waivers, insurance policies, borrower substitutions, lease changes and other similar actions that the special servicer may perform under the PSA and will have no obligations with respect to any Non-Serviced Mortgage Loan.
The operating advisor’s review of information (other than a Final Asset Status Report and information accompanying such report) or interaction with the special servicer related to any specific Specially Serviced Loan is only to provide background information to support the operating advisor’s duties following a servicing transfer, if needed, or to allow more meaningful interaction with the special servicer.
A “Final Asset Status Report”, with respect to any Specially Serviced Loan, means each related Asset Status Report, together with such other data or supporting information provided by the special servicer to the Directing Certificateholder which does not include any communication (other than the related Asset Status Report) between the special servicer and Directing Certificateholder with respect to such Specially Serviced Loan;provided that, so long as a Control Termination Event has not occurred and is not continuing, no Asset Status Report will be considered to be a Final Asset Status Report unless the Directing Certificateholder, has either finally approved of and consented to the actions proposed to be taken in connection therewith, or has exhausted all of its rights of approval or consent or has been deemed to have approved or consented to such action or the Asset Status Report is otherwise implemented by the special servicer in accordance with the terms of the PSA.
Duties of Operating Advisor While a Control Termination Event Has Occurred and Is Continuing
With respect to each Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan, while a Control Termination Event has occurred and is continuing, the operating advisor’s obligations will consist of the following:
| (i) | the operating advisor will be required to consult (on a non-binding basis) with the special servicer in respect of the Asset Status Reports in accordance with the Operating Advisor Standard, as described under “—Asset Status Report”; |
| (ii) | the operating advisor will be required to consult (on a non-binding basis) with the special servicer in accordance with the Operating Advisor Standard with respect to Major Decisions as described under “—The Directing Certificateholder—Major Decisions”; |
| (iii) | the operating advisor will be required to prepare an annual report (if any Mortgage Loan other than the Non-Serviced Mortgage Loans, or any Serviced Whole Loan) was a Specially Serviced Loan during the prior calendar year) in the form attached to this prospectus as Annex C to be provided to the trustee, the master servicer, the Rating Agencies, the certificate administrator (and made available through the certificate administrator’s website) and the 17g-5 Information Provider (and made available through the 17g-5 Information |
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Provider’s website) in accordance with the Operating Advisor Standard, as described below under “—Annual Report”; and
| (iv) | the operating advisor will be required to promptly recalculate and verify the accuracy of the mathematical calculations and the corresponding application of the non-discretionary portion of the applicable formulas required to be utilized in connection with: (1) any Appraisal Reduction Amount or (2) net present value calculations used in the special servicer’s determination of what course of action to take in connection with the workout or liquidation of a Specially Serviced Loan prior to utilization by the special servicer. |
In connection with the performance of the duties described in clause (iv) above:
(1) after the calculation but prior to the utilization by the special servicer, the special servicer will be required to deliver the foregoing calculations together with information and support materials (including such additional information reasonably requested by the operating advisor to confirm the mathematical accuracy of such calculations, but not including any Privileged Information and, in the case of the Appraisal Reduction Amount, only to the extent the master servicer has provided such information to the special servicer) to the operating advisor;
(2) if the operating advisor does not agree with the mathematical calculations or the application of the applicable non-discretionary portions of the formula required to be utilized for such calculation, the operating advisor and the master servicer or the special servicer, as applicable, will be required to consult with each other in order to resolve any inaccuracy in the mathematical calculations or the application of the non-discretionary portions of the related formula in arriving at those mathematical calculations or any disagreement; and
(3) if the operating advisor and special servicer are not able to resolve such matters, the operating advisor will be required to promptly notify the certificate administrator and the certificate administrator will be required to examine the calculations and supporting materials provided by the master servicer or the special servicer, as applicable, and the operating advisor and determine which calculation is to apply.
The “Operating Advisor Standard” means the requirement that the operating advisor must act solely on behalf of the issuing entity and in the best interest of, and for the benefit of, the Certificateholders and, with respect to any Serviced Whole Loan for the benefit of the holders of the related Companion Loan (as a collective whole as if such Certificateholders and Companion Loan Holders constituted a single lender), and not to holders of any particular class of certificates (as determined by the operating advisor in the exercise of its good faith and reasonable judgment), but without regard to any conflict of interest arising from any relationship that the operating advisor or any of its affiliates may have with any of the underlying borrowers, any sponsor, the mortgage loan seller, the depositor, the servicer, the special servicer, the asset representations reviewer, the Directing Certificateholder, or any of their affiliates.
Annual Report
After the occurrence and during the continuance of a Control Termination Event, based on the operating advisor’s review of any Assessment of Compliance Report, Attestation Report, Asset Status Report and other information (other than any communications between the Directing Certificateholder and the special servicer that would be Privileged Information) delivered to the operating advisor by the special servicer, including each Asset Status Report delivered during the prior calendar year, the operating advisor will (if any Mortgage Loans were Specially Serviced Loans in the prior calendar year) prepare an annual report in the form attached to this prospectus as Annex C to be provided to the 17g-5 Information Provider (and made available through the 17g-5 Information Provider’s website) and the certificate administrator for the benefit of the Certificateholders (and made available through the certificate administrator’s website) within 120 days of the end of the prior calendar year for which a Control Termination Event was continuing as of December 31 and setting forth its assessment of the special servicer’s performance of its duties under the PSA during the prior calendar year on a “platform-level basis” with respect to the resolution and liquidation of Specially Serviced Loans that the special servicer is
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responsible for servicing under the PSA; provided, however, that in the event the special servicer is replaced, the operating advisor’s annual report will only relate to the entity that was acting as special servicer as of December 31 in the prior calendar year and is continuing in such capacity through the date of such annual report. Only as used in connection with the operating advisor’s annual report, the term “platform-level basis” refers to the special servicer’s performance of its duties as they relate to the resolution and/or liquidation of Specially Serviced Loans, taking into account the special servicer’s specific duties under the PSA as well as the extent to which those duties were performed in accordance with the Servicing Standard, with reasonable consideration by the operating advisor of any Assessment of Compliance Report, Attestation Report, Asset Status Report and other information delivered to the operating advisor by the special servicer (other than any communications between the Directing Certificateholder and the special servicer that would be Privileged Information) pursuant to the PSA.
The special servicer must be given an opportunity to review any annual report produced by the operating advisor at least five (5) business days prior to its delivery to the certificate administrator and the 17g-5 Information Provider;provided that the operating advisor will have no obligation to adopt any comments to such annual report that are provided by the special servicer.
In each annual report, the operating advisor will identify any material deviations (i) from the Servicing Standard and (ii) from the special servicer’s obligations under the PSA with respect to the resolution or liquidation of Specially Serviced Loans or REO Properties that the special servicer is responsible for servicing under the PSA (other than with respect to any REO Property related to the Non-Serviced Mortgage Loan) based on the limited review required in the PSA. Each annual report will be required to comply with the confidentiality requirements, subject to certain exceptions, each as described in this prospectus and as provided in the PSA regarding Privileged Information.
Recommendation of the Replacement of the Special Servicer
After the occurrence of a Consultation Termination Event, if the operating advisor determines that the special servicer is not performing its duties as required under the PSA or is otherwise not acting in accordance with the Servicing Standard, the operating advisor may recommend the replacement of the special servicer in the manner described in “—Replacement of Special Servicer Without Cause” and “―Termination of Servicer and Special Servicer for Cause—Servicer Termination Events”.
Eligibility of Operating Advisor
The operating advisor will be required to be an Eligible Operating Advisor at all times during the term of the PSA. “Eligible Operating Advisor” means an institution:
| (i) | that is a special servicer or operating advisor on a commercial mortgage-backed securities transaction rated by Moody’s Investors Service, Inc. (“Moody’s”), Fitch Ratings, Inc. (“Fitch”) and DBRS, Inc. (“DBRS”) (including, in the case of the operating advisor, this transaction) but has not been special servicer or operating advisor on a transaction for which any Rating Agency has qualified, downgraded or withdrawn its rating or ratings of, one or more classes of certificates for such transaction citing servicing concerns with the special servicer or operating advisor as the sole or a material factor in such rating action; |
| (ii) | that can and will make the representations and warranties of the operating advisor set forth in the PSA; |
| (iii) | that is not (and is not affiliated with) the depositor, the trustee, the certificate administrator, the master servicer, the special servicer, a mortgage loan seller, the Directing Certificateholder, or a depositor, a trustee, a certificate administrator, master servicer or special servicer with respect to the securitization of a Companion Loan, or any of their respective affiliates; and |
| (iv) | that has not been paid by any special servicer or successor special servicer any fees, compensation or other remuneration (x) in respect of its obligations under the PSA or (y) for |
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the appointment or recommendation for replacement of a successor special servicer to become the special servicer.
Other Obligations of Operating Advisor
At all times, subject to the Privileged Information Exception, the operating advisor and its affiliates will be obligated to keep confidential any Privileged Information received from the special servicer or Directing Certificateholder in connection with the Directing Certificateholder’s exercise of any rights under the PSA (including, without limitation, in connection with any Asset Status Report) or otherwise in connection with the transaction, except under the circumstances described below. As used in this prospectus, “Privileged Information” means (i) any correspondence between the Directing Certificateholder and the special servicer related to any Specially Serviced Loan (other than with respect to an Excluded Loan) or the exercise of the Directing Certificateholder’s consent or consultation rights under the PSA, (ii) any strategically sensitive information that the special servicer has reasonably determined could compromise the issuing entity’s position in any ongoing or future negotiations with the related borrower or other interested party, (iii) information subject to attorney-client privilege and (iv) any Asset Status Report or Final Asset Status Report.
The operating advisor is required to keep all Privileged Information confidential and may not disclose such Privileged Information to any person (including Certificateholders other than the Directing Certificateholder), other than (1) to the extent expressly required by the PSA, to the other parties to the PSA with a notice indicating that such information is Privileged Information or (2) pursuant to a Privileged Information Exception. Each party to the PSA that receives Privileged Information from the operating advisor with a notice stating that such information is Privileged Information may not disclose such Privileged Information to any person without the prior written consent of the special servicer and, unless a Consultation Termination Event has occurred, the Directing Certificateholder (with respect to any Mortgage Loan other than a Non-Serviced Whole Loan) other than pursuant to a Privileged Information Exception.
“Privileged Information Exception” means, with respect to any Privileged Information, at any time (a) such Privileged Information becomes generally available and known to the public other than as a result of a disclosure directly or indirectly by the party restricted from disclosing such Privileged Information (the “Restricted Party”), (b) it is reasonable and necessary for the Restricted Party to disclose such Privileged Information in working with legal counsel, auditors, taxing authorities or other governmental agencies, (c) such Privileged Information was already known to such Restricted Party and not otherwise subject to a confidentiality obligation and/or (d) the Restricted Party is (in the case of the master servicer, the special servicer, the operating advisor, the asset representations reviewer, the certificate administrator and the trustee, as evidenced by an opinion of counsel (which will be an additional expense of the issuing entity) delivered to each of the master servicer, the special servicer, the Directing Certificateholder (other than with respect to an Excluded Loan), the operating advisor, the asset representations reviewer, the certificate administrator and the trustee), required by law, rule, regulation, order, judgment or decree to disclose such information.
Neither the operating advisor nor any of its affiliates may make any investment in any class of certificates;provided,however, that such prohibition will not apply to (i) riskless principal transactions effected by a broker dealer affiliate of the operating advisor or (ii) investments by an affiliate of the operating advisor if the operating advisor and such affiliate maintain policies and procedures that (A) segregate personnel involved in the activities of the operating advisor under the PSA from personnel involved in such affiliate’s investment activities and (B) prevent such affiliate and its personnel from gaining access to information regarding the issuing entity and the operating advisor and its personnel from gaining access to such affiliate’s information regarding its investment activities.
Termination of the Operating Advisor With Cause
The following constitute operating advisor termination events under the PSA (each, an “Operating Advisor Termination Event”), whether any such event is voluntary or involuntary or is effected by
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operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body:
(a) any failure by the operating advisor to observe or perform in any material respect any of its covenants or agreements or the material breach of any of its representations or warranties under the PSA, which failure continues unremedied for a period of 30 days after the date on which written notice of such failure is given to the operating advisor by any party to the PSA or to the operating advisor, the certificate administrator and the trustee by the holders of certificates having greater than 25% of the aggregate Voting Rights;providedthat with respect to any such failure which is not curable within such 30 day period, the operating advisor will have an additional cure period of 30 days to effect such cure so long as it has commenced to cure such failure within the initial 30 day period and has provided the trustee and the certificate administrator with an officer’s certificate certifying that it has diligently pursued, and is continuing to pursue, such cure;
(b) any failure by the operating advisor to perform in accordance with the Operating Advisor Standard which failure continues unremedied for a period of 30 days;
(c) any failure by the operating advisor to be an Eligible Operating Advisor, which failure continues unremedied for a period of 30 days;
(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 for 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, has been entered against the operating advisor, and such decree or order has remained in force undischarged or unstayed for a period of 60 days;
(e) the operating advisor consents to the appointment of a conservator or receiver or liquidator or liquidation committee in any insolvency, readjustment of debt, marshaling of assets and liabilities, voluntary liquidation, or similar proceedings of or relating to the operating advisor or of or relating to all or substantially all of its property; or
(f) the operating advisor admits in writing its inability to pay its debts generally as they become due, files a petition to take advantage of any applicable insolvency or reorganization statute, makes an assignment for the benefit of its creditors, or voluntarily suspends payment of its obligations.
Upon receipt by the certificate administrator of notice of the occurrence of any Operating Advisor Termination Event, the certificate administrator will be required to promptly provide written notice to all Certificateholders electronically by posting such notice on its internet website and by mail, unless the certificate administrator has received notice that such Operating Advisor Termination Event has been remedied.
Rights Upon Operating Advisor Termination Event
After the occurrence of an Operating Advisor Termination Event, either (i) the trustee may or (ii) upon the written direction of Certificateholders representing at least 25% of the Voting Rights of each class of certificates, the trustee will be required to promptly terminate all of the rights and obligations of the operating advisor under the PSA (other than rights and obligations accrued prior to such termination (including accrued and unpaid compensation) and indemnification rights (arising out of events occurring prior to such termination)), by written notice to the operating advisor and appoint a replacement operating advisor that is an Eligible Operating Advisor;providedthat no such termination will be effective until a successor operating advisor has been appointed and has assumed all of the obligations of the operating advisor under the PSA. The trustee may rely on a certification by the replacement operating advisor that it is an Eligible Operating Advisor. If the certificate administrator is unable to find a replacement operating advisor that is an Eligible Operating Advisor within 30 days of the termination of the operating advisor, the depositor will be permitted to find a replacement.
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Upon any termination of the operating advisor and appointment of a successor operating advisor, the trustee will, as soon as possible, be required to give written notice of the termination and appointment to the special servicer, the master servicer, the certificate administrator, the depositor, the Directing Certificateholder (only for so long as no Consultation Termination Event has occurred), any Companion Loan noteholder, the Certificateholders and the 17g-5 Information Provider (and made available through the 17g-5 Information Provider’s website).
Termination of the Operating Advisor Without Cause
Upon (i) the written direction of holders of certificates evidencing not less than 15% of the aggregate Voting Rights requesting a vote to terminate and replace the operating advisor with a proposed successor operating advisor that is an Eligible Operating Advisor and (ii) payment by such holders to the certificate administrator of the reasonable fees and expenses to be incurred by the certificate administrator in connection with administering such vote, the certificate administrator will be required to promptly provide written notice of such request to all Certificateholders and the operating advisor by posting such notice on its internet website and by mailing such notice to all Certificateholders. Upon the written direction of holders of more than 50% of the Voting Rights of the certificates that exercise their right to vote (providedthat holders of at least 50% of the Voting Rights of the certificates exercise their right to vote), the trustee will be required to terminate all of the rights and obligations of the operating advisor under the PSA by written notice to the operating advisor (other than any rights or obligations that accrued prior to the date of such termination (including accrued and unpaid compensation) and other than indemnification rights arising out of events occurring prior to such termination). The certificate administrator will be required to include on each Distribution Date statement a statement that each Certificateholder and beneficial owner of certificates may access such notices on the certificate administrator’s website and each Certificateholder and beneficial owner of certificates may register to receive email notifications when such notices are posted on the website. The certificate administrator will be entitled to reimbursement from the requesting Certificateholders for the reasonable expenses of posting such notices.
In addition, in the event there are no classes of certificates outstanding other than the Control Eligible Certificates and the Class V certificates and the Class R certificates, then all of the rights and obligations of the operating advisor under the PSA will terminate without payment of any penalty or termination fee (other than any rights or obligations that accrued prior to the date of such termination (including accrued and unpaid compensation) and other than indemnification rights arising out of events occurring prior to such termination). If the operating advisor is terminated pursuant to the foregoing sentence, then no replacement operating advisor will be appointed.
Resignation of the Operating Advisor
The operating advisor may resign upon 30 days’ prior written notice to the depositor, master servicer, special servicer, trustee, certificate administrator, the asset representations reviewer and the Directing Certificateholder, if the operating advisor has secured a replacement operating advisor that is an Eligible Operating Advisor and such replacement operating advisor has accepted its appointment as the replacement operating advisor. If no successor operating advisor has been so appointed and accepted the appointment within 30 days after the notice of resignation, the resigning operating advisor may petition any court of competent jurisdiction for the appointment of a successor operating advisor that is an Eligible Operating Advisor. The resigning operating advisor must pay all costs and expenses associated with the transfer of its duties.
In addition, the operating advisor has the right to resign without cost or expense on or after any date on which the aggregate Stated Principal Balance of the Mortgage Loans remaining in the issuing entity is less than 1.0% of the aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off Date. The operating advisor will provide all of the parties to the PSA and the Directing Certificateholder 30 days prior written notice of any such resignation. If the operating advisor resigns pursuant to the foregoing, then no replacement operating advisor will be appointed. The resigning operating advisor will be entitled to, and subject, to any rights and obligations that accrued under the PSA prior to the date of any such resignation (including accrued and unpaid compensation) and any indemnification rights arising out of events occurring prior to its resignation.
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Operating Advisor Compensation
Certain fees will be payable to the operating advisor, and the operating advisor will be entitled to be reimbursed for certain expenses, as described under “Transaction Parties—The Operating Advisor and Asset Representations Reviewer”.
In the event the operating advisor resigns or is terminated for any reason, it will remain entitled to any accrued and unpaid fees and reimbursement of operating advisor expenses and any rights to indemnification provided under the PSA with respect to the period for which it acted as operating advisor.
The operating advisor will be entitled to reimbursement of certain expenses incurred by the operating advisor in the event that the operating advisor is terminated without cause. See “—Termination of the Operating Advisor Without Cause” above.
The Asset Representations Reviewer
Asset Review
Asset Review Trigger
On or prior to each Distribution Date, based on either the CREFC® Delinquent Loan Status Report or the CREFC® Loan Periodic Update File delivered by the master servicer for such Distribution Date, the certificate administrator will be required to determine if an Asset Review Trigger has occurred. If an Asset Review Trigger is determined to have occurred, the certificate administrator will be required to promptly provide notice to the asset representations reviewer, the master servicer, the special servicer, the Directing Certificateholder and all Certificateholders by posting a notice of its determination on its internet website and by mailing such notice to the Certificateholders’ addresses appearing in the certificate register. On each Distribution Date after providing such notice to Certificateholders, the certificate administrator, based on information provided to it by the master servicer, will be required to determine whether (1) any additional Mortgage Loan has become a Delinquent Loan, (2) any Mortgage Loan has ceased to be a Delinquent Loan and (3) an Asset Review Trigger has ceased to exist, and, if there is an occurrence of any of the events or circumstances identified in clauses (1), (2) or (3), deliver such information in a written notice (which may be via email) within two (2) business days to the master servicer, the special servicer, the operating advisor, the asset representations reviewer and the Directing Certificateholder.
An “Asset Review Trigger” will occur when either (1) Mortgage Loans with an aggregate outstanding principal balance of 25.0% or more of the aggregate outstanding principal balance of all of the Mortgage Loans (including any REO Loans (or a portion of any REO Loan in the case of a Whole Loan)) held by the issuing entity as of the end of the applicable Collection Period are Delinquent Loans or (2)(A) prior to and including the second anniversary of the Closing Date, at least 10 Mortgage Loans are Delinquent Loans as of the end of the applicable Collection Period and the outstanding principal balance of such Delinquent Loans in the aggregate constitutes at least 15.0% of the aggregate outstanding principal balance of all of the Mortgage Loans (including any REO Loans (or a portion of any REO Loan in the case of a Whole Loan)) held by the issuing entity as of the end of the applicable Collection Period, or (B) after the second anniversary of the Closing Date, at least 15 Mortgage Loans are Delinquent Loans as of the end of the applicable Collection Period and the outstanding principal balance of such Delinquent Loans in the aggregate constitutes at least 20.0% of the aggregate outstanding principal balance of all of the Mortgage Loans (including any REO Loans (or a portion of any REO Loan in the case of a Whole Loan)) held by the issuing entity as of the end of the applicable Collection Period. The PSA will require that the certificate administrator include in the Distribution Report on Form 10-D relating to the distribution period in which the Asset Review Trigger occurred a description of the events that caused the Asset Review Trigger to occur.
We believe this Asset Review Trigger is appropriate considering the unique characteristics of pools of Mortgage Loans underlying CMBS. See “Risk Factors—Risks Relating to the Mortgage Loans—Static Pool Data Would Not Be Indicative of the Performance of this Pool”. While we do not believe static pool
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information is relevant to CMBS transactions as a general matter, as a point of relative context, with respect to the 58 prior pools of commercial mortgage loans for which GACC (or its predecessors) was sponsor in a public offering of CMBS with a securitization closing date on or after January 1, 2006, the highest percentage of loans, based on the aggregate outstanding principal balance of delinquent mortgage loans in an individual CMBS transaction, that were delinquent at least 60 days at the end of any reporting period between January 1, 2011 and June 30, 2016 was approximately 28.07%; however, the average of the highest delinquency percentages based on the aggregate outstanding principal balance of delinquent mortgage loans in the reviewed transactions was approximately 16.59%; and the highest percentage of delinquent mortgage loans, based upon the number of mortgage loans in the reviewed transactions was approximately 15.98% and the average of the highest delinquency percentages based on the number of mortgage loans in the reviewed transactions was approximately 5.56%.
This pool of Mortgage Loans is not homogeneous or granular, and there are individual Mortgage Loans that each represent a significant percentage, by outstanding principal balance, of the Mortgage Pool. For example, the 3 largest Mortgage Loans in the Mortgage Pool represent approximately 27.0% of the Initial Pool Balance. Given this Mortgage Pool composition and the fact that CMBS pools as a general matter include a small relative number of larger mortgage loans, we believe it would not be appropriate for the delinquency of the 2 largest Mortgage Loans, in the case of this Mortgage Pool, to cause the Asset Review Trigger to be met, as that would not necessarily be indicative of the overall quality of the Mortgage Pool. On the other hand, a significant number of delinquent Mortgage Loans by loan count could indicate an issue with the quality of the Mortgage Pool. As a result, we believe it would be appropriate to have the alternative test as set forth in clause (2) of the definition of “Asset Review Trigger”, namely to have the Asset Review Trigger be met if Mortgage Loans representing a specified percentage of the Mortgage Loans (by loan count) are Delinquent Loans, assuming those mortgage loans still meet a minimum principal balance threshold. However, given the nature of commercial mortgage loans and the inherent risks of a delinquency based solely on market conditions, a static trigger based on the number of delinquent loans would reflect a lower relative risk of an Asset Review Trigger being triggered earlier in the transaction’s lifecycle for delinquencies that are based on issues unrelated to breaches or representations and warranties and would reflect a higher relative risk later in the transaction’s lifecycle. To address this, we believe the specified percentage should increase during the life of the transaction, as provided for in clause (2) of the definition of “Asset Review Trigger”. CMBS as an asset class has historically not had a large number of claims for, or repurchases based on, breaches of representations and warranties. While the Asset Review Trigger we have selected is less than this historical peak, we feel it remains at a level that avoids a trigger based on market variability while providing an appropriate threshold to capture delinquencies that may have resulted from an underlying deficiency in one or more mortgage loan seller’s Mortgage Loans that could be the basis for claims against those mortgage loan sellers based on breaches of the representations and warranties.
“Delinquent Loan” means a Mortgage Loan that is delinquent at least sixty days in respect of its Periodic Payments or balloon payment, if any, in either case such delinquency to be determined without giving effect to any grace period.
Asset Review Vote
If Certificateholders evidencing not less than 5% of the Voting Rights deliver to the certificate administrator, within 90 days after the filing of the Form 10-D reporting the occurrence of an Asset Review Trigger, a written direction requesting a vote to commence an Asset Review (an “Asset Review Vote Election”), the certificate administrator will be required to promptly provide written notice of such direction to the asset representations reviewer and to all Certificateholders, and to conduct a solicitation of votes of Certificateholders to authorize an Asset Review. Upon the affirmative vote to authorize an Asset Review by a majority of Certificateholders that constitute an Asset Review Quorum within 150 days of the receipt of the Asset Review Vote Election (an “Affirmative Asset Review Vote”), the certificate administrator will be required to promptly provide written notice of such Affirmative Asset Review Vote to all parties to the PSA, the underwriters, the mortgage loan sellers, the Directing Certificateholder and the Certificateholders. In the event an Affirmative Asset Review Vote has not occurred within such 150-day period following the receipt of the Asset Review Vote Election, no Certificateholder may request a vote or
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cast a vote for an Asset Review and the asset representations reviewer will not be required to review any Delinquent Loan unless and until (A) an additional Mortgage Loan has become a Delinquent Loan after the expiration of such 150-day period, (B) an additional Asset Review Trigger has occurred as a result or otherwise is in effect, (C) the certificate administrator has timely received any Asset Review Vote Election after the occurrence of the events described in clauses (A) and (B) above and (D) an Affirmative Asset Review Vote has occurred within 150 days after the Asset Review Vote Election described in clause (C) above. After the occurrence of any Asset Review Vote Election or an Affirmative Asset Review Vote, no Certificateholder may make any additional Asset Review Vote Election except as described in the immediately preceding sentence. Any reasonable out-of-pocket expenses incurred by the certificate administrator in connection with administering such vote will be paid as an expense of the issuing entity from the Collection Account.
An “Asset Review Quorum” means, in connection with any solicitation of votes to authorize an Asset Review as described above, the holders of certificates evidencing at least 5% of the aggregate Voting Rights.
Review Materials
Upon receipt of notice from the certificate administrator of an Affirmative Asset Review Vote (the “Asset Review Notice”), the custodian (with respect to clauses (i) – (v) for non-Specially Serviced Loans), the master servicer (with respect to clause (vi) for non-Specially Serviced Loans) and the special servicer (with respect to Specially Serviced Loans), in each case to the extent in such party’s possession, will be required to promptly, but in no event later than 10 business days (except with respect to clause (vi)) after receipt of such notice from the certificate administrator, provide the following materials to the asset representations reviewer (collectively, with the Diligence Files, a copy of the prospectus, a copy of each related MLPA and a copy of the PSA, the “Review Materials”):
| (i) | a copy of an assignment of the Mortgage in favor of the related trustee, with evidence of recording thereon, for each Delinquent Loan that is subject to an Asset Review; |
| (ii) | a copy of an assignment of any related assignment of leases (if such item is a document separate from the Mortgage) in favor of the related trustee, with evidence of recording thereon, related to each Delinquent Loan that is subject to an Asset Review; |
| (iii) | a copy of the assignment of all unrecorded documents relating to each Delinquent Loan that is subject to an Asset Review, if not already covered pursuant to items (i) or (ii) above; |
| (iv) | a copy of all filed copies (bearing evidence of filing) or evidence of filing of any UCC financing statements related to each Delinquent Loan that is subject to an Asset Review; |
| (v) | a copy of an assignment in favor of the related trustee of any financing statement executed and filed in the relevant jurisdiction related to each Delinquent Loan that is subject to an Asset Review; and |
| (vi) | any other related documents that were entered into or delivered in connection with the origination of such Mortgage Loan that are necessary in connection with the asset representations reviewer’s completion of any Asset Review and that are requested (in writing in accordance with the PSA) by the asset representations reviewer, in the time frames and as otherwise described below. |
If, as part of an Asset Review of such Mortgage Loan, the asset representations reviewer determines that it is missing any documents that are required to be part of the Review Materials for such Mortgage Loan or which were entered into or delivered in connection with the origination of such Mortgage Loan that, in either case, are necessary in connection with its completion of any such Asset Review, then the asset representations reviewer will promptly, but in no event later than 10 business days after receipt of the Review Materials identified inclauses (i)through(v) above, notify (in writing in accordance with the PSA) the master servicer (with respect to non-Specially Serviced Loans) or the special servicer (with
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respect to Specially Serviced Loans), as applicable, of such missing documents, and request (in writing in accordance with the PSA) the master servicer or the special servicer, as applicable, promptly, but in no event later than 10 business days after receipt of such notification from the asset representations reviewer, to deliver to the asset representations reviewer such missing documents to the extent in its possession. In the event any missing documents are not provided by the master servicer or special servicer, as applicable, within such 10 business day period, the asset representations reviewer will request such documents from the related mortgage loan seller. The mortgage loan seller will be required under the related MLPA to deliver such additional documents only to the extent in the possession of such party.
The asset representations reviewer may, but is under no obligation to, consider and rely upon information furnished to it by a person that is not a party to the PSA or the related mortgage loan seller, and will do so only if such information can be independently verified (without unreasonable effort or expense to the asset representations reviewer) and is determined by the asset representations reviewer in its good faith sole discretion to be relevant to the Asset Review, as described below (such information, “Unsolicited Information”).
Asset Review
Upon its receipt of the Asset Review Notice and access to the Diligence File posted to the secure data room with respect to a Delinquent Loan, the asset representations reviewer, as an independent contractor, is required to commence a review of the compliance of each Delinquent Loan with the representations and warranties related to that Delinquent Loan (such review, the “Asset Review”). An Asset Review of each Delinquent Loan will consist of the application of a set of pre-determined review procedures (the “Tests”) for each representation and warranty made by the mortgage loan seller with respect to such Delinquent Loan. Once an Asset Review of a Mortgage Loan is completed, no further Asset Review will be required or performed of that Mortgage Loan notwithstanding that such Mortgage Loan may continue to be a Delinquent Loan or become a Delinquent Loan again at the time when a new Asset Review Trigger occurs and a new Affirmative Asset Review Vote is obtained subsequent to the occurrence of such Asset Review Trigger.
“Asset Review Standard” means the performance of the asset representations reviewer of its duties under the PSA in good faith subject to the express terms of the PSA. All determinations or assumptions made by the asset representations reviewer in connection with an Asset Review are required to be made in the asset representations reviewer’s good faith discretion and judgment based on the facts and circumstances known to it at the time of such determination or assumption.
No Certificateholder will have the right to change the scope of the asset representations reviewer’s review, and the asset representations reviewer will not be required to review any information other than (i) the Review Materials, or (ii) Unsolicited Information.
The asset representations reviewer may, absent manifest error and subject to the Asset Review Standard, (i) assume, without independent investigation or verification, that the Review Materials are accurate and complete in all material respects and (ii) conclusively rely on such Review Materials.
If the asset representations reviewer determines that the Review Materials are insufficient to complete a Test and such missing documentation is not delivered to the asset representations reviewer by the applicable mortgage loan seller, the master servicer (with respect to non-Specially Serviced Loans) or the special servicer (with respect to Specially Serviced Loans) within 10 days upon request as described above, then the asset representations reviewer will list such missing documents in its preliminary report setting forth the preliminary results of the application of the Tests and the reasons why such missing documents are necessary to complete a Test and (if the asset representations reviewer has so concluded) that the absence of such documents will be deemed to be a failure of such Test. The asset representations reviewer will provide such preliminary report to the master servicer (with respect to non-Specially Serviced Loans) or the special servicer (with respect to Specially Serviced Loans) and the related mortgage loan seller no later than 60 days after the date on which access to the Diligence Files in the secure data room is made available to the asset representations reviewer by the certificate
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administrator. If the preliminary report indicates that any of the representations and warranties fails or is deemed to fail any Test, the mortgage loan seller will have 90 days (the “Cure/Contest Period”) to remedy or otherwise refute the failure. Any documents provided or explanations given to support a conclusion that the representation and warranty has not failed a Test or that any missing documents in the Review Materials are not required to complete a Test will be required to be promptly delivered by the related mortgage loan seller to the asset representations reviewer.
The asset representations reviewer will be required, within the later of (x) 60 days after the date on which access to the Diligence Files in the secure data room is made available to the asset representations reviewer by the certificate administrator or (y) 10 days after the expiration of the Cure/Contest Period, to complete an Asset Review with respect to each Delinquent Loan and deliver (i) a report setting forth the asset representations reviewer’s findings and conclusions as to whether or not it has determined there is any evidence of a failure of any Test based on the Asset Review and a statement that the asset representations reviewer’s findings and conclusions set forth in such report were not influenced by any third party (an “Asset Review Report”) to each party to the PSA and the applicable mortgage loan seller for each Delinquent Loan and the Directing Certificateholder, and (ii) a summary of the asset representations reviewer’s conclusions included in such Asset Review Report (an “Asset Review Report Summary”) to the trustee, certificate administrator, master servicer and special servicer. The period of time by which the Asset Review Report must be completed and delivered may be extended by up to an additional 30 days, upon written notice to the parties to the PSA and the related mortgage loan seller, if the asset representations reviewer determines pursuant to the Asset Review Standard that such additional time is required due to the characteristics of the Mortgage Loans and/or the Mortgaged Property or Mortgaged Properties. In no event will the asset representations reviewer be required to determine whether any Test failure constitutes a Material Defect, or whether the issuing entity should enforce any rights it may have against the applicable mortgage loan seller, which, in each such case, will be the responsibility of the master servicer (with respect to non-Specially Serviced Loans) or the special servicer (with respect to Specially Serviced Loans). See “—Enforcement of Mortgage Loan Seller’s Obligations Under the MLPA” below. In addition, in the event that the asset representations reviewer does not receive any documentation that it requested from the master servicer (with respect to non-Specially Serviced Loans), the special servicer (with respect to Specially Serviced Loans) or the applicable mortgage loan seller in sufficient time to allow the asset representations reviewer to complete its Asset Review and deliver an Asset Review Report, the asset representations reviewer will be required to prepare the Asset Review Report solely based on the documentation received by the asset representations reviewer with respect to the related Delinquent Loan, and the asset representations reviewer will have no responsibility to independently obtain any such documentation from any party to the PSA or otherwise. The PSA will require that the certificate administrator (i) include the Asset Review Report Summary in the Distribution Report on Form 10–D relating to the distribution period in which such Asset Review Report Summary was received by the certificate administrator, and (ii) post such Asset Review Report Summary to the certificate administrator’s website not later than 2 business days after receipt of such Asset Review Report Summary from the asset representations reviewer.
Eligibility of Asset Representations Reviewer
The asset representations reviewer will be required to represent and warrant in the PSA that it is an Eligible Asset Representations Reviewer. The asset representations reviewer is required to at all times be an Eligible Asset Representations Reviewer. If the asset representations reviewer ceases to be an Eligible Asset Representations Reviewer, the asset representations reviewer is required to immediately notify the master servicer, the special servicer, the trustee, the operating advisor, the certificate administrator and the Directing Certificateholder of such disqualification and immediately resign, and the trustee will be required to use commercially reasonable efforts to appoint a successor asset representations reviewer. If the trustee is unable to find a successor asset representations reviewer within 30 days of the termination of the asset representations reviewer, the depositor will be permitted to find a replacement.
An “Eligible Asset Representations Reviewer” is an institution that (i) is the special servicer, operating advisor or asset representations reviewer on a transaction rated by any of Moody’s, Fitch, DBRS, Kroll
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Bond Rating Agency, Inc., Morningstar Credit Ratings, LLC or Standard & Poor’s Ratings Services and that has not been a special servicer, operating advisor or asset representations reviewer on a transaction for which Moody’s, Fitch, DBRS, Kroll Bond Rating Agency, Inc., Morningstar Credit Ratings, LLC or Standard & Poor’s Ratings Services has qualified, downgraded or withdrawn its rating or ratings of, one or more classes of certificates for such transaction citing servicing or other relevant concerns with the special servicer, the operating advisor or the asset representations reviewer, as applicable, as the sole or material factor in such rating action, (ii) can and will make the representations and warranties of the asset representations reviewer set forth in the PSA, (iii) is not (and is not affiliated with) any sponsor, any mortgage loan seller, any originator, the master servicer, the special servicer, the depositor, the certificate administrator, the trustee, the Directing Certificateholder or any of their respective affiliates, (iv) has not performed (and is not affiliated with any party hired to perform) any due diligence, loan underwriting, brokerage, borrower advisory or similar services with respect to any Mortgage Loan or any related Companion Loan prior to the Closing Date for or on behalf of any sponsor, any mortgage loan seller, any underwriter, any party to the PSA or the Directing Certificateholder or any of their respective affiliates, or have been paid any fees, compensation or other remuneration by any of them in connection with any such services and (v) does not directly or indirectly, through one or more affiliates or otherwise, own any interest in any certificates, any Mortgage Loans, any Companion Loan or any securities backed by a Companion Loan or otherwise have any financial interest in the securitization transaction to which the PSA relates, other than in fees from its role as asset representations reviewer (or as operating advisor, if applicable) and except as otherwise set forth in the PSA.
Other Obligations of Asset Representations Reviewer
The asset representations reviewer and its affiliates are required to keep confidential any Privileged Information received from any party to the PSA or any sponsor under the PSA (including, without limitation, in connection with the review of the Mortgage Loans) and not disclose such Privileged Information to any person (including Certificateholders), other than (1) to the extent expressly required by the PSA in an Asset Review Report or otherwise, to the other parties to the PSA with a notice indicating that such information is Privileged Information or (2) pursuant to a Privileged Information Exception. Each party to the PSA that receives Privileged Information from the asset representations reviewer with a notice stating that such information is Privileged Information may not disclose such Privileged Information to any person without the prior written consent of the special servicer other than pursuant to a Privileged Information Exception. In addition, the asset representations reviewer will be required to keep all documents and information received by the asset representations reviewer in connection with an Asset Review that are provided by the applicable mortgage loan seller, the master servicer and the special servicer confidential and will not be permitted to disclose such documents or information except (i) for purposes of complying with its duties and obligations under the PSA, (ii) if such documents or information become generally available and known to the public other than as a result of a disclosure directly or indirectly by the asset representations reviewer, (iii) if it is reasonable and necessary for the asset representations reviewer to disclose such documents or information in working with legal counsel, auditors, taxing authorities or other governmental agencies, (iv) if such documents or information was already known to the asset representations reviewer and not otherwise subject to a confidentiality obligation and/or (v) if the asset representations reviewer is required by law, rule, regulation, order, judgment or decree to disclose such document or information.
Neither the asset representations reviewer nor any of its affiliates may make any investment in any class of certificates;provided,however, that such prohibition will not apply to (i) riskless principal transactions effected by a broker-dealer affiliate of the asset representations reviewer or (ii) investments by an affiliate of the asset representations reviewer if the asset representations reviewer and such affiliate maintain policies and procedures that (A) segregate personnel involved in the activities of the asset representations reviewer under the PSA from personnel involved in such affiliate’s investment activities and (B) prevent such affiliate and its personnel from gaining access to information regarding the issuing entity and the asset representations reviewer and its personnel from gaining access to such affiliate’s information regarding its investment activities.
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Delegation of Asset Representations Reviewer’s Duties
The asset representations reviewer may delegate its duties to agents or subcontractors in accordance with the PSA, however, the asset representations reviewer will remain obligated and primarily liable for any Asset Review required in accordance with the provisions of the PSA without diminution of such obligation or liability by virtue of such delegation or arrangements or by virtue of indemnification from any person acting as its agents or subcontractor to the same extent and under the same terms and conditions as if the asset representations reviewer alone were performing its obligations under the PSA.
Assignment of Asset Representations Reviewer’s Rights and Obligations
The asset representations reviewer may assign its rights and obligations under the PSA in connection with the sale or transfer of all or substantially all of its asset representations reviewer portfolio,provided that: (i) the purchaser or transferee accepting such assignment and delegation (A) is an Eligible Asset Representations Reviewer, organized and doing business under the laws of the United States of America, any state of the United States of America or the District of Columbia, authorized under such laws to perform the duties of the asset representations reviewer resulting from a merger, consolidation or succession that is permitted under the PSA, (B) executes and delivers to the trustee and the certificate administrator an agreement that contains an assumption by such person of the due and punctual performance and observance of each covenant and condition to be performed or observed by the asset representations reviewer under the PSA from and after the date of such agreement and (C) is not be a prohibited party under the PSA; (ii) the asset representations reviewer will not be released from its obligations under the PSA that arose prior to the effective date of such assignment and delegation; (iii) the rate at which the Asset Representations Reviewer Asset Review Fee (or any component thereof) is calculated may not exceed the rate then in effect and (iv) the resigning asset representations reviewer will be required to be responsible for the reasonable costs and expenses of each other party hereto and the Rating Agencies in connection with such transfer. Upon acceptance of such assignment and delegation, the purchaser or transferee will be required to provide notice to each party to the PSA and then will be the successor asset representations reviewer hereunder.
Asset Representations Reviewer Termination Events
The following constitute asset representations reviewer termination events under the PSA (each, an “Asset Representations Reviewer Termination Event”) whether any such event is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body:
| (i) | any failure by the asset representations reviewer to observe or perform in any material respect any of its covenants or agreements or the material breach of any of its representations or warranties under the PSA, which failure continues unremedied for a period of 30 days after the date on which written notice of such failure is given to the asset representations reviewer by the trustee or to the asset representations reviewer and the trustee by the holders of certificates evidencing at least 25% of the Voting Rights;provided that if such failure is capable of being cured and the asset representations reviewer is diligently pursuing such cure, such 30 day period will be extended by an additional 30 days; |
| (ii) | any failure by the asset representations reviewer to perform its obligations set forth in the PSA in accordance with the Asset Review Standard in any material respect, which failure continues unremedied for a period of 30 days after the date written notice of such failure, requiring the same to be remedied, is given to the asset representations reviewer by any party to the PSA; |
| (iii) | any failure by the asset representations reviewer to be an Eligible Asset Representations Reviewer, which failure continues unremedied for a period of 30 days after the date written notice of such failure, requiring the same to be remedied, is given to the asset representations reviewer by any party to the PSA; |
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| (iv) | 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 for 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, has been entered against the asset representations reviewer, and such decree or order has remained in force undischarged or unstayed for a period of 60 days; |
| (v) | the asset representations reviewer consents to the appointment of a conservator or receiver or liquidator or liquidation committee in any insolvency, readjustment of debt, marshaling of assets and liabilities, voluntary liquidation, or similar proceedings of or relating to the asset representations reviewer or of or relating to all or substantially all of its property; or |
| (vi) | the asset representations reviewer admits in writing its inability to pay its debts generally as they become due, files a petition to take advantage of any applicable insolvency or reorganization statute, makes an assignment for the benefit of its creditors, or voluntarily suspends payment of its obligations. |
Upon receipt by the certificate administrator of written notice (which will be simultaneously delivered to the asset representations reviewer) of the occurrence of any Asset Representations Reviewer Termination Event, the certificate administrator will be required to promptly provide written notice to all Certificateholders electronically by posting such notice on its internet website and by mail, unless the certificate administrator has received notice that such Asset Representations Reviewer Termination Event has been remedied.
Rights Upon Asset Representations Reviewer Termination Event
If an Asset Representations Reviewer Termination Event occurs, and in each and every such case, so long as such Asset Representations Reviewer Termination Event has not been remedied, then either the trustee (i) may or (ii) upon the written direction of Certificateholders evidencing at least 25% of the Voting Rights will be required to, terminate all of the rights and obligations of the asset representations reviewer under the PSA, other than rights and obligations accrued prior to such termination and other than indemnification rights (arising out of events occurring prior to such termination), by written notice to the asset representations reviewer. The asset representations reviewer is required to bear all reasonable costs and expenses of each other party to the PSA in connection with its termination for cause.
Termination of the Asset Representations Reviewer Without Cause
Upon (i) the written direction of Certificateholders evidencing not less than 25% of the Voting Rights requesting a vote to terminate and replace the asset representations reviewer with a proposed successor asset representations reviewer that is an Eligible Asset Representations Reviewer, and (ii) payment by such holders to the certificate administrator of the reasonable fees and expenses to be incurred by the certificate administrator in connection with administering such vote, the certificate administrator will promptly provide notice to all Certificateholders and the asset representations reviewer of such request by posting such notice on its internet website, and by mailing to all Certificateholders and the asset representations reviewer. Upon the written direction of Certificateholders evidencing at least 75% of a Certificateholder Quorum, the trustee will terminate all of the rights and obligations of the asset representations reviewer under the PSA (other than any rights or obligations that accrued prior to the date of such termination and other than indemnification rights (arising out of events occurring prior to such termination)) by written notice to the asset representations reviewer, and the proposed successor asset representations reviewer will be appointed.
In the event that holders of the certificates evidencing at least 75% of a Certificateholder Quorum elect to remove the asset representations reviewer without cause and appoint a successor, the successor asset representations reviewer will be responsible for all expenses necessary to effect the transfer of responsibilities from its predecessor.
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Resignation of Asset Representations Reviewer
The asset representations reviewer may at any time resign by giving written notice to the other parties to the PSA. In addition, the asset representations reviewer will at all times be, and will be required to resign if it fails to be, an Eligible Asset Representations Reviewer by giving written notice to the other parties. Upon such notice of resignation, the depositor is required to promptly appoint a successor asset representations reviewer that is an Eligible Asset Representations Reviewer. No resignation of the asset representations reviewer will be effective until a successor asset representations reviewer that is an Eligible Asset Representations Reviewer has been appointed and accepted the appointment. If no successor asset representations reviewer has been so appointed and accepted the appointment within 30 days after the notice of resignation, the resigning asset representations reviewer may petition any court of competent jurisdiction for the appointment of a successor asset representations reviewer that is an Eligible Asset Representations Reviewer. The resigning asset representations reviewer must pay all costs and expenses associated with the transfer of its duties.
Asset Representations Reviewer Compensation
Certain fees will be payable to the asset representations reviewer, and the asset representations reviewer will be entitled to be reimbursed for certain expenses, as described under “—Servicing and Other Compensation and Payment of Expenses”.
Replacement of Special Servicer Without Cause
Except as limited by certain conditions described below and subject to the rights of the holder of the related Companion Loan under the related Intercreditor Agreement, the special servicer may generally be replaced, prior to the occurrence and continuance of a Control Termination Event, at any time and without cause, by the Directing Certificateholder so long as, among other things, the Directing Certificateholder appoints a replacement special servicer that meets the requirements of the PSA, including that the trustee and the certificate administrator receive a Rating Agency Confirmation from each Rating Agency and that such replacement special servicer may not be the asset representations reviewer or any of its affiliates. The reasonable fees of any such termination incurred by the Directing Certificateholder will be paid by the holders of the Controlling Class.
After the occurrence and during the continuance of a Control Termination Event, upon (i) the written direction of holders of Principal Balance Certificates evidencing not less than 25% of the Voting Rights (taking into account the application of any Appraisal Reduction Amounts to notionally reduce the Certificate Balances) of the Principal Balance Certificates requesting a vote to replace the special servicer with a new special servicer, (ii) payment by such holders to the certificate administrator of the reasonable fees and expenses (including any legal fees and expenses and any Rating Agency fees and expenses) to be incurred by the certificate administrator in connection with administering such vote (which fees and expenses will not be additional trust fund expenses), and (iii) delivery by such holders to the certificate administrator and the trustee of Rating Agency Confirmation from each Rating Agency (such Rating Agency Confirmation will be obtained at the expense of those holders of certificates requesting such vote), the certificate administrator will be required to promptly post notice of such request on the certificate administrator’s website and concurrently provide written notice of such request by mail and conduct the solicitation of votes of all certificates in such regard, which such vote must occur within 180 days of the posting of such notice. Upon the written direction of (i) holders of Principal Balance Certificates evidencing at least 66-2/3% of a Certificateholder Quorum or (ii) holders of Principal Balance Certificates evidencing more than 50% of the aggregate Voting Rights of each Class of Non-Reduced Certificates on an aggregate basis, the trustee will be required to terminate all of the rights and obligations of the special servicer under the PSA and appoint the successor special servicer (which must be a Qualified Replacement Special Servicer) designated by such Certificateholders;provided such successor special servicer is a Qualified Replacement Special Servicer, subject to indemnification, right to outstanding fees, reimbursement of Advances and other rights set forth in the PSA, which survive such termination.
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A “Certificateholder Quorum” means, in connection with any solicitation of votes in connection with the replacement of the special servicer or the asset representations reviewer described above, the holders of certificates evidencing at least 50% of the aggregate Voting Rights (taking into account the application of any Appraisal Reduction Amounts to notionally reduce the Certificate Balances of the certificates, except in the case of the termination of the asset representations reviewer) of all Principal Balance Certificates on an aggregate basis.
“Non-Reduced Certificates” means any Class of Principal Balance Certificates then-outstanding for which (a)(1) the initial Certificate Balance of such class of certificates minus (2) the sum (without duplication) of (x) any payments of principal (whether as principal prepayments or otherwise) distributed to the Certificateholders of such class of certificates, (y) any Appraisal Reduction Amounts allocated to such class of certificates and (z) any Realized Losses previously allocated to such class of certificates, is equal to or greater than (b) 25% of the remainder of (1) the initial Certificate Balance of such class of certificates less (2) any payments of principal (whether as principal prepayments or otherwise) previously distributed to the Certificateholders of such class of certificates.
A “Qualified Replacement Special Servicer” is a replacement special servicer that (i) satisfies all of the eligibility requirements applicable to special servicers in the PSA, (ii) is not the operating advisor, the asset representations reviewer or an affiliate of the operating advisor or the asset representations reviewer, (iii) is not obligated to pay the operating advisor (x) any fees or otherwise compensate the operating advisor in respect of its obligations under the PSA, or (y) for the appointment of the successor special servicer or the recommendation by the operating advisor for the replacement special servicer to become the special servicer, (iv) is not entitled to receive any compensation from the operating advisor other than compensation that is not material and is unrelated to the operating advisor’s recommendation that such party be appointed as the replacement special servicer, (v) is not entitled to receive any fee from the operating advisor for its appointment as successor special servicer, in each case, unless expressly approved by 100% of the Certificateholders, (vi) is not a special servicer that has been cited by Moody’s as having servicing concerns as the sole or material factor in any qualification, downgrade or withdrawal of the ratings (or placement on “watch status” in contemplation of a ratings downgrade or withdrawal) of securities in a transaction serviced by the applicable servicer prior to the time of determination, (vii) currently has a special servicer rating of at least “CSS3” from Fitch and (viii) is currently acting as a special servicer in a transaction rated by DBRS and has not been cited by DBRS as having servicing concerns as the sole or a material factor in any qualification, downgrade or withdrawal of the ratings (or placement on “watch status” in contemplation of a ratings downgrade or withdrawal) of securities in a transaction serviced by the applicable servicer prior to the time of determination.
In addition, after the occurrence of a Consultation Termination Event, if the operating advisor determines that the special servicer is not performing its duties as required under the PSA or is otherwise not acting in accordance with the Servicing Standard, the operating advisor will have the right to recommend the replacement of the special servicer. In such event, the operating advisor will be required to deliver to the trustee and the certificate administrator, with a copy to the special servicer, a written report detailing the reasons supporting its recommendation (along with relevant information justifying its recommendation) and recommending a suggested replacement special servicer (which must be a Qualified Replacement Special Servicer). The certificate administrator will be required to notify each Certificateholder of the recommendation and post the related report on the certificate administrator’s internet website, and to conduct the solicitation of votes with respect to such recommendation.
The operating advisor’s recommendation to replace the special servicer must be confirmed by an affirmative vote of holders of Principal Balance Certificates evidencing at least a majority of the aggregate Voting Rights (taking into account the application of any Appraisal Reduction Amounts to notionally reduce the respective Certificate Balances) of all Principal Balance Certificates on an aggregate basis. In the event the holders of such Principal Balance Certificates elect to remove and replace the special servicer, the certificate administrator will be required to obtain a Rating Agency Confirmation from each of the Rating Agencies at that time. In the event the certificate administrator obtains a Rating Agency Confirmation from each of the Rating Agencies (and the successor special servicer agrees to be bound by the terms of the PSA) and the certificate administrator receives the requisite amount of affirmative
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votes within 180 days of the posting of notice of such vote to the certificate administrator’s website, the trustee will then be required to terminate all of the rights and obligations of the special servicer under the PSA and to appoint the successor special servicer approved by the Certificateholders,provided such successor special servicer is a Qualified Replacement Special Servicer, subject to the terminated special servicer’s rights to indemnification, payment of outstanding fees, reimbursement of Advances and other rights set forth in the PSA that survive termination. The reasonable out-of-pocket costs and expenses (including reasonable legal fees and expenses of outside counsel) associated with obtaining such Rating Agency Confirmations and administering the vote of the applicable holders of the Principal Balance Certificates and the operating advisor’s identification of a Qualified Replacement Special Servicer will be an additional trust fund expense.
In any case, the trustee will notify the outgoing special servicer promptly of the effective date of its termination. Any replacement special servicer recommended by the operating advisor must be a Qualified Replacement Special Servicer.
Notwithstanding the foregoing, if the special servicer obtains knowledge that it is a Borrower Party with respect to any Mortgage Loan (other than a Non-Serviced Mortgage Loan) or Serviced Whole Loan (any such Mortgage Loan or Serviced Whole Loan, an “Excluded Special Servicer Mortgage Loan”), the special servicer will be required to resign as special servicer of that Excluded Special Servicer Mortgage Loan.
In the event the special servicer is required to resign as special servicer with respect to any Excluded Special Servicer Mortgage Loan because it obtains knowledge that it is a Borrower Party prior to the occurrence and continuance of a Consultation Termination Event, then (i) if the Excluded Special Servicer Mortgage Loan is not also an Excluded Loan, then the Directing Certificateholder will be entitled to appoint (and replace with or without cause) a successor special servicer that is not a Borrower Party in accordance with the terms of the PSA (the “Excluded Special Servicer”) for the Excluded Special Servicer Mortgage Loan, (ii) if the Excluded Special Servicer Mortgage Loan is also an Excluded Loan, then the largest Controlling Class Certificateholder (by Certificate Balance) that is not an Excluded Controlling Class Holder will be entitled to appoint (and replace with or without cause) the Excluded Special Servicer for the Excluded Special Servicer Mortgage Loan, and (iii) if there is no Controlling Class Certificateholder that is not an Excluded Controlling Class Holder, then the Excluded Special Servicer will be appointed as described in the following paragraph.
In the event the special servicer is required to resign as special servicer with respect to any Excluded Special Servicer Mortgage Loan because it obtains knowledge that it is a Borrower Party and either (i) a Consultation Termination Event has occurred and is continuing or (ii) there is no Controlling Class Certificateholder that is not an Excluded Controlling Class Holder, then, at the expense of the issuing entity, the certificate administrator will be required to promptly provide written notice of such resignation to all Certificateholders by posting such notice on its internet website and the Excluded Special Servicer will be appointed upon the written direction of more than 50% of the Voting Rights of the certificates that exercise their right to vote (provided that holders of at least 20% of the Voting Rights of the certificates exercise their right to vote). If such Excluded Special Servicer has not been appointed pursuant to the preceding sentence within 30 days after the special servicer has provided its written notice of resignation, the certificate administrator will be required to provide written notice to the resigning special servicer that such Excluded Special Servicer has not been appointed and such resigning special servicer will be required to appoint such Excluded Special Servicer. The special servicer will not have any liability with respect to the actions or inactions of the applicable Excluded Special Servicer or with respect to the identity of the applicable Excluded Special Servicer.
If at any time a special servicer is no longer a Borrower Party with respect to an Excluded Special Servicer Mortgage Loan, (1) the related Excluded Special Servicer will be required to resign, (2) the related Mortgage Loan will no longer be an Excluded Special Servicer Mortgage Loan, (3) such special servicer will become the special servicer again for the such related Mortgage Loan and (4) such special servicer will be entitled all special servicing compensation with respect to such Mortgage Loan earned during such time on and after such Mortgage Loan is no longer an Excluded Special Servicer Mortgage Loan.
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The Excluded Special Servicer will be required to perform all of the obligations of the special servicer for the related Excluded Special Servicer Mortgage Loan and will be entitled to all special servicing compensation with respect to such Excluded Special Servicer Mortgage Loan earned during such time as the related Mortgage Loan is an Excluded Special Servicer Mortgage Loan (provided that that special servicer will remain entitled to all other special servicing compensation with respect all Mortgage Loans and Serviced Whole Loan which are not Excluded Special Servicer Loans).
No appointment of a special servicer will be effective until the depositor has filed any required Exchange Act filings related to the removal and replacement of the special servicer.
With respect to each Non-Serviced Whole Loan, the related Non-Serviced Special Servicer may be removed, and a successor special servicer appointed at any time by the directing certificateholder appointed under the related Non-Serviced PSA (and not by the Directing Certificateholder for this transaction) to the extent set forth in the related Non-Serviced PSA and the related Intercreditor Agreement for such Non-Serviced Whole Loan. See “Description of the Mortgage Pool—The Whole Loans—10 Hudson Yards Whole Loan”, “—Westfield San Francisco Centre Whole Loan”, “—Prudential Plaza Whole Loan”, “—Birch Run Premium Outlets Whole Loan”, “—Gas Company Tower & World Trade Center Parking Garage Whole Loan”, “—Vertex Pharmaceuticals HQ Whole Loan”, “—401 South State Street Whole Loan” and “—Servicing of the Non-Serviced Mortgage Loans”below.
Termination of Servicer and Special Servicer for Cause
Servicer Termination Events
A “Servicer Termination Event” under the PSA with respect to the master servicer or the special servicer, as the case may be, will include, without limitation:
(a) with respect to the master servicer only, any failure by the master servicer (i) to make a required deposit to the Collection Account or to the separate custodial account for any Serviced Whole Loan on the day such deposit was first required to be made, which failure is not remedied within two business days, (ii) to deposit into, or remit to the certificate administrator for deposit into, the Distribution Account any amount required to be so deposited or remitted (including any required P&I Advance, unless the master servicer determines that such P&I Advance would not be recoverable), which failure is not remedied by 11:00 a.m. (New York City time) on the relevant Distribution Date (provided,however, that to the extent the master servicer does not timely make such remittances to the certificate administrator, the master servicer will be required to pay the certificate administrator for the account of the certificate administrator interest on any amount not timely remitted at the Reimbursement Rate from and including the applicable required remittance date to, but not including, the date such remittance is actually made) or (iii) to remit to any holder of a Serviced Companion Loan, as and when required by the PSA or the related intercreditor agreement, any amount required to be so remitted which failure continues for two business days;
(b) with respect to the special servicer only, any failure by the special servicer to deposit into the REO Account on the day such deposit is required to be made and such failure continues unremedied for two business days, or to remit to the master servicer for deposit in the Collection Account (or, in the case of a Serviced Whole Loan, the related custodial account) any such remittance required to be made, under the PSA;provided,however, that the failure of the special servicer to remit such remittance to the master servicer will not be a Servicer Termination Event if such failure is remedied within two business days and if the special servicer has compensated the master servicer for any loss of income (at the Reimbursement Rate) on such amount suffered by the master servicer due to and caused by the late remittance of the special servicer and reimbursed the issuing entity for any resulting advance interest due to the master servicer;
(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 PSA, which failure continues unremedied for 30 days (15 days in the case of the master servicer’s failure to make a Servicing Advance or 45 days in the case of failure to pay the premium for any insurance policy required to be
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force placed by the master servicer or the special servicer, as the case may be, pursuant to the PSA or in any event such reasonable shorter period of time as is necessary to avoid the commencement of foreclosure proceedings for any lien relating to unpaid real estate taxes or assessments or a lapse in any required insurance coverage) 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 PSA, by the certificateholders of any class issued by the issuing entity, evidencing percentage interest aggregating not less than 25% of such class or by such holder of a Serviced Companion Loan, if affected;provided,if that failure is capable of being cured and the master servicer or the special servicer, as applicable, is diligently pursuing that cure, that 15-, 30- or 45-day period, as applicable, will be extended an additional 30 days;
(d) any breach on the part of the master servicer or the special servicer of any representation or warranty in the PSA which materially and adversely affects the interests of any certificateholders of any class of certificates issued by the issuing entity or holder of a Serviced Companion Loan 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, is given to the master servicer or the special servicer, as the case may be, by any other party to the PSA, or to the master servicer, the special servicer, the depositor and the trustee by the holders of certificates of any class issued by the issuing entity, evidencing percentage interests aggregating not less than 25% of such class or by such holder of a Serviced Companion Loan, if affected;provided,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 30 days;
(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, as applicable, 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) (A) Moody’s (i) has qualified, downgraded or withdrawn its rating or ratings of one or more classes of certificates issued by the issuing entity, or (ii) has placed one or more classes of certificates issued by the issuing entity on “watch status” in contemplation of a ratings downgrade or withdrawal (and in the case of clause (i) and (ii), such action has not been withdrawn by Moody’s within 60 days of such event) and, in the case of either of clauses (i) or (ii), publicly cited servicing concerns with the master servicer or the special servicer, as the case may be, as the sole or a material factor in such action or (B) DBRS (i) has qualified, downgraded or withdrawn its rating or ratings of one or more classes of certificates issued by the issuing entity, or (ii) has placed one or more classes of certificates issued by the issuing entity on “watch status” in contemplation of a ratings downgrade or withdrawal (and in the case of clause (i) and (ii), such action has not been withdrawn by DBRS within 60 days of such event) and, in the case of either of clauses (i) or (ii), publicly cited servicing concerns with the master servicer or the special servicer, as the case may be, as the sole or a material factor in such action;
(g) the master servicer or the special servicer is no longer rated at least “CMS3” or “CSS3”, respectively, by Fitch and such master servicer or special servicer is not reinstated to at least that rating within 60 days of the delisting; or
(h) so long as the issuing entity is subject to Exchange Act reporting requirements, any failure by the master servicer or special servicer, as applicable, to deliver to the trustee and the certificate administrator (i) an annual certification regarding such servicer’s compliance with the terms of the PSA, as well as an assessment of compliance with certain servicing criteria and an accountant’s attestation report with respect to such assessment by the time required under the PSA after any applicable grace period or (ii) any Exchange Act reporting items that a primary servicer, sub-servicer or servicing function participant (such entity, the “Sub-Servicing Entity”) retained by the master servicer or special servicer, as applicable (but excluding any Sub-Servicing Entity which the master servicer or special servicer has been directed to retain by a sponsor or mortgage loan seller) is required to deliver (any Sub-Servicing Entity will be terminated if it defaults in accordance with the provision of this clause (h)).
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Rights Upon Servicer Termination Event
If a Servicer Termination Event with respect to the master servicer or the special servicer, as applicable, occurs and is continuing, then the trustee may, and at the written direction of (1) the holders of certificates evidencing at least 25% of the aggregate Voting Rights, (2) in the case of the special servicer, for so long as no Control Termination Event has occurred and is continuing, the Directing Certificateholder, or (3) the Depositor (with respect to clause (h) of the definition of “Servicer Termination Event”), the trustee will be required to terminate all of the rights (other than certain rights to indemnification, compensation and (in certain limited circumstances) the excess servicing strip as provided in the PSA) and obligations of the master servicer as master servicer or the special servicer as special servicer, as the case may be, under the PSA. In the case of a Servicer Termination Event pursuant to clause (f) of the definition thereof, the certificate administrator will be required to notify Certificateholders and Serviced Companion Loan noteholders of such Servicer Termination Event and request whether such Certificateholders and, if applicable, the Serviced Companion Loan noteholders favor such termination. Notwithstanding the foregoing, upon any termination of the master servicer or the special servicer, as applicable, under the PSA, the master servicer or the special servicer, as applicable, will continue to be entitled to receive all accrued and unpaid servicing compensation through the date of termination plus reimbursement for all Advances and interest thereon as provided in the PSA.
Notwithstanding the foregoing, (a) if a Servicer Termination Event with respect to the master servicer affects a Serviced Companion Loan or the holder thereof and the master servicer is not otherwise terminated or (b) if a nationally recognized statistical rating organization (“NRSRO”), as that term is defined in Section 3(a)(62) of the Exchange Act, engaged to rate any class of certificates backed, wholly or partially, by any Serviced Companion Loan qualifies, downgrades or withdraws its rating of such class of certificates, publicly citing servicing concerns with the master servicer as the sole or a material factor in such rating action, then the holder of such Serviced Companion Loan will be entitled to request that the trustee direct the master servicer to appoint a sub-servicer (or if the related Serviced Whole Loan is currently being sub-serviced, then the trustee may direct the master servicer to replace such sub-servicer with a new sub-servicer but only if such original sub-servicer is in default (beyond any applicable cure periods) under the related sub-servicing agreement) that will be responsible for servicing the related Serviced Whole Loan;provided that the trustee will be required to direct the master servicer to obtain a Rating Agency Confirmation (including a Rating Agency Confirmation with respect to any companion loan securities) (at the expense of the requesting party) with respect to the appointment of such sub-servicer.
Notwithstanding the foregoing, (a) if a Servicer Termination Event with respect to the special servicer affects a Serviced Companion Loan and the special servicer is not otherwise terminated or (b) if an NRSRO engaged to rate any class of certificates backed, wholly or partially, by any Serviced Companion Loan qualifies, downgrades or withdraws its rating of such class of certificates, citing servicing concerns with the special servicer as the sole or a material factor in such rating action, then the holder of such Serviced Companion Loan will be entitled to direct that the trustee terminate the special servicer with respect to the related Serviced Whole Loan only, but no other Mortgage Loan.
On and after the date of termination following a Servicer Termination Event 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 applicable, under the PSA (and any sub-servicing agreements) and generally will be entitled to the compensation arrangements to which the master servicer or the special servicer, as applicable, would have been entitled. If the trustee is unwilling or unable so to act, or holders of certificates evidencing (i) in the case of the master servicer, at least 25% of the aggregate Voting Rights, or (ii) in the case of the special servicer, at least 25% of the aggregate Voting Rights (or, for so long as no Control Termination Event has occurred and is continuing, the Directing Certificateholder so request, or, with respect to a Serviced Whole Loan, if an affected Serviced Companion Loan noteholder so requests, or if the trustee is not an “approved” servicer by any of the rating agencies for mortgage pools similar to the one held by the issuing entity, the trustee must appoint, or petition a court of competent jurisdiction for the appointment of, a mortgage loan servicing institution that, for so long as no Control Termination Event has occurred and is continuing, has been approved by the Directing Certificateholder (which approval may not be unreasonably withheld in the case of the appointment of a successor master servicer) to act
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as successor to the master servicer or the special servicer, as applicable, under the PSA;provided that the trustee must obtain a Rating Agency Confirmation (including a Rating Agency Confirmation with respect to any companion loan securities). Pending such appointment, the trustee is obligated to act in such capacity unless the trustee is prohibited by law from so acting. The trustee and any such successor may agree upon the servicing compensation to be paid;provided that no such compensation may be in excess of that permitted to the terminated master servicer or special servicer,provided,further, that if no successor can be obtained to perform the obligations of the terminated master servicer or special servicer, additional amounts may be paid to such successor and such amounts in excess of that permitted the terminated master servicer or special servicer will be treated as Realized Losses. All reasonable costs and expenses of the trustee (including the cost of obtaining a Rating Agency Confirmation and any applicable indemnity) or the successor master servicer or successor special servicer incurred in connection with transferring the mortgage files to the successor master servicer or special servicer and amending the PSA to reflect such succession are required to be paid by the predecessor master servicer or the special servicer, as applicable, upon presentation of reasonable documentation of such costs and expenses. If the predecessor master servicer or special servicer (as the case may be) has not reimbursed the trustee or the successor master servicer or special servicer for such expenses within 90 days after the presentation of reasonable documentation, such expense is required to be reimbursed by the issuing entity;provided that the terminated master servicer or special servicer will not thereby be relieved of its liability for such expenses.
No Certificateholder will have any right under the PSA to institute any proceeding with respect to the PSA, the certificates or the Mortgage Loans, unless, with respect to the PSA, such holder previously has given to the trustee a written notice of a default under the PSA, and of the continuance thereof, and unless the holders of certificates of any Class affected thereby evidencing percentage interests of at least 25% of such Class, as applicable, have made written request of the trustee to institute such proceeding in its capacity as trustee under the PSA and have offered to the trustee such security or indemnity reasonably satisfactory to it as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the trustee, for 60 days after its receipt of such notice, request and offer of security or indemnity, failed or refused to institute such proceeding.
Neither the trustee nor the certificate administrator will have any obligation to make any investigation of matters arising under the PSA or to institute, conduct or defend any litigation under the PSA or in relation to it at the request, order or direction of any of the holders of certificates, unless holders of certificates entitled to greater than 25% of the percentage interest of each affected class direct the trustee to do so and such holders of certificates have offered to the trustee or the certificate administrator, as applicable security or indemnity reasonably satisfactory to the trustee or the certificate administrator, as applicable against the costs, expenses and liabilities which may be incurred in connection with such action.
Notwithstanding the foregoing discussion in this “—Rights Upon Servicer Termination Event” section, if the master servicer is terminated under the circumstances described above because of the occurrence of any of the events described in clause (f) under “—Servicer Termination Events” above, the master servicer will have the right, at its expense, to sell its master servicing rights with respect to the Mortgage Loans to a successor master servicer in connection with whose appointment a Rating Agency Confirmation (including a Rating Agency Confirmation with respect to any companion loan securities) has been provided, in accordance with the terms set forth in the PSA, including that any successor master servicer fulfill the ratings requirements for successor master servicer set forth in the PSA.
In addition, the depositor may direct the trustee to terminate the master servicer upon 5 business days’ written notice if the master servicer fails to comply with certain of its reporting obligations under the PSA (subject to any applicable grace period).
Waiver of Servicer Termination Event
A Servicer Termination Event may be waived by the Certificateholders evidencing not less than 66-2/3% of the aggregate Voting Rights of the certificates and each Serviced Companion Loan noteholder adversely affected by such Servicer Termination Event, except (a) a Servicer Termination
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Event under clause (g) of the definition of “Servicer Termination Events” may be waived only with the consent of the Depositor and (b) a default in making any required deposits to or payments from the Collection Account, any Serviced Whole Loan Custodial Account or the Lower-Tier REMIC Distribution Account or in remitting payments as received, in each case in accordance with the PSA.
Resignation of the Master Servicer and Special Servicer
The PSA permits the master servicer and the special servicer to resign from their respective obligations only upon (a) the appointment of, and the acceptance of the appointment by, a successor and receipt by the certificate administrator and the trustee of a Rating Agency Confirmation from each of the Rating Agencies and confirmation of the applicable rating agencies that such action will not result in the downgrade, withdrawal or qualification of its then-current ratings of any securities related to a Serviced Companion Loan (provided that such rating agency confirmation may be considered satisfied in the same manner as any Rating Agency Confirmation required under the PSA may be considered satisfied with respect to the certificates as described in this prospectus); and, as to the special servicer only, for so long as a Control Termination Event has not occurred and is not continuing, the approval of such successor by the Directing Certificateholder, which approval in each case will not be unreasonably withheld or (b) a determination that their respective obligations are no longer permissible with respect to the master servicer or the special servicer, as the case may be, under applicable law. In the event that the master servicer or special servicer resigns as a result of the determination that their respective obligations are no longer permissible under applicable law, the trustee will then succeed to all of the responsibilities, duties and liabilities of the resigning party as master servicer or special servicer, as the case may be, under the PSA and will be entitled to similar compensation arrangements. If the trustee is unwilling or unable to so act, it may appoint, or petition a court of competent jurisdiction to appoint, a loan servicing institution or other entity, subject to the trustee’s receipt of a Rating Agency Confirmation from each of the Rating Agencies.
No resignation will become effective until the trustee or other successor has assumed the obligations and duties of the resigning master servicer or special servicer, as the case may be, under the PSA. Further, the resigning master servicer or special servicer, as the case may be, must pay all costs and expenses associated with the transfer of its duties. Other than as described under “—Termination of Servicer and Special Servicer for Cause—Servicer Termination Events” above, in no event will the master servicer or the special servicer have the right to appoint any successor master servicer or special servicer if such master servicer or special servicer, as applicable, is terminated or removed pursuant to the PSA. In addition, the PSA will prohibit the appointment of the asset representations reviewer, the operating advisor or one of their respective affiliates as successor to the master servicer or the special servicer.
Limitation on Liability; Indemnification
The PSA will provide that none of the master servicer (including in its capacity as the paying agent for any Companion Loan), the special servicer, the depositor, the operating advisor, the asset representations reviewer or any partner, shareholder, member, manager, director, officer, employee or agent of any of them will be under any liability to the issuing entity, Certificateholders or holders of the related Companion Loan, as applicable, for any action taken, or not taken, in good faith pursuant to the PSA or for errors in judgment;provided, however, that none of the master servicer (including in its capacity as the paying agent for any Companion Loan), the special servicer, the depositor, the operating advisor, the asset representations reviewer or similar person will be protected against any breach of a representation or warranty made by such party, as applicable, in the PSA or any liability that would otherwise be imposed by reason of willful misconduct, bad faith or negligence in the performance of obligations or duties under the PSA or by reason of negligent disregard of such obligations and duties. The PSA will also provide that the master servicer (including in its capacity as the paying agent for any Companion Loan), the special servicer, the depositor, the operating advisor, the asset representations reviewer and their respective affiliates and any partner, shareholder, member, manager, director, officer, employee or agent of any of them will be entitled to indemnification by the issuing entity against any claims, losses, penalties, fines, forfeitures, reasonable legal fees and related costs, judgments, and other costs, liabilities, fees and expenses incurred in connection with any legal action or claim that relates to the PSA, the Mortgage Loans, any related Companion Loan or the certificates;provided, however, that the
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indemnification will not extend to any loss, liability or expense incurred in connection with any breach of a representation or warranty made by such party, as applicable, in the PSA or incurred by reason of willful misconduct, bad faith or negligence in the performance of obligations or duties under the PSA, by reason of negligent disregard of such party’s obligations or duties, or in the case of the depositor and any of its partners, shareholders, directors, officers, members, managers, employees and agents, any violation by any of them of any state or federal securities law. In addition, absent actual fraud (as determined by a final non-appealable court order), neither the trustee nor the certificate administrator (including in its capacity as custodian) will be liable for special, punitive, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the trustee or the certificate administrator has been advised of the likelihood of such loss or damage and regardless of the form of action. The PSA will also provide that any related master servicer, depositor, special servicer, operating advisor (or the equivalent), asset representations reviewer, certificate administrator or trustee under the related Non-Serviced PSA with respect to a Non-Serviced Companion Loan and any partner, director, officer, shareholder, member, manager, employee or agent of any of them and each Non-Serviced Securitization Trust will be entitled to indemnification by the issuing entity and held harmless against the issuing entity’spro rata share of any and all claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments and any other costs, liabilities, fees and expenses incurred in connection with servicing and administration of such Non-Serviced Mortgage Loan and the related non-serviced Mortgaged Property under the related Non-Serviced PSA or the PSA (as and to the same extent the securitization trust formed under the related Non-Serviced PSA is required to indemnify such parties in respect of other Mortgage Loans in the securitization trust formed under the related Non-Serviced PSA pursuant to the terms of the Non-Serviced PSA). In addition, the PSA will provide that the COMM 2015-CCRE26 Master Servicer and any of its partners, directors, officers, shareholders, members, managers, employees or agents will be entitled to indemnification by the issuing entity and held harmless against the issuing entity’spro rata share of any and all claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments and any other costs, liabilities, fees and expenses incurred in connection with the COMM 2015-CCRE26 Master Servicer’s provision of information relating to the Prudential Plaza Whole Loan to the certificate administrator required by the certificate administrator in its preparation and filing of REMIC tax returns on behalf of the Prudential Plaza Loan REMIC;provided, however, that the indemnification will not extend to any loss, liability or expense incurred reason of willful misconduct, bad faith or negligence in the performance of obligations or duties under the related agreement or by reason of negligent disregard of such obligations and duties.
In addition, the PSA will provide that none of the master servicer (including in its capacity as the paying agent for any Companion Loans), the special servicer, the depositor or operating advisor will be under any obligation to appear in, prosecute or defend any legal action that (i) is not incidental to its respective responsibilities under the PSA or (ii) in its opinion, may expose it to any expense or liability not reimbursed by the issuing entity. However, each of the master servicer, the special servicer, the depositor and the operating advisor will be permitted, in the exercise of its discretion, to undertake any action that it may deem necessary or desirable with respect to the enforcement and/or protection of the rights and duties of the parties to the PSA and the interests of the Certificateholders (and, in the case of a Serviced Whole Loan, the rights of the Certificateholders and the holders of the related Serviced Companion Loan (as a collective whole), taking into account the subordinate orpari passu nature of such Serviced Companion Loan) under the PSA;provided, however, that if a Serviced Whole Loan and/or the holder of the related Companion Loan are involved, such expenses, costs and liabilities will be payable out of funds related to such Serviced Whole Loan in accordance with the related Intercreditor Agreement and will also be payable out of the other funds in the Collection Account if amounts on deposit with respect to such Serviced Whole Loan are insufficient therefor. If any such expenses, costs or liabilities relate to a Mortgage Loan, Companion Loan, then any subsequent recovery on that Mortgage Loan or Companion Loan, as applicable, will be used to reimburse the issuing entity for any amounts advanced for the payment of such expenses, costs or liabilities. In that event, the legal expenses and costs of the action, and any liability resulting from the action, will be expenses, costs and liabilities of the issuing entity, and the master servicer (including in its capacity as the paying agent for any Companion Loans), the special servicer, the depositor, the asset representations reviewer or the operating advisor, as the case may be, will be entitled to be reimbursed out of the Collection Account for the expenses.
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Pursuant to the PSA, the master servicer and the special servicer will each be required to maintain a fidelity bond and errors and omissions policy or their equivalent that provides coverage against losses that may be sustained as a result of an officer’s or employee’s misappropriation of funds or errors and omissions, subject to certain limitations as to amount of coverage, deductible amounts, conditions, exclusions and exceptions permitted by the PSA. Notwithstanding the foregoing, the master servicer and the special servicer will be allowed to self-insure with respect to an errors and omission policy and a fidelity bond so long as certain conditions set forth in the PSA are met.
Any person into which the master servicer, the special servicer, the depositor, operating advisor or asset representations reviewer may be merged or consolidated, or any person resulting from any merger or consolidation to which the master servicer, the special servicer, the depositor, operating advisor or asset representations reviewer is a party, or any person succeeding to the business of the master servicer, the special servicer, the depositor, operating advisor or asset representations reviewer, will be the successor of the master servicer, the special servicer, the depositor, operating advisor or asset representations reviewer, as the case may be, under the PSA. The master servicer, the special servicer, the operating advisor and the asset representations reviewer may have other normal business relationships with the depositor or the depositor’s affiliates.
The trustee and the certificate administrator make no representations as to the validity or sufficiency of the PSA (other than as to it being a valid obligation of the trustee and the certificate administrator), the certificates, the Mortgage Loans, this prospectus (other than as to the accuracy of the information provided by the trustee and the certificate administrator as set forth above) or any related documents and will not be accountable for the use or application by or on behalf of the master servicer or the special servicer of any funds paid to the master servicer or any special servicer in respect of the certificates or the Mortgage Loans, or any funds deposited into or withdrawn from the Collection Account or any other account by or on behalf of the master servicer or any special servicer. The PSA provides that no provision of such agreement will be construed to relieve the trustee and the certificate administrator from liability for their own negligent action, their own negligent failure to act or their own willful misconduct or bad faith.
The PSA provides that neither the trustee nor the certificate administrator, as applicable, will be liable for an error of judgment made in good faith by a responsible officer of the trustee or the certificate administrator, unless it is proven that the trustee or the certificate administrator, as applicable, was negligent in ascertaining the pertinent facts. In addition, neither the trustee nor the certificate administrator, as applicable, will be liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of holders of certificates entitled to greater than 25% of the percentage interest of each affected class, or of the aggregate Voting Rights of the certificates, relating to the time, method and place of conducting any proceeding for any remedy available to the trustee and the certificate administrator, or exercising any trust or power conferred upon the trustee and the certificate administrator, under the PSA (unless a higher percentage of Voting Rights is required for such action).
The trustee and the certificate administrator and any director, officer, employee, representative or agent of the trustee and the certificate administrator, will be entitled to indemnification by the issuing entity, to the extent of amounts held in the Collection Account or the Lower-Tier REMIC Distribution Account from time to time, for any loss, liability, damages, claims or unanticipated expenses (including reasonable attorneys’ fees and expenses) arising out of or incurred by the trustee or the certificate administrator in connection with their participation in the transaction and any act or omission of the trustee or the certificate administrator relating to the exercise and performance of any of the powers and duties of the trustee and the certificate administrator (including in any capacities in which they serve,e.g., paying agent, REMIC administrator, authenticating agent, custodian, certificate registrar and 17g-5 Information Provider) under the PSA. However, the indemnification will not extend to any loss, liability or expense that constitutes a specific liability imposed on the trustee or the certificate administrator pursuant to the PSA, or to any loss, liability or expense incurred by reason of willful misconduct, bad faith or negligence on the part of the trustee or the certificate administrator in the performance of their obligations and duties under the PSA, or by reason of their negligent disregard of those obligations or duties, or as may arise from a breach of any representation or warranty of the trustee or the certificate administrator made in the PSA.
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Enforcement of Mortgage Loan Seller’s Obligations Under the MLPA
In the event any party to the PSA receives a request or demand from a Requesting Investor to the effect that a Mortgage Loan should be repurchased or replaced due to a Material Defect, or if the depositor, the master servicer, the special servicer, the trustee, the certificate administrator or the operating advisor (solely in its capacity as operating advisor) determines that a Mortgage Loan should be repurchased or replaced due to a Material Defect, that party to the PSA will be required to promptly forward such request or demand to the master servicer and the special servicer, and the Enforcing Servicer will be required to promptly forward it to each other party to the PSA and the applicable mortgage loan seller. The Enforcing Servicer will be required to enforce the obligations of the mortgage loan sellers under the MLPAs pursuant to the terms of the PSA and the MLPAs. These obligations include (but are not limited to) obligations resulting from a Material Defect. Subject to the provisions of the applicable MLPA relating to the dispute resolutions as described under “Description of the Mortgage Loan Purchase Agreements—Dispute Resolution Provisions”, such enforcement, including, without limitation, the legal prosecution of claims, if any, will be required to be carried out in such form, to such extent and at such time as the master servicer or the special servicer, as applicable, would require were it, in its individual capacity, the owner of the affected Mortgage Loan.
Within 45 days after receipt of an Asset Review Report with respect to any Mortgage Loan, the special servicer will be required to determine whether at that time, based on the Servicing Standard, whether there exists a Material Defect with respect to such Mortgage Loan. If the special servicer determines that a Material Defect exists, the special servicer will be required to enforce the obligations of the applicable mortgage loan seller under the MLPA with respect to such Material Defect as discussed in the preceding paragraph. See“—The Asset Representations Reviewer—Asset Review” above.
Any costs incurred by the master servicer or the special servicer with respect to the enforcement of the obligations of a mortgage loan seller under the applicable MLPA will be deemed to be Servicing Advances, to the extent not recovered from the mortgage loan seller or the Requesting Investor or, to the extent nonrecoverable, trust fund expenses. See “Description of the Mortgage Loan Purchase Agreements—Dispute Resolution Provisions”.
Dispute Resolution Provisions
Certificateholder’s Rights When a Repurchase Request is Initially Delivered By a Certificateholder
In the event an Initial Requesting Certificateholder delivers a written request to a party to the PSA that a Mortgage Loan be repurchased by the applicable mortgage loan seller alleging the existence of a Material Defect with respect to such Mortgage Loan and setting forth the basis for such allegation (a “Certificateholder Repurchase Request”), the receiving party will be required to promptly forward that Certificateholder Repurchase Request to the master servicer and the special servicer, and the Enforcing Servicer will be required to promptly forward that Repurchase Request to the related mortgage loan seller and each other party to the PSA. An “Initial Requesting Certificateholder” is the first Certificateholder or Certificate Owner to deliver a Certificateholder Repurchase Request as described above with respect to a Mortgage Loan, and there may not be more than one Initial Requesting Certificateholder with respect to any Mortgage Loan. Subject to the provisions described below under this heading “—Dispute Resolution Provisions”, the Enforcing Servicer will be the Enforcing Party with respect to the Repurchase Request.
The “Enforcing Servicer” will be (a) with respect to a Specially Serviced Loan, the special servicer, and (b) with respect to a non-Specially Serviced Loan, (i) in the case of a Repurchase Request made by the special servicer, the Directing Certificateholder or a Controlling Class Certificateholder, the master servicer, and (ii) in the case of a Repurchase Request made by any person other than the special servicer, the Directing Certificateholder or a Controlling Class Certificateholder, (A) prior to a Resolution Failure relating to such non-Specially Serviced Loan, the master servicer (provided that the consent of the special servicer will be required with respect to any Qualified Substitute Mortgage Loan), and (B) from and after a Resolution Failure relating to such non-Specially Serviced Loan, the special servicer.
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An “Enforcing Party” is the person obligated to or that elects pursuant to the terms of the PSA to enforce the rights of the issuing entity against the related mortgage loan seller with respect to the Repurchase Request.
Repurchase Request Delivered by a Party to the PSA
In the event that the depositor, the master servicer, the special servicer, the trustee, the certificate administrator or the operating advisor (solely in its capacity as operating advisor) has knowledge of a Material Defect with respect to a Mortgage Loan, that party will be required to deliver prompt written notice of such Material Defect to the master servicer and the special servicer, and the Enforcing Servicer will be required to promptly forward to each other party to the PSA and the related mortgage loan seller, identifying the applicable Mortgage Loan and setting forth the basis for such allegation (a “PSA Party Repurchase Request” and, each of a Certificateholder Repurchase Request or a PSA Party Repurchase Request, a “Repurchase Request”). The Enforcing Servicer will be required to act as the Enforcing Party and enforce the rights of the issuing entity against the related mortgage loan seller with respect to the PSA Party Repurchase Request. However, if a Resolution Failure occurs with respect to the PSA Party Repurchase Request, the provisions described below under “—Resolution of a Repurchase Request” will apply.
Within 2 business days after a Resolution Failure occurs with respect to a PSA Party Repurchase Request made by any party other than the special servicer or a Certificateholder Repurchase Request made by any Certificateholder other than the Directing Certificateholder or a Controlling Class Certificateholder, in each case, related to a non-Specially Serviced Loan, the master servicer will be required to send a written notice (a “Master Servicer Proposed Course of Action Notice”) to the special servicer, indicating the master servicer’s analysis and recommended course of action with respect to such Repurchase Request, along with the servicing file and all information, documents (but excluding the original documents constituting the mortgage file) and records (including records stored electronically on computer tapes, magnetic discs and the like) relating to such non-Specially Serviced Loan and, if applicable, the related Serviced Companion Loan, either in the master servicer’s possession or otherwise reasonably available to the master servicer, and reasonably requested by the special servicer to enable it to assume its duties under the PSA to the extent set forth in the PSA for such non-Specially Serviced Loan. Upon receipt of such Master Servicer Proposed Course of Action Notice and such servicing file, the special servicer will become the Enforcing Servicer with respect to such Repurchase Request.
Resolution of a Repurchase Request
In the event the Repurchase Request is not Resolved within 180 days after the mortgage loan seller receives the Repurchase Request as described in “—Certificateholder’s Rights When a Repurchase Request is Initially Delivered By a Certificateholder” or “—Repurchase Request Delivered by a Party to the PSA” above, a “Resolution Failure” will be deemed to have occurred. Receipt of the Repurchase Request will be deemed to occur two business days after the Repurchase Request is sent to the related mortgage loan seller. “Resolved” means, with respect to a Repurchase Request, (i) that the related Material Defect has been cured, (ii) the related Mortgage Loan has been repurchased in accordance with the related MLPA, (iii) a mortgage loan has been substituted for the related Mortgage Loan in accordance with the related MLPA, (iv) the applicable mortgage loan seller made the Loss of Value Payment, (v) a contractually binding agreement is entered into between the Enforcing Servicer, on behalf of the issuing entity, and the related mortgage loan seller that settles the related mortgage loan seller’s obligations under the related MLPA, or (vi) the related Mortgage Loan is no longer property of the issuing entity as a result of a sale or other disposition in accordance with the PSA.
After a Resolution Failure occurs with respect to a Repurchase Request regarding a Mortgage Loan (whether the Repurchase Request was initiated by an Initial Requesting Certificateholder or by a party to the PSA), the Enforcing Servicer will be required to send a notice (a “Proposed Course of Action Notice”) to the Initial Requesting Certificateholder, if any, to the address specified in the Initial Requesting Certificateholder’s Repurchase Request, and to the certificate administrator, who will make such notice available to all other Certificateholders and Certificate Owners (by posting such notice on the certificate administrator’s website) indicating the Enforcing Servicer’s intended course of action with respect to the
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Repurchase Request (the “Proposed Course of Action”). If the master servicer is the Enforcing Servicer, the master servicer may (but will not be obligated to) consult with the special servicer and (for so long as no Consultation Termination Event has occurred) the Directing Certificateholder regarding any Proposed Course of Action. Such notice will be required to include (a) a request to Certificateholders to indicate their agreement with or dissent from such Proposed Course of Action by clearly marking “agree” or “disagree” to the Proposed Course of Action on such notice within 30 days of the date of such notice and a disclaimer that responses received after such 30-day period will not be taken into consideration, (b) a statement that in the event any Certificateholder disagrees with the Proposed Course of Action, the Enforcing Servicer (either as the Enforcing Party or as the Enforcing Servicer in circumstances where a Certificateholder is acting as the Enforcing Party) will be compelled to follow the course of action agreed to and/or proposed by the majority of the responding Certificateholders that involves referring the matter to mediation or arbitration, as the case may be, (c) a statement that responding Certificateholders will be required to certify their holdings in connection with such response, (d) a statement that only responses clearly marked “agree” or “disagree” with such Proposed Course of Action will be taken into consideration and (e) instructions for responding Certificateholders to send their responses to the applicable Enforcing Servicer and the certificate administrator. The certificate administrator will within three (3) business days after the expiration of the 30-day response period, tabulate the responses received from the Certificateholders and share the results to the Enforcing Servicer. The certificate administrator will only count responses timely received and clearly indicating agreement or dissent with the related Proposed Course of Action and additional verbiage or qualifying language will not be taken into consideration for purposes of determining whether the related Certificateholder agrees or disagrees with the Proposed Course of Action. The certificate administrator will be under no obligation to answer questions from Certificateholders regarding such Proposed Course of Action. For the avoidance of doubt, the certificate administrator’s obligations in connection with this heading “—Resolution of a Repurchase Request” will be limited solely to tabulating Certificateholder responses of “agree” or “disagree” to the Proposed Course of Action, and such obligation will not be construed to impose any enforcement obligation on the certificate administrator. The Enforcing Servicer may conclusively rely (without investigation) on the certificate administrator’s tabulation of the majority of the responding Certificateholders. If (a) the Enforcing Servicer’s intended course of action with respect to the Repurchase Request does not involve pursuing further action to exercise rights against the applicable mortgage loan seller with respect to the Repurchase Request and the Initial Requesting Certificateholder, if any, or any other Certificateholder or Certificate Owner wishes to exercise its right to refer the matter to mediation (including nonbinding arbitration) or arbitration, as discussed below under “—Mediation and Arbitration Provisions”, or (b) the Enforcing Servicer’s intended course of action is to pursue further action to exercise rights against the applicable mortgage loan seller with respect to the Repurchase Request but the Initial Requesting Certificateholder, if any, or any other Certificateholder or Certificate Owner does not agree with the dispute resolution method selected by the Enforcing Servicer, then the Initial Requesting Certificateholder, if any, or such other Certificateholder or Certificate Owner may deliver to the Enforcing Servicer a written notice (a “Preliminary Dispute Resolution Election Notice”) within 30 days from the date the Proposed Course of Action Notice is posted on the certificate administrator’s website (the “Dispute Resolution Cut-off Date”) indicating its intent to exercise its right to refer the matter to either mediation or arbitration. In the event any Certificateholder or Certificate Owner delivers a Preliminary Dispute Resolution Election Notice, and the Enforcing Servicer has also received responses from other Certificateholders or Certificate Owners supporting the Enforcing Servicer’s initial Proposed Course of Action, such responses will be considered Preliminary Dispute Resolution Election Notices supporting the Proposed Course of Action for purposes of determining the course of action proposed by the majority of Certificateholders.
If neither the Initial Requesting Certificateholder, if any, nor any other Certificateholder or Certificate Owner delivers a Preliminary Dispute Resolution Election Notice prior to the Dispute Resolution Cut-off Date, no Certificateholder or Certificate Owner will have the right to refer the Repurchase Request to mediation or arbitration, and the Enforcing Servicer, as the Enforcing Party, will be the sole party obligated and entitled to determine a course of action, including but not limited to, enforcing the issuing entity’s rights against the related mortgage loan seller, subject to any consent or consultation rights of the Directing Certificateholder.
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Promptly and in any event within 10 business days following receipt of a Preliminary Dispute Resolution Election Notice from (i) the Initial Requesting Certificateholder, if any, or (ii) any other Certificateholder or Certificate Owner (each of clauses (i) and (ii), a “Requesting Certificateholder”), the Enforcing Servicer will be required to consult with each Requesting Certificateholder regarding such Requesting Certificateholder’s intention to elect either mediation (including nonbinding arbitration) or arbitration as the dispute resolution method with respect to the Repurchase Request (the “Dispute Resolution Consultation”) so that such Requesting Certificateholder may consider the views of the Enforcing Servicer as to the claims underlying the Repurchase Request and possible dispute resolution methods, such discussions to occur and be completed no later than 10 business days following the Dispute Resolution Cut-off Date. The Enforcing Servicer will be entitled to establish procedures the Enforcing Servicer deems to be in accordance with the Servicing Standard relating to the timing and extent of such consultations. No later than 5 business days after completion of the Dispute Resolution Consultation, a Requesting Certificateholder may provide a final notice to the Enforcing Servicer indicating its decision to exercise its right to refer the matter to either mediation or arbitration (“Final Dispute Resolution Election Notice”).
If, following the Dispute Resolution Consultation, no Requesting Certificateholder timely delivers a Final Dispute Resolution Election Notice to the Enforcing Servicer, then the Enforcing Servicer will continue to act as the Enforcing Party and remain obligated under the PSA to determine a course of action, including but not limited to, enforcing the rights of the issuing entity with respect to the Repurchase Request and no Certificateholder or Certificate Owner will have any further right to elect to refer the matter to mediation or arbitration.
If a Requesting Certificateholder timely delivers a Final Dispute Resolution Election Notice to the Enforcing Servicer, then such Requesting Certificateholder will become the Enforcing Party and must promptly submit the matter to mediation (including nonbinding arbitration) or arbitration. If there is more than one Requesting Certificateholder that timely delivers a Final Dispute Resolution Election Notice, then such Requesting Certificateholders will collectively become the Enforcing Party, and the holder or holders of a majority of the Voting Rights among such Requesting Certificateholders will be entitled to make all decisions relating to such mediation or arbitration. If, however, no Requesting Certificateholder commences arbitration or mediation pursuant to the terms of the PSA within 30 days after delivery of its Final Dispute Resolution Election Notice to the Enforcing Servicer, then (i) the rights of a Requesting Certificateholder to act as the Enforcing Party will terminate and no Certificateholder or Certificate Owner will have any further right to elect to refer the matter to mediation or arbitration, (ii) if the Proposed Course of Action Notice indicated that the Enforcing Servicer will take no further action with respect to the Repurchase Request, then the related Material Defect will be deemed waived for all purposes under the PSA and related MLPA;provided,however, that such Material Defect will not be deemed waived with respect to a Requesting Certificateholder, any other Certificateholder or Certificate Owner or the Enforcing Servicer to the extent there is a material change in the facts and circumstances known to such party and (iii) if the Proposed Course of Action Notice had indicated a course of action other than the course of action under clause (ii), then the Enforcing Servicer will again become the Enforcing Party and, as such, will be the sole party obligated and entitled to determine a course of action including, but not limited to, enforcing the issuing entity’s rights against the related mortgage loan seller.
Notwithstanding the foregoing, the dispute resolution provisions described under this heading
“—Resolution of a Repurchase Request” will not apply, and the Enforcing Servicer will remain the Enforcing Party, if the Enforcing Servicer has commenced litigation with respect to the Repurchase Request, or determines in accordance with the Servicing Standard that it is in the best interest of Certificateholders to commence litigation with respect to the Repurchase Request to avoid the running of any applicable statute of limitations.
In the event a Requesting Certificateholder becomes the Enforcing Party, the Enforcing Servicer, on behalf of the issuing entity, will remain a party to any proceedings against the related mortgage loan seller as further described below;providedthat the degree and extent to which the Enforcing Servicer actively prepares for and participates in such proceeding will be determined by such Enforcing Servicer in consultation with the Directing Certificateholder,provided that a Consultation Termination Event has not
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occurred and is continuing), and in accordance with the Servicing Standard. For the avoidance of doubt, the depositor, the mortgage loan sellers and any of their respective affiliates will not be entitled to be an Initial Requesting Certificateholder or a Requesting Certificateholder.
The Requesting Certificateholder is entitled to elect either mediation or arbitration in its sole discretion; however, the Requesting Certificateholder may not elect to then utilize the alternative method in the event that the initial method is unsuccessful.
If (i) a Repurchase Request is made with respect to any Mortgage Loan based on any particular alleged Material Defect, (ii) a Resolution Failure is deemed to occur with respect to such Repurchase Request, and (iii) if either (A) a mediation or arbitration is undertaken with respect to such Repurchase Request or (B) the Certificateholders and Certificate Owners cease to have a right to refer such Repurchase Request to mediation or arbitration, in either case in accordance with the foregoing discussion under this heading “—Resolution of a Repurchase Request,” then no Certificateholder or Certificate Owner may make any subsequent Repurchase Request with respect to such Mortgage Loan based on the same alleged Material Defect unless there is a material change in the facts and circumstances known to such party.
Mediation and Arbitration Provisions
If the Enforcing Party elects mediation (including nonbinding arbitration) or arbitration, the mediation or arbitration will be administered by a nationally recognized arbitration or mediation organization selected by the related mortgage loan seller. A single mediator or arbitrator will be selected by the mediation or arbitration organization from a list of neutrals maintained by it according to its mediation or arbitration rules then in effect. The mediator or arbitrator must be impartial, an attorney admitted to practice in the State of New York and have at least 15 years of experience in commercial litigation and commercial real estate finance or commercial mortgage-backed securitization matters or other complex commercial transactions.
The expenses of any mediation will be allocated among the parties to the mediation including, if applicable, between the Enforcing Party and the Enforcing Servicer, as mutually agreed by the parties as part of the mediation.
In any arbitration, the arbitrator will be required to resolve the dispute in accordance with the MLPA and PSA, and may not modify or change those agreements in any way or award remedies not consistent with those agreements. The arbitrator will not have the power to award punitive or consequential damages. In its final determination, the arbitrator will determine and award the costs of the arbitration to the parties to the arbitration in its reasonable discretion. In the event a Requesting Certificateholder is the Enforcing Party, the Requesting Certificateholder will be required to pay any expenses allocated to the Enforcing Party in the arbitration proceedings or any expenses that the Enforcing Party agrees to bear in the mediation proceedings.
For the avoidance of doubt, any expenses required to be borne by or allocated to the Enforcing Servicer in mediation or arbitration or related responsibilities under the PSA will be reimbursable as trust fund expenses.
The final determination of the arbitrator will be final and non-appealable, except for actions to confirm or vacate the determination permitted under federal or state law, and may be entered and enforced in any court with jurisdiction over the parties and the matter. By selecting arbitration, the Enforcing Party would be waiving its right to sue in court, including the right to a trial by jury.
In the event a Requesting Certificateholder is the Enforcing Party, the agreement with the arbitrator or mediator, as the case may be, will be required under the PSA to contain an acknowledgment that the issuing entity, or the Enforcing Servicer on its behalf, will be a party to any arbitration or mediation proceedings solely for the purpose of being the beneficiary of any award in favor of the Enforcing Party;provided that the degree and extent to which the Enforcing Servicer actively prepares for and participates in such proceeding will be determined by such Enforcing Servicer in consultation with the Directing
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Certificateholder,provided that a Consultation Termination Event has not occurred and is continuing, and in accordance with the Servicing Standard. All amounts recovered by the Enforcing Party will be required to be paid to the issuing entity, or the Enforcing Servicer on its behalf, and deposited in the Collection Account. The agreement with the arbitrator or mediator, as the case may be, will provide that in the event a Requesting Certificateholder is allocated any related costs and expenses pursuant to the terms of the arbitrator’s decision or the agreement reached in mediation, neither the issuing entity nor the Enforcing Servicer acting on its behalf will be responsible for any such costs and expenses allocated to the Requesting Certificateholder.
The issuing entity (or the trustee or the Enforcing Servicer, acting on its behalf), the depositor or any mortgage loan seller will be permitted to redact any personally identifiable customer information included in any information provided for purposes of any mediation or arbitration. Each party to the proceedings will be required to agree to keep confidential the details related to the Repurchase Request and the dispute resolution identified in connection with such proceedings;provided, however, the Certificateholders will be permitted to communicate prior to the commencement of any such proceedings to the extent described under “Description of the Certificates—Certificateholder Communication”.
For avoidance of doubt, in no event will the exercise of any right of a Requesting Certificateholder to refer a Repurchase Request to mediation or arbitration or participation in such mediation or arbitration affect in any manner the ability of the master servicer or the special servicer to perform its obligations with respect to a Mortgage Loan or the exercise of any rights of a Directing Certificateholder (including without limitation, a liquidation, foreclosure, negotiation of a loan modification or workout, acceptance of a discounted pay off or deed in lieu, or bankruptcy or other litigation).
Servicing of the Non-Serviced Mortgage Loans
Each Non-Serviced Mortgage Loan and any related REO Properties are being serviced and administered under the applicable Non-Serviced PSA. Accordingly, as to each Non-Serviced Mortgage Loan, the related Non-Serviced Master Servicer (or, if it fails to do so, the related Non-Serviced Trustee) will (and, in certain urgent or emergency situations, the related Non-Serviced Special Servicer may) generally make servicing advances, unless it is determined in accordance with the related Non-Serviced PSA that such servicing advance would not be recoverable from related collections. However, no such party will make a P&I advance with respect to a Non-Serviced Mortgage Loan. The related Non-Serviced Master Servicer will generally also remit collections on the related Non-Serviced Mortgage Loan to or on behalf of the issuing entity for this securitization. However, the master servicer for this securitization will generally be obligated to compile reports that include information on a Non-Serviced Mortgage Loan, and, to the extent required by the Servicing Standard, to enforce the rights of the issuing entity as the holder of a Non-Serviced Mortgage Loan under the terms of the related Intercreditor Agreement and make P&I Advances with respect to a Non-Serviced Mortgage Loan, subject to any non-recoverability determination.
Each Non-Serviced PSA and the PSA both address similar servicing matters, including, but not limited to: collection of payments; establishment of accounts to hold such payments; investment of funds in those accounts; maintenance of insurance coverage on the Mortgaged Properties; enforcement of due-on-sale and due-on-encumbrance provisions; property inspections; collection of operating statements; loan assumptions; realization upon and sale of defaulted Mortgage Loans; acquisition, operation, maintenance and disposition of REO Properties; servicing compensation; modifications, waivers, amendments and consents with respect to the serviced Mortgage Loans; servicing reports; servicer liability and indemnification; servicer resignation; servicer termination events; and the ability of certain parties to terminate a particular servicer in connection with a servicer termination event or otherwise. In addition, the securitization transaction governing the servicing of each Non-Serviced Whole Loan is a rated commercial mortgage-backed securitization transaction that is rated by one or more nationally recognized statistical rating organizations. Nonetheless, the servicing arrangements under the Non-Serviced PSAs differ in certain respects from the servicing arrangements under the PSA. For example, the provisions of the Non-Serviced PSAs and the PSA differ with respect to, among other things, time periods and timing matters, terminology, allocation of duties between multiple servicers and other service providers, circumstances under which the consent of the special servicer must be obtained by the master
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servicer or the consent of a directing holder must be obtained by the master servicer or special servicer, the specifics of particular servicer termination events, notices to and communications with applicable rating agencies and rating confirmation requirements.
In addition, pursuant to the PSA, with respect to each Non-Serviced Mortgage Loan:
| · | The master servicer, the special servicer, the certificate administrator and the trustee under the PSA will have no obligation or authority to (a) supervise the Non-Serviced Master Servicer, the Non-Serviced Special Servicer, or any of the trustee, certificate administrator or operating advisor under a Non-Serviced PSA or (b) make Servicing Advances with respect to any Non-Serviced Mortgage Loan. The obligation of the master servicer for this securitization to provide information and collections and make P&I Advances to the certificate administrator for the benefit of the Certificateholders with respect to a Non-Serviced Mortgage Loan is dependent on its receipt of the corresponding information and/or collections from the related Non-Serviced Master Servicer or the related Non-Serviced Special Servicer. |
| · | The master servicer for this securitization will be required to make P&I Advances with respect to the Non-Serviced Mortgage Loan, unless it or the special servicer has determined that such Advance would not be recoverable from collections on the Non-Serviced Mortgage Loan. |
Servicing of the 10 Hudson Yards Mortgage Loan
The 10 Hudson Yards Mortgage Loan, the 10 Hudson Yards Companion Loans and any related REO Property are being serviced and administered under the Hudson Yards 2016-10HY Trust and Servicing Agreement. While the Hudson Yards 2016-10HY Trust and Servicing Agreement and the PSA both address similar servicing matters, the servicing arrangements under the Hudson Yards 2016-10HY Trust and Servicing Agreement differ in certain respects from the servicing arrangements under the PSA. In that regard, in the case of the Hudson Yards 2016-10HY Trust and Servicing Agreement, the following are considerations relating to servicing, including the identification of some (but not all) of the differences in expected servicing provisions between such Non-Serviced PSA and the PSA:
| · | The Hudson Yards 2016-10HY Master Servicer will earn a primary servicing fee at a primary servicing fee rate of 0.00125%per annum with respect to the 10 Hudson Yards Mortgage Loan. |
| · | Any P&I Advance made by the Hudson Yards 2016-10HY Master Servicer or the Hudson Yards 2016-10HY Trustee with respect to the 10 Hudson Yards Standalone Companion Loans or the applicable master servicer or the trustee for the 10 Hudson Yards Non-Standalone Companion Loan may only be reimbursed out of future payments and collections on the 10 Hudson Yards Standalone Companion Loans or the 10 Hudson Yards Non-Standalone Companion Loan, respectively, or, as and to the extent permitted under the Hudson Yards 2016-10HY Trust and Servicing Agreement or the pooling and servicing agreement for the securitization of the 10 Hudson Yards Non-Standalone Companion Loan, on other loans, if applicable, included in the related securitization trust, but not out of payments or other collections on the Mortgage Loans. |
| · | The Hudson Yards 2016-10HY Special Servicer will earn a special servicing fee at a special servicing fee rate of 0.25%per annum with respect to the 10 Hudson Yards Mortgage Loan. |
| · | Pursuant to the Hudson Yards 2016-10HY Trust and Servicing Agreement, the liquidation fee rate and workout fee rate are both equal to a rate of 0.50%, subject to any cap set forth in the Hudson Yards 2016-10HY Trust and Servicing Agreement. |
| · | The Hudson Yards 2016-10HY Master Servicer is obligated to make servicing advances with respect to the 10 Hudson Yards Whole Loan in accordance with the servicing standard under the Hudson Yards 2016-10HY Trust and Servicing Agreement. If the Hudson Yards 2016-10HY Master Servicer determines that a servicing advance it made with respect to the 10 Hudson Yards Whole Loan or the related Mortgaged Property is nonrecoverable, it will be entitled to be reimbursed first, from collections on, and proceeds of the 10 Hudson Yards Whole Loan allocable |
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to the 10 Hudson Yards Subordinate Companion Loans, then second, from collections on, and proceeds of, the 10 Hudson Yards Whole Loan allocable to the 10 Hudson Yards Mortgage Loan and the 10 Hudson Yards Pari Passu Companion Loans on apro rata basis, and then third, with respect to the 10 Hudson Yards Mortgage Loan and 10 Hudson Yards Non-Standalone Companion Loan, from general collections on the issuing entity and the related securitization trust, respectively, on apro rata basis.
| · | With respect to the 10 Hudson Yards Mortgage Loan, during a “subordinate control period” under the Hudson Yards 2016-10HY Trust and Servicing Agreement, the Hudson Yards 2016-10HY Directing Holder will have the right to terminate the Hudson Yards 2016-10HY Special Servicer, with or without cause, and appoint the successor Hudson Yards 2016-10HY Special Servicer that meets the requirements of the Hudson Yards 2016-10HY Trust and Servicing Agreement;provided that if at any time no Hudson Yards 2016-10HY Directing Holder has been appointed, then (i) during any subordinate control period, each “initial consulting holder” will have non-binding consultation rights with respect to any major decisions and other matters as to which the Hudson Yards 2016-10HY Directing Holder would have had consent rights or direction rights if the Hudson Yards 2016-10HY Directing Holder had been appointed at such time and (ii) during any “subordinate consultation period”, each initial consulting holder will have the same non-binding consultation rights that the Hudson Yards 2016-10HY Directing Holder would have had if the Hudson Yards 2016-10HY Directing Holder had been appointed at such time. |
| · | With respect to the 10 Hudson Yards Mortgage Loan, at any time other than during a subordinate control period under the Hudson Yards 2016-10HY Trust and Servicing Agreement, at the written direction of holders of principal balance certificates under the Hudson Yards 2016-10HY Trust and Servicing Agreement evidencing not less than 25% of the voting rights of such certificates (taking into account the application of any appraisal reduction amounts and collateral deficiency amounts to notionally reduce the certificate balances of such certificates), the Hudson Yards 2016-10HY Certificate Administrator is required to conduct a vote to terminate the Hudson Yards 2016-10HY Special Servicer. At the written direction of certificate holders representing 75% of the applicable certificateholder quorum required for this vote or certificate holders of non-reduced certificates representing more than 50% of the voting rights of each class of non-reduced certificates, the Hudson Yards 2016-10HY Trustee will be required to terminate the Hudson Yards 2016-10HY Special Servicer and appoint a successor special servicer. |
| · | There is no operating advisor (and therefore no operating advisor fee) or asset representations reviewer (and therefore no asset representations reviewer asset review fee) under the Hudson Yards 2016-10HY Trust and Servicing Agreement. |
| · | If the 10 Hudson Yards Mortgage Loan becomes a defaulted loan, then (subject to, in each case if and when applicable, the consent/consultation rights of the Hudson Yards 2016-10HY Directing Holder and the consultation rights of the holders of the 10 Hudson Yards Pari Passu Companion Loans) the Hudson Yards 2016-10HY Special Servicer will be required to take one of the following actions in response: (i) foreclose upon or otherwise comparably convert ownership of the related Mortgaged Properties; (ii) negotiate a workout with the related borrower; or (iii) sell the 10 Hudson Yards Whole Loan in its entirety. If the Hudson Yards 2016-10HY Special Servicer determines to sell the 10 Hudson Yards Mortgage Loan and the 10 Hudson Yards Companion Loans, then the Hudson Yards 2016-10HY Special Servicer will have the right and the obligation to sell the 10 Hudson Yards Mortgage Loan and the 10 Hudson Yards Companion Loans as notes evidencing one whole loan in accordance with the terms of the Hudson Yards 2016-10HY Trust and Servicing Agreement. See “—Sale of Defaulted Loans and REO Properties” above and “Description of the Mortgage Pool—The Whole Loans—10 Hudson Yards Whole Loan—Sale of Defaulted 10 Hudson Yards Whole Loan”. |
| · | With respect to the 10 Hudson Yards Mortgage Loan, the servicing provisions relating to performing inspections and collecting operating information are substantially similar to those of the PSA. |
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| · | The Hudson Yards 2016-10HY Master Servicer and Hudson Yards 2016-10HY Special Servicer (a) have substantially similar rights related to resignation and (b) are subject to servicer termination events substantially similar to those in the PSA. |
| · | The rating agencies rating the securities issued under the Hudson Yards 2016-10HY Trust and Servicing Agreement vary from the rating agencies rating the certificates, which may cause servicing arrangements (including, but not limited to, servicer termination events and eligibility requirements for service providers) to be different under the Hudson Yards 2016-10HY Trust and Servicing Agreement than under the PSA. |
See also “Description of the Mortgage Pool—The Whole Loans—10 Hudson Yards Whole Loan” in this prospectus.
Servicing of the Westfield San Francisco Centre Mortgage Loan
The Westfield San Francisco Centre Mortgage Loan, the Westfield San Francisco Centre Companion Loans and any related REO Property are being serviced and administered under the DBJPM 2016-SFC Trust and Servicing Agreement. While the DBJPM 2016-SFC Trust and Servicing Agreement and the PSA both address similar servicing matters, the servicing arrangements under the DBJPM 2016-SFC Trust and Servicing Agreement differ in certain respects from the servicing arrangements under the PSA. In that regard, in the case of the DBJPM 2016-SFC Trust and Servicing Agreement, the following are considerations relating to servicing, including the identification of some (but not all) of the differences in expected servicing provisions between such Non-Serviced PSA and the PSA:
| · | The DBJPM 2016-SFC Master Servicer will earn a primary servicing fee (which includes any sub-servicing fee) of 0.00125%per annum with respect to the Westfield San Francisco Centre Mortgage Loan. |
| · | Any P&I Advance made by the DBJPM 2016-SFC Master Servicer or the DBJPM 2016-SFC Trustee or the master servicer or the trustee for the securitization of the other Westfield San Francisco Centre Pari Passu Non-Standalone Companion Loan in respect of a monthly payment on the Westfield San Francisco Centre Non-Standalone Pari Passu Companion Loan may only be reimbursed out of future payments and collections on the related Westfield San Francisco Centre Non-Standalone Pari Passu Companion Loan, or, as and to the extent permitted under the DBJPM 2016-SFC Trust and Servicing Agreement or the pooling and servicing agreement for the securitization of the other Westfield San Francisco Centre Non-Standalone Pari Passu Companion Loan, on other loans included in the related securitization trust, but not out of payments or other collections on the Mortgage Loans. |
| · | Pursuant to the DBJPM 2016-SFC Trust and Servicing Agreement, the special servicing fee with respect to the Westfield San Francisco Centre Mortgage Loan will be generally similar to the corresponding fee payable under the PSA. |
| · | Pursuant to the DBJPM 2016-SFC Trust and Servicing Agreement, the liquidation fee rate and workout fee rate are both equal to a rate of 0.25% and are not subject to any cap. |
| · | The DBJPM 2016-SFC Master Servicer is obligated to make servicing advances with respect to the Westfield San Francisco Centre Whole Loan in accordance with the servicing standard under the DBJPM 2016-SFC Trust and Servicing Agreement. If the DBJPM 2016-SFC Master Servicer determines that a servicing advance it made with respect to the Westfield San Francisco Centre Whole Loan or the related Mortgaged Property is nonrecoverable, it will be entitled to be reimbursed first, from collections on, and proceeds of the Westfield San Francisco Centre Whole Loan allocable to the Westfield San Francisco Centre Subordinate Companion Loan, then, from collections on, and proceeds of, the Westfield San Francisco Centre Whole Loan allocable to the Westfield San Francisco Centre Mortgage Loan and the Westfield San Francisco Centre Pari Passu Companion Loans on a pro rata basis, and then from general collections on the mortgage loans in the DBJPM 2016-SFC Securitization Trust, the securitization trust related to the other |
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Westfield San Francisco Centre Pari Passu Companion Loan and the Collection Account, on apro rata basis.
| · | With respect to the Westfield San Francisco Centre Mortgage Loan, prior to the occurrence and continuance of any control termination event under the DBJPM 2016-SFC Trust and Servicing Agreement, the DBJPM 2016-SFC Directing Holder will have the right to terminate the DBJPM 2016-SFC Special Servicer, with or without cause, and appoint the successor DBJPM 2016-SFC Special Servicer that meets the requirements of the DBJPM 2016-SFC Trust and Servicing Agreement. |
| · | With respect to the Westfield San Francisco Centre Mortgage Loan, after the occurrence and during the continuance of any control termination event under the DBJPM 2016-SFC Pooling and Servicing Agreement, at the written direction of holders of principal balance certificates under the DBJPM 2016-SFC Trust and Servicing Agreement evidencing not less than 25% of the voting rights of such certificates (taking into account the application of any appraisal reduction amounts to notionally reduce the certificate balances of those certificates), the DBJPM 2016-SFC Certificate Administrator is required to conduct a vote to terminate the DBJPM 2016-SFC Special Servicer. At the written direction of certificate holders representing 75% of the applicable certificateholder quorum required for this vote or certificate holders of non-reduced certificates representing more than 50% of the voting rights of each class of non-reduced certificates or certificate holders of non-reduced certificates representing more than 50% of the voting rights of each class of non-reduced certificates, the DBJPM 2016-SFC Trustee will be required to terminate the DBJPM 2016-SFC Special Servicer and appoint a successor DBJPM 2016-SFC Special Servicer. |
| · | There is no operating advisor (and therefore no operating advisor fee) or asset representations reviewer (and therefore no asset representations reviewer asset review fee) with respect to the DBJPM 2016-SFC Mortgage Trust. |
| · | If the Westfield San Francisco Centre Mortgage Loan becomes a defaulted loan, then (subject to, in each case if and when applicable, the consent/consultation rights of the DBJPM 2016-SFC Directing Holder and the consultation rights of the holders of the Westfield San Francisco Centre Pari Passu Companion Loans) the DBJPM 2016-SFC Special Servicer will be required to take one of the following actions in response: (i) foreclose upon or otherwise comparably convert ownership of the related Mortgaged Properties; (ii) negotiate a workout with the related borrower; or (iii) sell the Westfield San Francisco Centre Whole Loan in its entirety. If the DBJPM 2016-SFC Special Servicer determines to sell the Westfield San Francisco Centre Mortgage Loan and the Westfield San Francisco Centre Companion Loans, then the DBJPM 2016-SFC Special Servicer will have the right and the obligation to sell the Westfield San Francisco Centre Mortgage Loan and the Westfield San Francisco Centre Companion Loans as notes evidencing one whole loan in accordance with the terms of the DBJPM 2016-SFC Trust and Servicing Agreement. See “—Sale of Defaulted Loans and REO Properties” above and “Description of the Mortgage Pool—The Whole Loans—Westfield San Francisco Centre Whole Loan—Sale of Defaulted Westfield San Francisco Centre Whole Loan”. |
| · | With respect to the Westfield San Francisco Centre Mortgage Loan, the servicing provisions relating to performing inspections and collecting operating information are substantially similar to those of the PSA. |
| · | The DBJPM 2016-SFC Master Servicer and DBJPM 2016-SFC Special Servicer (a) have substantially similar rights related to resignation and (b) are subject to servicer termination events substantially similar to those in the PSA. |
| · | The rating agencies rating the securities issued under the DBJPM 2016-SFC Trust and Servicing Agreement vary from the rating agencies rating the certificates, which may cause servicing arrangements (including, but not limited to, servicer termination events and eligibility |
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requirements for service providers) to be different under the DBJPM 2016-SFC Trust and Servicing Agreement than under the PSA.
See also “Description of the Mortgage Pool—The Whole Loans—Westfield San Francisco Centre Whole Loan” in this prospectus.
Servicing of the Prudential Plaza Mortgage Loan
The Prudential Plaza Mortgage Loan, the Prudential Plaza Companion Loans and any related REO Property are being serviced and administered under the COMM 2015-CCRE26 Pooling and Servicing Agreement. While the COMM 2015-CCRE26 Pooling and Servicing Agreement and the PSA both address similar servicing matters, the servicing arrangements under the COMM 2015-CCRE26 Pooling and Servicing Agreement differ in certain respects from the servicing arrangements under the PSA. In that regard, in the case of the COMM 2015-CCRE26 Pooling and Servicing Agreement, the following are considerations relating to servicing, including the identification of some (but not all) of the differences in expected servicing provisions between such Non-Serviced PSA and the PSA:
| · | The COMM 2015-CCRE26 Master Servicer will earn a primary servicing fee (which includes any sub-servicing fee) of 0.00250%per annum with respect to the Prudential Plaza Mortgage Loan. |
| · | Any P&I Advance made by the COMM 2015-CCRE26 Master Servicer or the COMM 2015-CCRE26 Trustee or the master servicer or the trustee for the securitization of the other Prudential Plaza Companion Loans in respect of a monthly payment on the Prudential Plaza Companion Loans may only be reimbursed out of future payments and collections on the related Prudential Plaza Companion Loans, or, as and to the extent permitted under the COMM 2015-CCRE26 Pooling and Servicing Agreement or the pooling and servicing agreement for the securitization of the other Prudential Plaza Companion Loans, on other loans included in the related securitization trust, but not out of payments or other collections on the Mortgage Loan. |
| · | Pursuant to the COMM 2015-CCRE26 Pooling and Servicing Agreement, the liquidation fee, special servicing fee and workout fee with respect to the Prudential Plaza Mortgage Loan will be generally similar to the corresponding fee payable under the PSA. |
| · | The COMM 2015-CCRE26 Master Servicer is obligated to make servicing advances with respect to the Prudential Plaza Whole Loan in accordance with the servicing standard under the COMM 2015-CCRE26 Pooling and Servicing Agreement. If the COMM 2015-CCRE26 Master Servicer determines that a servicing advance it made with respect to the Prudential Plaza Whole Loan or the related Mortgaged Property is nonrecoverable, it will be entitled to be reimbursed first, from collections on, and proceeds of the Prudential Plaza Whole Loan allocable to the Prudential Plaza Subordinate Companion Loans, then, from collections on, and proceeds of, the Prudential Plaza Whole Loan allocable to the Prudential Plaza Mortgage Loan and the Prudential Plaza Pari Passu Companion Loans on a pro rata basis, and then from general collections on the mortgage loans in the COMM 2015-CCRE26 Securitization Trust, the securitization trust related to the other Prudential Plaza Pari Passu Companion Loans and the Collection Account, on apro rata basis. |
| · | With respect to the Prudential Plaza Mortgage Loan, prior to the occurrence and continuance of any control termination event under the COMM 2015-CCRE26 Pooling and Servicing Agreement, the COMM 2015-CCRE26 Majority Controlling Class Certificateholder will have the right to terminate the COMM 2015-CCRE26 Special Servicer, with or without cause, and appoint the successor COMM 2015-CCRE26 Special Servicer that meets the requirements of the COMM 2015-CCRE26 Pooling and Servicing Agreement. |
| · | With respect to the Prudential Plaza Mortgage Loan, after the occurrence and during the continuance of any control termination event under the COMM 2015-CCRE26 Pooling and Servicing Agreement, at the written direction of holders of principal balance certificates under the COMM 2015-CCRE26 Pooling and Servicing Agreement evidencing not less than 25% of the voting rights of such certificates (taking into account the application of any appraisal reduction |
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amounts to notionally reduce the certificate balances of those certificates), the COMM 2015-CCRE26 Certificate Administrator is required to conduct a vote to terminate the COMM 2015-CCRE26 Special Servicer. At the written direction of certificateholders representing at least 75% of the applicable certificateholder quorum required for this vote or certificateholders of non-reduced certificates representing more than 50% of the voting rights of each class of non-reduced certificates, the COMM 2015-CCRE26 Trustee will be required to terminate the COMM 2015-CCRE26 Special Servicer and appoint a successor COMM 2015-CCRE26 Special Servicer.
| · | There is no asset representations reviewer (and therefore no asset representations reviewer asset review fee) with respect to the COMM 2015-CCRE26 Mortgage Trust. |
| · | If the Prudential Plaza Mortgage Loan becomes a defaulted loan, then (subject to, in each case if and when applicable, the consent/consultation rights of the COMM 2015-CCRE26 Majority Controlling Class Certificateholder and the consultation rights of the holders of the Prudential Plaza Pari Passu Companion Loans) the COMM 2015-CCRE26 Special Servicer will be required to take one of the following actions in response: (i) foreclose upon or otherwise comparably convert ownership of the related Mortgaged Properties; (ii) negotiate a workout with the related borrower; or (iii) sell the Prudential Plaza Whole Loan in its entirety. If the COMM 2015-CCRE26 Special Servicer determines to sell the Prudential Plaza Mortgage Loan and the Prudential Plaza Companion Loans, then the COMM 2015-CCRE26 Special Servicer will have the right and the obligation to sell the Prudential Plaza Mortgage Loan and the Prudential Plaza Companion Loans as notes evidencing one whole loan in accordance with the terms of the COMM 2015-CCRE26 Pooling and Servicing Agreement. See “—Sale of Defaulted Loans and REO Properties” above and “Description of the Mortgage Pool—The Whole Loans—Prudential Plaza Whole Loan—Sale of Defaulted Prudential PlazaWhole Loan”. |
| · | With respect to the Prudential Plaza Mortgage Loan, the servicing provisions relating to performing inspections and collecting operating information are substantially similar to those of the PSA. |
| · | The COMM 2015-CCRE26 Master Servicer and COMM 2015-CCRE26 Special Servicer (a) have substantially similar rights related to resignation and (b) are subject to servicer termination events substantially similar to those in the PSA. |
| · | The rating agencies rating the securities issued under the COMM 2015-CCRE26 Pooling and Servicing Agreement vary from the rating agencies rating the certificates, which may cause servicing arrangements (including, but not limited to, servicer termination events and eligibility requirements for service providers) to be different under the COMM 2015-CCRE26 Pooling and Servicing Agreement than under the PSA. |
See also “Description of the Mortgage Pool—The Whole Loans—Prudential Plaza Whole Loan” in this prospectus.
Servicing of the Birch Run Premium Outlets Mortgage Loan
The Birch Run Premium Outlets Mortgage Loan, the Birch Run Premium Outlets Companion Loans and any related REO Property are being serviced and administered under the COMM 2016-DC2 Pooling and Servicing Agreement (however, the servicing of the Birch Run Premium Outlets Mortgage Loan and the Birch Run Premium Outlets Companion Loans will shift once the controlling note, Note A-3, is securitized). While the COMM 2016-DC2 Pooling and Servicing Agreement and the PSA both address similar servicing matters, the servicing arrangements under the COMM 2016-DC2 Pooling and Servicing Agreement differ in certain respects from the servicing arrangements under the PSA. In that regard, in the case of the COMM 2016-DC2 Pooling and Servicing Agreement, the following are considerations relating to servicing, including the identification of some (but not all) of the differences in expected servicing provisions between such Non-Serviced PSA and the PSA:
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| · | The COMM 2016-DC2 Master Servicer will earn a primary servicing fee (which includes any sub-servicing fee) of 0.0025%per annum with respect to the Birch Run Premium Outlets Mortgage Loan. |
| · | Any P&I Advance made by the COMM 2016-DC2 Master Servicer or the COMM 2016-DC2 Trustee or the master servicer or the trustee for the securitization of the other Birch Run Premium Outlets Companion Loans in respect of a monthly payment on the Birch Run Premium Outlets Companion Loans may only be reimbursed out of future payments and collections on the related Birch Run Premium Outlets Companion Loans, or, as and to the extent permitted under the COMM 2016-DC2 Pooling and Servicing Agreement or the pooling and servicing agreement for the securitization of the other Birch Run Premium Outlets Companion Loans, on other loans included in the related securitization trust, but not out of payments or other collections on the Mortgage Loan. |
| · | Pursuant to the COMM 2016-DC2 Pooling and Servicing Agreement, the liquidation fee, special servicing fee and workout fee with respect to the Birch Run Premium Outlets Mortgage Loan will be generally similar to the corresponding fee payable under the PSA. |
| · | The COMM 2016-DC2 Master Servicer is obligated to make servicing advances with respect to the Birch Run Premium Outlets Whole Loan in accordance with the servicing standard under the COMM 2016-DC2 Pooling and Servicing Agreement. If the COMM 2016-DC2 Master Servicer determines that a servicing advance it made with respect to the Birch Run Premium Outlets Whole Loan or the related Mortgaged Property is nonrecoverable, it will be entitled to be reimbursed first, from collections on, and proceeds of, the Birch Run Premium Outlets Whole Loan allocable to the Birch Run Premium Outlets Mortgage Loan and the Birch Run Premium Outlets Companion Loans on apro rata basis, and then from general collections on the mortgage loans in the COMM 2016-DC2 Securitization Trust, the securitization trust related to the other Birch Run Premium Outlets Companion Loans and the Collection Account, on apro rata basis. |
| · | With respect to the Birch Run Premium Outlets Mortgage Loan, prior to the occurrence and continuance of any control termination event under the COMM 2016-DC2 Pooling and Servicing Agreement, the COMM 2016-DC2 Directing Certificateholder will have the right to terminate the COMM 2016-DC2 Special Servicer, with or without cause, and appoint the successor COMM 2016-DC2 Special Servicer that meets the requirements of the COMM 2016-DC2 Pooling and Servicing Agreement. |
| · | With respect to the Birch Run Premium Outlets Mortgage Loan, after the occurrence and during the continuance of any control termination event under the COMM 2016-DC2 Pooling and Servicing Agreement, at the written direction of holders of principal balance certificates under the COMM 2016-DC2 Pooling and Servicing Agreement evidencing not less than 25% of the voting rights of such certificates (taking into account the application of any appraisal reduction amounts to notionally reduce the certificate balances of those certificates), the COMM 2016-DC2 Certificate Administrator is required to conduct a vote to terminate the COMM 2016-DC2 Special Servicer. At the written direction of certificate holders representing at least 75% of the applicable certificateholder quorum required for this vote or certificateholders of non-reduced certificates representing more than 50% of the voting rights of each class of non-reduced certificates, the COMM 2016-DC2 Trustee will be required to terminate the COMM 2016-DC2 Special Servicer and appoint a successor COMM 2016-DC2 Special Servicer. |
| · | If the Birch Run Premium Outlets Mortgage Loan becomes a defaulted loan, then (subject to, in each case if and when applicable, the consent/consultation rights of the COMM 2016-DC2 Directing Certificateholder and the consultation rights of the holders of the Birch Run Premium Outlets Companion Loans) the COMM 2016-DC2 Special Servicer will be required to take one of the following actions in response: (i) foreclose upon or otherwise comparably convert ownership of the related Mortgaged Properties; (ii) negotiate a workout with the related borrower; or (iii) sell the Birch Run Premium Outlets Whole Loan in its entirety. If the Birch Run Premium Outlets |
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Whole Loan becomes a defaulted mortgage loan pursuant to the terms of the COMM 2016-DC2 Pooling and Servicing Agreement, the COMM 2016-DC2 Special Servicer will be required to sell the Birch Run Premium Outlets Mortgage Loan together with the Birch Run Premium Outlets Companion Loans as a single whole loan. See “—Sale of Defaulted Loans and REO Properties” above and “Description of the Mortgage Pool—The Whole Loans—Birch Run Premium Outlets Whole Loan—Sale of Defaulted Birch Run Premium OutletsWhole Loan”.
| · | With respect to the Birch Run Premium Outlets Mortgage Loan, the servicing provisions relating to performing inspections and collecting operating information are substantially similar to those of the PSA, except that inspection obligations commence in the year 2016. |
| · | The COMM 2016-DC2 Master Servicer and COMM 2016-DC2 Special Servicer (a) have substantially similar rights related to resignation and (b) are subject to servicer termination events substantially similar to those in the PSA. |
| · | The rating agencies rating the securities issued under the COMM 2016-DC2 Pooling and Servicing Agreement vary from the rating agencies rating the certificates, which may cause servicing arrangements (including, but not limited to, servicer termination events and eligibility requirements for service providers) to be different under the COMM 2016-DC2 Pooling and Servicing Agreement than under the PSA. |
The servicing of the Birch Run Premium Outlets Whole Loan is expected to be governed by the COMM 2016-DC2 PSA only temporarily, until the applicable Birch Run Premium Outlets Companion Loan Securitization Date. From and after the Birch Run Premium Outlets Companion Loan Securitization Date, the Birch Run Premium Outlets Whole Loan will be serviced by the master servicer and special servicer under the related PSA pursuant to the terms of the related PSA. Although the related Intercreditor Agreement imposes some requirements regarding the terms of the related PSA (and it is expected that such PSA will contain servicing provisions substantially similar to, but not identical with, the provisions of the COMM 2016-DC2 PSA), the securitization to which the related Controlling Companion Loan is to be contributed has not been determined, and accordingly, the servicing terms of such PSA are unknown. See “Description of the Mortgage Pool—The Whole Loans—Birch Run Premium Outlets Whole Loan” in this prospectus.
Servicing of the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan
The Gas Company Tower & World Trade Center Parking Garage Mortgage Loan, the Gas Company Tower & World Trade Center Parking Garage Companion Loans and any related REO Property are being serviced and administered under the COMM 2016-GCT Trust and Servicing Agreement. While the COMM 2016-GCT Trust and Servicing Agreement and the PSA both address similar servicing matters, the servicing arrangements under the COMM 2016-GCT Trust and Servicing Agreement differ in certain respects from the servicing arrangements under the PSA. In that regard, in the case of the COMM 2016-GCT Trust and Servicing Agreement, the following are considerations relating to servicing, including the identification of some (but not all) of the differences in expected servicing provisions between such Non-Serviced PSA and the PSA:
| · | The COMM 2016-GCT Master Servicer will earn a primary servicing fee at a primary servicing fee rate of 0.00125%per annum with respect to the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan. |
| · | Any P&I Advance made by the COMM 2016-GCT Master Servicer or the COMM 2016-GCT Trustee with respect to the Gas Company Tower & World Trade Center Parking Garage Standalone Companion Loans or the applicable master servicer or the trustee for the Gas Company Tower & World Trade Center Parking Garage Non-Standalone Pari Passu Companion Loan may only be reimbursed out of future payments and collections on the Gas Company Tower & World Trade Center Parking Garage Standalone Companion Loans and the Gas Company Tower & World Trade Center Parking Garage Non-Standalone Pari Passu Companion Loan, respectively, or, as and to the extent permitted under the COMM 2016-GCT Trust and Servicing |
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Agreement and the pooling and servicing agreement for the securitization of the Gas Company Tower & World Trade Center Parking Garage Non-Standalone Pari Passu Companion Loan, on other loans, if applicable, included in the related securitization trust, but not out of payments or other collections on the Mortgage Loans.
| · | The COMM 2016-GCT Special Servicer will earn a special servicing fee at a special servicing fee rate of 0.250%per annum with respect to the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan. |
| · | Pursuant to the COMM 2016-GCT Trust and Servicing Agreement, the liquidation fee rate and workout fee rate are both equal to a rate of 0.500%, subject to any cap set forth in the COMM 2016-GCT Trust and Servicing Agreement. |
| · | The COMM 2016-GCT Master Servicer is obligated to make servicing advances with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan in accordance with the servicing standard under the COMM 2016-GCT Trust and Servicing Agreement. If the COMM 2016-GCT Master Servicer determines that a servicing advance it made with respect to the Gas Company Tower & World Trade Center Parking Garage Whole Loan or the related Mortgaged Property is nonrecoverable, it will be entitled to be reimbursed first, from collections on, and proceeds of the Gas Company Tower & World Trade Center Parking Garage Whole Loan allocable to the Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loans, then second, from collections on, and proceeds of, the Gas Company Tower & World Trade Center Parking Garage Whole Loan allocable to the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Pari Passu Companion Loans on apro rata basis, and then third, with respect to the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Non-Standalone Companion Loan, from general collections of the issuing entity and the related securitization trust, respectively, on apro ratabasis. |
| · | With respect to the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan, during a “subordinate control period” under the COMM 2016-GCT Trust and Servicing Agreement, the COMM 2016-GCT Directing Holder will have the right to terminate the COMM 2016-GCT Special Servicer, with or without cause, and appoint a successor special servicer that meets the requirements of the COMM 2016-GCT Trust and Servicing Agreement. |
| · | With respect to the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan at any time other than during a subordinate control period under the COMM 2016-GCT Trust and Servicing Agreement, at the written direction of holders of principal balance certificates under the COMM 2016-GCT Trust and Servicing Agreement evidencing not less than 25% of the voting rights of such certificates (taking into account the application of any appraisal reduction amounts and collateral deficiency amounts to notionally reduce the certificate balances of such certificates), the COMM 2016-GCT Certificate Administrator is required to conduct a vote to terminate the COMM 2016-GCT Special Servicer. At the written direction of certificate holders representing 75% of the applicable certificateholder quorum required for this vote or certificate holders of non-reduced certificates representing more than 50% of the voting rights of each class of non-reduced certificates, the COMM 2016-GCT Trustee will be required to terminate the COMM 2016-GCT Special Servicer and appoint a successor special servicer. |
| · | There is no operating advisor (and therefore no operating advisor fee) or asset representations reviewer (and therefore no asset representations reviewer asset review fee) under the COMM 2016-GCT Trust and Servicing Agreement. |
| · | If the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan becomes a defaulted loan, then (subject to, in each case if and when applicable, the consent/consultation rights of the COMM 2016-GCT Directing Holder and the consultation rights, if any, of the holders |
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of the Gas Company Tower & World Trade Center Parking Garage Pari Passu Companion Loans) the COMM 2016-GCT Special Servicer will be required to take one of the following actions in response: (i) foreclose upon or otherwise comparably convert ownership of the related Mortgaged Properties; (ii) negotiate a workout with the related borrower; or (iii) sell the Gas Company Tower & World Trade Center Parking Garage Whole Loan in its entirety. If the COMM 2016-GCT Special Servicer determines to sell the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Companion Loans, then the COMM 2016-GCT Special Servicer will have the right and the obligation to sell the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and the Gas Company Tower & World Trade Center Parking Garage Companion Loans as notes evidencing one whole loan in accordance with the terms of the COMM 2016-GCT Trust and Servicing Agreement. See “—Sale of Defaulted Loans and REO Properties” above and “Description of the Mortgage Pool—The Whole Loans—Gas Company Tower & World Trade Center Parking Garage Whole Loan—Sale of Defaulted Gas Company Tower & World Trade Center Parking Garage Whole Loan”.
| · | With respect to the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan, the servicing provisions relating to performing inspections and collecting operating information are substantially similar to those of the PSA. |
| · | The COMM 2016-GCT Master Servicer and COMM 2016-GCT Special Servicer (a) have substantially similar rights related to resignation and (b) are subject to servicer termination events substantially similar to those in the PSA. |
| · | The rating agencies rating the securities issued under the COMM 2016-GCT Trust and Servicing Agreement vary from the rating agencies rating the certificates, which may cause servicing arrangements (including, but not limited to, servicer termination events and eligibility requirements for service providers) to be different under the COMM 2016-GCT Trust and Servicing Agreement than under the PSA. |
See also “Description of the Mortgage Pool—The Whole Loans—Gas Company Tower & World Trade Center Parking Garage Whole Loan” in this prospectus.
Servicing of the Vertex Pharmaceuticals HQ Mortgage Loan
As of the Closing Date, the Vertex Pharmaceuticals HQ Mortgage Loan, the Vertex Pharmaceuticals HQ Companion Loans and any related REO Property are expected to be serviced and administered under the WFCM 2016-BNK1 Pooling and Servicing Agreement. While it is expected that the WFCM 2016-BNK1 Pooling and Servicing Agreement and the PSA will both address generally similar servicing matters, it is likely that the servicing arrangements under the WFCM 2016-BNK1 Pooling and Servicing Agreement will differ in certain respects from the servicing arrangements under the PSA. In that regard, in the case of the WFCM 2016-BNK1 Pooling and Servicing Agreement, the following are considerations relating to servicing, including the identification of some (but not all) of the differences in expected servicing provisions between such Non-Serviced PSA and the PSA:
| · | It is expected that the WFCM 2016-BNK1 Master Servicer will earn a primary servicing fee (which includes any sub-servicing fee) of 0.00250%per annum with respect to the Vertex Pharmaceuticals HQ Mortgage Loan. |
| · | It is expected that any P&I advance made by the WFCM 2016-BNK1 Master Servicer or the WFCM 2016-BNK1 Trustee or the master servicer or the trustee for the securitization of the other Vertex Pharmaceuticals HQ Companion Loans in respect of a monthly payment on the Vertex Pharmaceuticals HQ Companion Loans may only be reimbursed out of future payments and collections on the related Vertex Pharmaceuticals HQ Companion Loans, or, as and to the extent permitted under the WFCM 2016-BNK1 Pooling and Servicing Agreement or the pooling and servicing agreement for the securitization of the other Vertex Pharmaceuticals HQ Companion |
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Loans, on other loans included in the related securitization trust, but not out of payments or other collections on the Vertex Pharmaceuticals HQ Mortgage Loan. It is expected that no party to the WFCM 2016-BNK1 Pooling and Servicing Agreement will be required to make P&I advances on the Vertex Pharmaceuticals HQ Mortgage Loan.
| · | It is expected that, pursuant to the WFCM 2016-BNK1 Pooling and Servicing Agreement, the special servicing fee with respect to the Vertex Pharmaceuticals HQ Mortgage Loan will be generally similar to the corresponding fee payable under the PSA, except that the WFCM 2016-BNK1 Pooling and Servicing Agreement is expected to provide for a $3,500 or, under certain circumstances, $5,000 per month minimum special servicing fee. |
| · | It is expected that, pursuant to the WFCM 2016-BNK1 Pooling and Servicing Agreement, the liquidation fee rate will be equal to a rate of 1.0% or, if such rate would result in a fee less than $25,000, the lesser of 3.0% and such rate as would result in a liquidation fee equal to $25,000. It is expected that, pursuant to the WFCM 2016-BNK1 Pooling and Servicing Agreement, the workout fee rate will be equal to a rate of 1.0% and will be subject to a $25,000 cap; however, in the event the workout fee rate would result in a fee less than $25,000, then the workout fee will be equal to $25,000. In addition, it is expected that there will not be any cap on the liquidation fee or workout fee payable under the WFCM 2016-BNK1 Pooling and Servicing Agreement. |
| · | The WFCM 2016-BNK1 Master Servicer will be obligated to make servicing advances with respect to the Vertex Pharmaceuticals HQ Whole Loan in accordance with the servicing standard under the WFCM 2016-BNK1 Pooling and Servicing Agreement. If the WFCM 2016-BNK1 Master Servicer determines that a servicing advance it made with respect to the Vertex Pharmaceuticals HQ Whole Loan or the related Mortgaged Property is nonrecoverable, it is expected that it will be entitled to be reimbursed first, from collections on, and proceeds of, the Vertex Pharmaceuticals HQ Whole Loan allocable to the Vertex Pharmaceuticals HQ Mortgage Loan and the Vertex Pharmaceuticals HQ Companion Loans on apro rata basis, and then, from general collections on the mortgage loans in the CD 2016-CD1 Mortgage Trust, the WFCM 2016-BNK1 Mortgage Trust and the securitization trust related to the other Vertex Pharmaceuticals HQ Companion Loans, on apro rata basis. |
| · | With respect to the Vertex Pharmaceuticals HQ Mortgage Loan, provided that the equivalent of a Control Termination Event does not exist under the WFCM 2016-BNK1 Pooling and Servicing Agreement, it is expected that the WFCM 2016-BNK1 Directing Certificateholder will generally have the right to terminate the WFCM 2016-BNK1 Special Servicer, with or without cause, and appoint a successor WFCM 2016-BNK1 Special Servicer that meets the requirements of the WFCM 2016-BNK1 Pooling and Servicing Agreement, with respect to the Vertex Pharmaceuticals HQ Whole Loan. |
| · | With respect to the Vertex Pharmaceuticals HQ Mortgage Loan, after the occurrence and during the continuance of the equivalent of a Control Termination Event under the WFCM 2016-BNK1 Pooling and Servicing Agreement, it is expected that at the written direction of holders of certificates issued under the WFCM 2016-BNK1 Pooling and Servicing Agreement of the applicable classes and evidencing the requisite percentage of voting rights, the WFCM 2016-BNK1 Special Servicer may be replaced. If the equivalent of a Consultation Termination Event exists under the WFCM 2016-BNK1 Pooling and Servicing Agreement, the WFCM 2016-BNK1 Operating Advisor may recommend replacement of the WFCM 2016-BNK1 Special Servicer if the WFCM 2016-BNK1 Operating Advisor determines that the WFCM 2016-BNK1 Special Servicer is not performing its duties under the WFCM 2016-BNK1 Pooling and Servicing Agreement or is otherwise not acting in accordance with the servicing standard thereunder. |
| · | If the Vertex Pharmaceuticals HQ Mortgage Loan becomes a defaulted loan, then it is expected that (subject to, in each case if and when applicable, the consent/consultation rights of the WFCM 2016-BNK1 Directing Certificateholder and the consultation rights of the holders of the Vertex Pharmaceuticals HQ Mortgage Loan and the Vertex Pharmaceuticals HQ Companion Loans, the |
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WFCM 2016-BNK1 Operating Advisor and any other party contemplated by the WFCM 2016-BNK1 Pooling and Servicing Agreement) the WFCM 2016-BNK1 Special Servicer will be required to take one of the following actions in response: (i) foreclose upon or otherwise comparably convert ownership of the related Mortgaged Property; (ii) negotiate a workout with the related borrower (although the related maturity date may not be extended beyond a date that is five years prior to August 2049); or (iii) sell the Vertex Pharmaceuticals HQ Whole Loan in its entirety. It is expected that, if the WFCM 2016-BNK1 Special Servicer determines to sell the Vertex Pharmaceuticals HQ Mortgage Loan and the Vertex Pharmaceuticals HQ Companion Loans, then the WFCM 2016-BNK1 Special Servicer will have the right and the obligation to sell the Vertex Pharmaceuticals HQ Mortgage Loan and the Vertex Pharmaceuticals HQ Companion Loans as notes evidencing one whole loan in accordance with the terms of the WFCM 2016-BNK1 Pooling and Servicing Agreement. See “—Sale of Defaulted Loans and REO Properties” above and “Description of the Mortgage Pool—The Whole Loans—Vertex Pharmaceuticals HQ Whole Loan—Sale of Defaulted Vertex Pharmaceuticals HQ Whole Loan” in this prospectus.
| · | With respect to the WFCM 2016-BNK1 Pooling and Servicing Agreement, the servicing provisions relating to performing inspections and collecting operating information are expected to be substantially similar to those of the PSA. |
| · | It is expected that the WFCM 2016-BNK1 Master Servicer and WFCM 2016-BNK1 Special Servicer will (a) have substantially similar rights related to resignation and (b) be subject to servicer termination events generally similar to those in the PSA. |
| · | It is expected that the specific types of actions constituting major decisions under the WFCM 2016-BNK1 Pooling and Servicing Agreement will differ in certain respects from those actions that constitute Major Decisions under the PSA, and therefore, the specific types of servicer actions with respect to which the WFCM 2016-BNK1 Directing Certificateholder is permitted to consent will correspondingly differ. |
| · | It is expected that the actions that the WFCM 2016-BNK1 Master Servicer is permitted to take without obtaining the consent of the WFCM 2016-BNK1 Special Servicer under the WFCM 2016-BNK1 Pooling and Servicing Agreement will differ from the actions that the master servicer is permitted to take without obtaining the consent of the special servicer under the PSA. |
| · | It is expected that the liability of the parties to the WFCM 2016-BNK1 Pooling and Servicing Agreement will be limited in a manner similar, but not necessarily identical, to the liability of the parties to the PSA. |
| · | It is expected that collections on the Vertex Pharmaceuticals HQ Whole Loan will be maintained under the WFCM 2016-BNK1 Pooling and Servicing Agreement in a manner similar, but not necessarily identical, to how collections on the Serviced Whole Loans are maintained under the PSA, provided that rating requirements for accounts and permitted investments may vary under those two pooling and servicing agreements. |
| · | It is expected that the rating agencies rating the securities issued under the WFCM 2016-BNK1 Pooling and Servicing Agreement will vary from the rating agencies rating the certificates, which may cause servicing arrangements (including, but not limited to, servicer termination events and eligibility requirements for service providers) to be different under the WFCM 2016-BNK1 Pooling and Servicing Agreement than under the PSA. |
| · | The WFCM 2016-BNK1 Pooling and Servicing Agreement is expected to provide for a risk retention consultation party with certain non-binding consultation rights in respect of the Vertex Pharmaceuticals HQ Whole Loan if it is specially serviced. |
| · | It is expected that, pursuant to the terms of the WFCM 2016-BNK1 Pooling and Servicing Agreement, the WFCM 2016-BNK1 Master Servicer or the WFCM 2016-BNK1 Special Servicer, |
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as the case may be, will be permitted to take enforcement action with respect to the related borrower’s failure to pay Excess Interest to the extent permitted under the related ARD Loan documents and may take action to enforce the lender’s right to apply excess cash flow to principal in accordance with the terms of the related ARD Loan documents.
The foregoing information is based solely on a publicly available prospectus for the WFCM 2016-BNK1 transaction and/or the related intercreditor agreement.
See also “Description of the Mortgage Pool—The Whole Loans—Vertex Pharmaceuticals HQ Whole Loan” in this prospectus.
Servicing of the 401 South State Street Mortgage Loan
The 401 South State Street Mortgage Loan, the 401 South State Street Companion Loan and any related REO Property are being serviced and administered under the CGCMT 2016-P4 Pooling and Servicing Agreement. While the CGCMT 2016-P4 Pooling and Servicing Agreement and the PSA both address similar servicing matters, the servicing arrangements under the CGCMT 2016-P4 Pooling and Servicing Agreement differ in certain respects from the servicing arrangements under the PSA. In that regard, in the case of the CGCMT 2016-P4 Pooling and Servicing Agreement, the following are considerations relating to servicing, including the identification of some (but not all) of the differences in expected servicing provisions between such Non-Serviced PSA and the PSA:
| · | The CGCMT 2016-P4 Master Servicer will earn a primary servicing fee (which includes any sub-servicing fee) of 0.00250%per annum with respect to the 401 South State Street Mortgage Loan. |
| · | Any P&I advance made by the CGCMT 2016-P4 Master Servicer or the CGCMT 2016-P4 Trustee in respect of a monthly payment on the 401 South State Street Companion Loan may only be reimbursed out of future payments and collections on the 401 South State Street Companion Loan, or, as and to the extent permitted under the CGCMT 2016-P4 Pooling and Servicing Agreement, on other loans included in the related securitization trust, but not out of payments or other collections on the 401 South State Street Mortgage Loan. No party to the CGCMT 2016-P4 Pooling and Servicing Agreement is required to make P&I advances on the 401 South State Street Mortgage Loan. |
| · | Pursuant to the CGCMT 2016-P4 Pooling and Servicing Agreement, the special servicing fee with respect to the 401 South State Street Mortgage Loan will be generally similar to the corresponding fee payable under the PSA, except that the CGCMT 2016-P4 Pooling and Servicing Agreement provides for a $3,500 per month minimum special servicing fee. |
| · | Pursuant to the CGCMT 2016-P4 Pooling and Servicing Agreement, the liquidation fee rate and workout fee rate are both equal to a rate of 1.0%, but the liquidation fee and workout fee are subject to a $25,000 minimum. |
| · | The CGCMT 2016-P4 Master Servicer is obligated to make servicing advances with respect to the 401 South State Street Whole Loan in accordance with the servicing standard under the CGCMT 2016-P4 Pooling and Servicing Agreement. If the CGCMT 2016-P4 Master Servicer determines that a servicing advance it made with respect to the 401 South State Street Whole Loan or the related Mortgaged Property is nonrecoverable, it will be entitled to be reimbursed first from collections on, and proceeds of, the 401 South State Street Whole Loan allocable to the 401 South State Street Mortgage Loan and the 401 South State Street Companion Loan on apro rata basis, and then from general collections on the mortgage loans in the CGCMT 2016-P4 securitization trust and the Collection Account, on apro rata basis. |
| · | With respect to the 401 South State Street Mortgage Loan, provided that the equivalent of a Control Termination Event does not exist under the CGCMT 2016-P4 Pooling and Servicing Agreement, the CGCMT 2016-P4 Directing Certificateholder will generally have the right to terminate the CGCMT 2016-P4 Special Servicer, with or without cause, and appoint a successor |
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CGCMT 2016-P4 Special Servicer that meets the requirements of the CGCMT 2016-P4 Pooling and Servicing Agreement, with respect to the 401 South State Street Whole Loan.
| · | With respect to the 401 South State Street Mortgage Loan, after the occurrence and during the continuance of the equivalent of a Control Termination Event under the CGCMT 2016-P4 Pooling and Servicing Agreement, at the written direction of holders of certificates issued under the CGCMT 2016-P4 Pooling and Servicing Agreement of the applicable classes and evidencing the requisite percentage of voting rights, the CGCMT 2016-P4 Special Servicer may be replaced. If the equivalent of a Consultation Termination Event exists under the CGCMT 2016-P4 Pooling and Servicing Agreement, the CGCMT 2016-P4 Operating Advisor may recommend replacement of the CGCMT 2016-P4 Special Servicer if the CGCMT 2016-P4 Operating Advisor determines that the CGCMT 2016-P4 Special Servicer is not performing its duties under the CGCMT 2016-P4 Pooling and Servicing Agreement or is otherwise not acting in accordance with the servicing standard thereunder. |
| · | If the 401 South State Street Mortgage Loan becomes a defaulted loan, then (subject to, in each case if and when applicable, the consent/consultation rights of the CGCMT 2016-P4 Directing Certificateholder and the consultation rights of the holder of the 401 South State Street Mortgage Loan and the CGCMT 2016-P4 Operating Advisor) the CGCMT 2016-P4 Special Servicer will be required to take one of the following actions in response: (i) foreclose upon or otherwise comparably convert ownership of the related Mortgaged Property; (ii) negotiate a workout with the related borrower (although the related maturity date may not be extended beyond a date that is five years prior to July 2049); or (iii) sell the 401 South State Street Whole Loan in its entirety. If the CGCMT 2016-P4 Special Servicer determines to sell the 401 South State Street Mortgage Loan and the 401 South State Street Companion Loan, then the CGCMT 2016-P4 Special Servicer will have the right and the obligation to sell the 401 South State Street Mortgage Loan and the 401 South State Street Companion Loan as notes evidencing one whole loan in accordance with the terms of the CGCMT 2016-P4 Pooling and Servicing Agreement. See “—Sale of Defaulted Loans and REO Properties” above and “Description of the Mortgage Pool—The Whole Loans—401 South State Street Whole Loan—Sale of Defaulted 401 South State StreetWhole Loan” in this prospectus. |
| · | With respect to the CGCMT 2016-P4 Pooling and Servicing Agreement, the servicing provisions relating to performing inspections and collecting operating information are generally similar to those of the PSA. |
| · | The CGCMT 2016-P4 Master Servicer and CGCMT 2016-P4 Special Servicer (a) have substantially similar rights related to resignation and (b) are subject to servicer termination events substantially similar to those in the PSA. |
| · | The specific types of actions constituting major decisions under the CGCMT 2016-P4 Pooling and Servicing Agreement differ in certain respects from those actions that constitute Major Decisions under the PSA, and therefore, the specific types of servicer actions with respect to which the CGCMT 2016-P4 Directing Certificateholder is permitted to consent correspondingly differ. |
| · | The actions that the CGCMT 2016-P4 Master Servicer is permitted to take without obtaining the consent of the CGCMT 2016-P4 Special Servicer under the CGCMT 2016-P4 Pooling and Servicing Agreement differ from the actions that the master servicer is permitted to take without obtaining the consent of the special servicer under the PSA. |
| · | The liability of the parties to the CGCMT 2016-P4 Pooling and Servicing Agreement is limited in a manner similar, but not necessarily identical, to the liability of the parties to the PSA. |
| · | Collections on the 401 South State Street Whole Loan are maintained under the CGCMT 2016-P4 Pooling and Servicing Agreement in a manner similar, but not necessarily identical, to how collections on the Serviced Whole Loans are maintained under the PSA, provided that rating |
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requirements for accounts and permitted investments may vary under those two pooling and servicing agreements.
| · | The rating agencies rating the securities issued under the CGCMT 2016-P4 Pooling and Servicing Agreement vary from the rating agencies rating the certificates, which may cause servicing arrangements (including, but not limited to, servicer termination events and eligibility requirements for service providers) to be different under the CGCMT 2016-P4 Pooling and Servicing Agreement than under the PSA. |
See also “Description of the Mortgage Pool—The Whole Loans—401 South State Street Whole Loan” in this prospectus.
Rating Agency Confirmations
The PSA will provide that, notwithstanding the terms of the related Mortgage Loan documents or other provisions of the PSA, if any action under such Mortgage Loan documents or the PSA requires a Rating Agency Confirmation from each of the Rating Agencies as a condition precedent to such action, if the party (the “Requesting Party”) attempting and/or required to obtain such Rating Agency Confirmations has made a request to any Rating Agency for such Rating Agency Confirmation and, within 10 business days of such request being posted to the 17g-5 Information Provider’s website, such Rating Agency has not replied to such request or has responded in a manner that indicates that such Rating Agency is neither reviewing such request nor waiving the requirement for Rating Agency Confirmation, then such Requesting Party will be required to confirm (through direct communication and not by posting any confirmation on the 17g-5 Information Provider’s website) that the applicable Rating Agency has received the Rating Agency Confirmation request, and, if it has not, promptly request the related Rating Agency Confirmation again (which may also be through direct communication). The circumstances described in the preceding sentence are referred to in this prospectus as a “RAC No-Response Scenario”.
If there is no response to either such Rating Agency Confirmation request within 5 business days of such second request in a RAC No-Response Scenario or if such Rating Agency has responded in a manner that indicates such Rating Agency is neither reviewing such request nor waiving the requirement for Rating Agency Confirmation, then (x) with respect to any condition in any Mortgage Loan document requiring such Rating Agency Confirmation, or with respect to any other matter under the PSA relating to the servicing of the Mortgage Loans (other than as set forth in clause (y) below), the requirement to obtain a Rating Agency Confirmation will be deemed not to apply (as if such requirement did not exist) with respect to such Rating Agency, and the master servicer or the special servicer, as the case may be, may then take such action if the master servicer or the special servicer, as applicable, confirms its original determination (made prior to making such request) that taking the action with respect to which it requested the Rating Agency Confirmation would still be consistent with the Servicing Standard, and (y) with respect to a replacement of the master servicer or special servicer, such condition will be deemed not to apply (as if such requirement did not exist) if (i)(A) the applicable replacement master servicer or special servicer has been appointed as a master servicer or special servicer, as applicable, on a transaction-level basis on the closing date of a commercial mortgage loan securitization and, as of the date of such determination, is the master servicer or special servicer, as applicable, of such securitization, with respect to which Moody’s rated one or more classes of certificates and one or more classes of such certificates are still outstanding and rated by Moody’s and (B) Moody’s has not cited servicing concerns of the applicable replacement as the sole or material factor in any qualification, downgrade or withdrawal of the ratings (or placement on “watch status” in contemplation of a ratings downgrade or withdrawal) of securities rated by Moody’s in a CMBS transaction serviced by the applicable master servicer or special servicer prior to the time of determination, if Moody’s is the non-responding Rating Agency, (ii) the applicable replacement master servicer or special servicer is rated at least “CMS3” (in the case of the master servicer) or “CSS3” (in the case of the special servicer), if Fitch is the non-responding Rating Agency or (iii) DBRS has not cited servicing concerns of the applicable replacement master servicer or special servicer as the sole or material factor in any qualification, downgrade or withdrawal of the ratings (or placement on “watch status” in contemplation of a ratings downgrade or withdrawal) of securities in any other commercial mortgage-backed securitization transaction serviced by the applicable master
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servicer or special servicer prior to the time of determination, if DBRS is the non-responding Rating Agency. Promptly following the master servicer’s or special servicer’s determination to take any action discussed above following any requirement to obtain Rating Agency Confirmation being deemed not to apply (as if such requirement did not exist) as described in clause (x) above, the master servicer or special servicer will be required to provide electronic written notice to the 17g-5 Information Provider, who will promptly post such notice to the 17g-5 Information Provider’s website pursuant to the PSA, of the action taken.
For all other matters or actions not specifically discussed above, the applicable Requesting Party will be required to obtain a Rating Agency Confirmation from each of the Rating Agencies. In the event an action otherwise requires a Rating Agency Confirmation from each of the Rating Agencies, in absence of such Rating Agency Confirmation, we cannot assure you that any Rating Agency will not downgrade, qualify or withdraw its ratings as a result of any such action taken by the master servicer or the special servicer in accordance with the procedures discussed above.
As used above, “Rating Agency Confirmation” means, with respect to any matter, confirmation in writing (which may be in electronic form) by each applicable Rating Agency that a proposed action, failure to act or other event specified in this prospectus will not in and of itself result in the downgrade, withdrawal or qualification of the then-current rating assigned to any class of certificates (if then rated by the Rating Agency);provided that a written waiver or acknowledgment from the Rating Agency indicating its decision not to review the matter for which the Rating Agency Confirmation is sought will be deemed to satisfy the requirement for the Rating Agency Confirmation from the Rating Agency with respect to such matter. The “Rating Agencies” mean each of Moody’s, Fitch and DBRS.
Any Rating Agency Confirmation requests made by the master servicer, special servicer, certificate administrator, or trustee, as applicable, pursuant to the PSA, will be required to be made in writing, which writing must contain a cover page indicating the nature of the Rating Agency Confirmation request, and must contain all back-up material necessary for the Rating Agency to process such request. Such written Rating Agency Confirmation requests must be provided in electronic format to the 17g-5 Information Provider (who will be required to post such request on the 17g-5 Information Provider’s website in accordance with the PSA).
The master servicer, the special servicer, the certificate administrator and the trustee will be permitted (but not obligated) to orally communicate with the Rating Agencies regarding any of the Mortgage Loan documents or any matter related to the Mortgage Loans, the related Mortgaged Properties, the related borrowers or any other matters relating to the PSA or any related Intercreditor Agreement;provided that such party summarizes the information provided to the Rating Agencies in such communication in writing and provides the 17g-5 Information Provider with such written summary the same day such communication takes place;provided,further, that the summary of such oral communications will not identify with which Rating Agency the communication was. The 17g-5 Information Provider will be required to post such written summary on the 17g-5 Information Provider’s website in accordance with the provisions of the PSA. All other information required to be delivered to the Rating Agencies pursuant to the PSA or requested by the Rating Agencies, will first be provided in electronic format to the 17g-5 Information Provider, who will be required to post such information to the 17g-5 Information Provider’s website in accordance with the PSA, and thereafter may be delivered by the applicable party to the Rating Agencies in accordance with the delivery instructions set forth in the PSA. The operating advisor will have no obligation or authority to communicate directly with the Rating Agencies, but may deliver required information to the Rating Agencies to the extent set forth in this prospectus.
The PSA will provide that the PSA may be amended to change the procedures regarding compliance with Rule 17g-5 without any Certificateholder consent;provided that notice of any such amendment must be provided to the 17g-5 Information Provider (who will post such notice to the 17g-5 Information Provider’s website) and to the certificate administrator (which will post such report to the certificate administrator’s website).
To the extent required under the PSA, in the event a rating agency confirmation is required by the applicable rating agencies that any action under any Mortgage Loan documents or the PSA will not result
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in the downgrade, withdrawal or qualification of any such rating agency’s then-current ratings of any securities related to a Companion Loan, then such rating agency confirmation may be considered satisfied in the same manner as described above with respect to any Rating Agency Confirmation from a Rating Agency.
Evidence as to Compliance
Each of the master servicer, the special servicer (regardless of whether the special servicer has commenced special servicing of a Mortgage Loan), the custodian, the trustee (only if an advance was made by the trustee in the applicable calendar year) and the certificate administrator will be required to furnish (and each such party will be required, with respect to each servicing function participant with which it has entered into a servicing relationship with respect to the Mortgage Loans, to cause (or, in the case of a sub-servicer that is a servicing function participant that a mortgage loan seller requires the master servicer to retain, to use commercially reasonable efforts to cause) such servicing function participant to furnish) to the depositor, the certificate administrator, the trustee and the 17g-5 Information Provider, 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 activities during the preceding calendar year or portion of that year and of performance under the PSA or any sub-servicing agreement in the case of an additional master servicer or special 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 PSA or the sub-servicing agreement in the case of an additional master servicer or special servicer, as applicable, in all material respects throughout the preceding calendar year or portion of such year, or, if there has been a failure to fulfill any such obligation in any material respect, specifying each such failure known to such officer and the nature and status of the failure.
In addition, each of the master servicer, the special servicer (regardless of whether the special servicer has commenced special servicing of any Mortgage Loan), the trustee (only if an advance was made by the trustee in the applicable calendar year), the custodian, the certificate administrator and the operating advisor, each at its own expense, will be required to furnish (and each such party will be required, with respect to each servicing function participant with which it has entered into a servicing relationship with respect to the Mortgage Loans, to cause (or, in the case of a sub-servicer that is a servicing function participant that a mortgage loan seller requires the master servicer to retain, to use commercially reasonable efforts to cause) such servicing function participant to furnish) to the trustee, the certificate administrator, the 17g-5 Information Provider and the depositor (and, with respect to the special servicer, also to the operating advisor) a report (an “Assessment of Compliance”) assessing compliance by that party with the servicing criteria set forth in Item 1122(d) of Regulation AB (as described below) under the Securities Act of 1933, as amended (the “Securities Act”) that contains the following:
| · | 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; |
| · | a statement that the party used the criteria in Item 1122(d) of Regulation AB to assess compliance with the applicable servicing criteria; |
| · | the party’s assessment of compliance with the applicable servicing criteria during and as of the end of the fiscal year, covered by the Form 10-K required to be filed pursuant to the PSA setting forth any material instance of noncompliance identified by the party, a discussion of each such failure and the nature and status of such failure; and |
| · | 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
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(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.
With respect to any Non-Serviced Whole Loan, each of the Non-Serviced Master Servicer, the Non-Serviced Special Servicer, the Non-Serviced Trustee and the Non-Serviced Certificate Administrator will have obligations under the related Non-Serviced PSA similar to those described above.
“Regulation AB” means subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100–229.1125, as such may be amended from time to time, and subject to such clarification and interpretation as have been provided by the SEC or by the staff of the SEC, or as may be provided by the SEC or its staff from time to time.
Limitation on Rights of Certificateholders to Institute a Proceeding
Other than with respect to any rights to deliver a Certificateholder Repurchase Request and exercise the rights described under “—Dispute Resolution Provisions”, no Certificateholder will have any right under the PSA to institute any proceeding with respect to the PSA or with respect to the certificates, unless the holder previously has given to the trustee and the certificate administrator written notice of default and the continuance of the default and unless the holders of certificates of any class evidencing not less than 25% of the aggregate percentage interests constituting the class have made written request upon the trustee to institute a proceeding in its own name (as trustee) and have offered to the trustee reasonable indemnity satisfactory to it, and the trustee for 60 days after receipt of the request and indemnity has neglected or refused to institute the proceeding. However, the trustee will be under no obligation to exercise any of the trusts or powers vested in it by the PSA or the certificates or to institute, conduct or defend any related litigation at the request, order or direction of any of the Certificateholders, unless the Certificateholders have offered to the trustee reasonable security or indemnity against the costs, expenses and liabilities that may be incurred as a result.
It is understood and intended, and expressly covenanted by each Certificateholder with every other Certificateholder and the trustee, that no one or more Certificateholders will have any right in any manner whatsoever by virtue of any provision of the PSA or the certificates to affect, disturb or prejudice the rights of the holders of any other of such certificates, or to obtain or seek to obtain priority over or preference to any other such Certificateholder, which priority or preference is not otherwise provided for in the PSA, or to enforce any right under the PSA or the certificates, except in the manner provided in the PSA or the certificates and for the equal, ratable and common benefit of all Certificateholders.
Termination; Retirement of Certificates
The obligations created by the PSA will terminate upon payment (or provision for payment) to all Certificateholders of all amounts held by the certificate administrator on behalf of the trustee and required to be paid on the Distribution Date following the earlier of (1) the final payment (or related Advance) or other liquidation of the last Mortgage Loan and REO Property (as applicable) subject to the PSA, (2) the voluntary exchange of all the then-outstanding certificates (other than the Class V and Class R certificates) for the Mortgage Loans remaining in the issuing entity, as described below or (3) the purchase or other liquidation of all of the assets of the issuing entity as described below by the holders of the Controlling Class, the special servicer, or the master servicer, in that order of priority. Written notice of termination of the PSA will be given by the certificate administrator to each Certificateholder and the 17g-5 Information Provider (who will promptly post such notice to the 17g-5 Information Provider’s website). 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.
Any holder of certificates owning a majority of the percentage interest of the then Controlling Class, and, if such holder does not exercise its option, the special servicer and, if the special servicer does not exercise its option, the master servicer, will have the option to purchase all of the Mortgage Loans and all property acquired in respect of any Mortgage Loan remaining in the issuing entity, and thereby effect termination of the issuing entity 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
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the issuing entity is less than 1.0% of the aggregate principal balance of all of the Mortgage Loans as of the Cut-off Date. Any such party may be an affiliate of the sponsor, depositor, issuing entity or other related party at the time it exercises such right. The purchase price payable upon the exercise of such option on such a Distribution Date will be an amount equal to the sum of, without duplication, (A) 100% of the outstanding principal balance of each Mortgage Loan included in the issuing entity as of the last day of the month preceding such Distribution Date (less any P&I Advances previously made on account of principal); (B) the fair market value of all other property included in the issuing entity 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 Mortgage Loan (including any Mortgage Loans as to which title to the related Mortgaged Property has been acquired) at the Mortgage Rate to the last day of the month preceding such Distribution Date (less any P&I Advances previously made on account of interest); and (D) unreimbursed Advances (with interest thereon), unpaid Servicing Fees and other servicing compensation, Certificate Administrator/Trustee Fees, CREFC® License Fees, Operating Advisor Fees, and unpaid expenses of and indemnity amounts owed by the issuing entity. The issuing entity may also be terminated in connection with an exchange by the Sole Certificateholder of all the then-outstanding certificates (excluding the Class R certificates) (provided that the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class A-M, Class B, Class C and Class D certificates are no longer outstanding) if the Sole Certificateholder compensates the certificate administrator for the amount of investment income the certificate administrator would have earned if the outstanding Certificate Balance of the then-outstanding certificates (other than the Class X Certificates and Class R certificates) were on deposit with the certificate administrator as of the first day of the current calendar month and the Sole Certificateholder pays to the master servicer an amount equal to (i) the product of (a) the prime rate, (b) the aggregate Certificate Balance of the then-outstanding certificates (other than the Class X Certificates and Class R certificates) as of the date of the exchange and (c) three, divided by (ii) 360, for the Mortgage Loans and any REO Properties remaining in the issuing entity;provided,further, that if the Sole Certificateholder has taken only an assignment of the Voting Rights of the Class X Certificates, the holders of the Class X Certificates will be entitled to receive a cash payment in consideration for an exchange of their certificates. Following such termination, no further amount will be payable on the certificates, regardless of whether any recoveries are received on the REO Properties. Notice of any such termination is required to be given promptly by the certificate administrator by mail to the Certificateholders with a copy to the master servicer, the special servicer, the operating advisor, the mortgage loan sellers, the trustee and the 17g-5 Information Provider (who will promptly post such notice to the 17g-5 Information Provider’s website). Notice to the Certificateholders will be given at their addresses shown in the certificate registrar not more than 30 days, and not less than ten days, prior to the anticipated termination date. With respect to any book-entry certificates, such notice will be mailed to DTC and beneficial owners of certificates will be notified to the extent provided in the procedures of DTC and its participants.
On the applicable Distribution Date, the aggregate amount paid by the holders of the Controlling Class, the special servicer, the master servicer or the holders of the Class R certificates, as the case may be, for the Mortgage Loans and other applicable assets in the issuing entity, together with all other amounts on deposit in the Collection Account and not otherwise payable to a person other than the Certificateholders, will be applied generally as described above under “Description of the Certificates—Distributions—Priority of Distributions”.
Amendment
The PSA may be amended by the parties to the PSA, without the consent of any of the holders of certificates or holders of any Companion Loan:
(a) to correct any defect or ambiguity in the PSA or in order to address any manifest error in any provision of the PSA;
(b) to cause the provisions in the PSA to conform or be consistent with or in furtherance of the statements made in this prospectus (or in an offering document for any related non-offered certificates) with respect to the certificates, the issuing entity or the PSA or to correct or supplement
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any of its provisions which may be defective or inconsistent with any other provisions in the PSA or to correct any error;
(c) to change the timing and/or nature of deposits in the Collection Account, the Distribution Accounts or any REO Account,provided that (A) the Master Servicer Remittance Date will in no event be later than the business day prior to the related Distribution Date and (B) the change would not adversely affect in any material respect the interests of any Certificateholder, as evidenced in writing by an opinion of counsel at the expense of the party requesting such amendment or as evidenced by a Rating Agency Confirmation from each of the Rating Agencies with respect to such amendment;
(d) to modify, eliminate or add to any of its provisions to the extent as will be necessary to maintain the qualification of the Prudential Plaza Loan REMIC or either Trust REMIC as a REMIC or the Grantor Trust as a grantor trust under the relevant provisions of the Code at all times that any certificate is outstanding, or to avoid or minimize the risk of imposition of any tax on the issuing entity, the Prudential Plaza Loan REMIC or either Trust REMIC or the Grantor Trust that would be a claim against the issuing entity, the Prudential Plaza Loan REMIC or either Trust REMIC or the Grantor Trust;provided that the trustee and the certificate administrator have 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 the risk of imposition of any such tax and (2) the action will not adversely affect in any material respect the interests of any holder of the certificates or holder of a Companion Loan;
(e) to modify, eliminate or add to any of its provisions 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, as evidenced by an opinion of counsel, give rise to any tax with respect to the transfer of the Residual Certificates to a non-permitted transferee;
(f) to revise or add any other provisions with respect to matters or questions arising under the PSA or any other change,provided that the required action will not adversely affect in any material respect the interests of any Certificateholder or any holder of a Serviced Pari Passu Companion Loan not consenting to such revision or addition, as evidenced in writing by an opinion of counsel at the expense of the party requesting such amendment or as evidenced by a Rating Agency Confirmation from each of the Rating Agencies with respect to such amendment or supplement and confirmation of the applicable rating agencies that such action will not result in the downgrade, withdrawal or qualification of its then-current ratings of any securities related to a Companion Loan, if any (provided that such rating agency confirmation may be considered satisfied in the same manner as any Rating Agency Confirmation may be considered satisfied with respect to the certificates as described in this prospectus);
(g) to amend or supplement any provision of the PSA to the extent necessary to maintain the then-current ratings assigned to each class of Offered Certificates by each Rating Agency, as evidenced by a Rating Agency Confirmation from each of the Rating Agencies and confirmation of the applicable rating agencies that such action will not result in the downgrade, withdrawal or qualification of its then-current ratings of any securities related to a Companion Loan, if any (provided that such rating agency confirmation may be considered satisfied in the same manner as any Rating Agency Confirmation may be considered satisfied with respect to the certificates as described in this prospectus);provided that such amendment or supplement would not adversely affect in any material respect the interests of any Certificateholder not consenting to such amendment or supplement, as evidenced by an opinion of counsel;
(h) to modify the provisions of the PSA with respect to reimbursement of Nonrecoverable Advances and Workout-Delayed Reimbursement Amounts if (a) the depositor, the master servicer, the trustee and, for so long as a Control Termination Event has not occurred and is not continuing, the Directing Certificateholder, determine that the commercial mortgage-backed securities industry standard for such provisions has changed, in order to conform to such industry standard, (b) such modification does not adversely affect the status of the Prudential Plaza Loan REMIC or either Trust REMIC as a REMIC or the status of the Grantor Trust as a grantor trust under the relevant provisions
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of the Code, as evidenced by an opinion of counsel and (c) a Rating Agency Confirmation and confirmation of the applicable rating agencies that such action will not result in the downgrade, withdrawal or qualification of its then-current ratings of any securities related to a Serviced Pari Passu Companion Loan, if any (provided that such rating agency confirmation may be considered satisfied in the same manner as any Rating Agency Confirmation may be considered satisfied with respect to the certificates as described in this prospectus);
(i) to modify the procedures set forth in the PSA relating to compliance with Rule 17g-5,provided that the change would not adversely affect in any material respect the interests of any Certificateholder, as evidenced by (A) an opinion of counsel or (B) if any certificate is then rated, receipt of Rating Agency Confirmation from each Rating Agency rating such certificates; andprovided,further, that the certificate administrator must give notice of any such amendment to the 17g-5 Information Provider for posting on the 17g-5 Information Provider’s website and the certificate administration must post such notice to its website; and
(j) to modify, eliminate or add to any provisions of the PSA to such extent as will be necessary to comply with the requirements for use of Form SF-3 in registered offerings to the extent provided in CFR 239.45(b)(1)(ii), (iii) or (iv).
The PSA may also be amended by the parties to the PSA with the consent of the holders of certificates of each class affected by such amendment evidencing, in each case, a majority 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 PSA or of modifying in any manner the rights of the holders of the certificates, except that the amendment may not directly (1) reduce in any manner the amount of, or delay the timing of, payments received on the Mortgage Loans that are required to be distributed on a certificate of any class without the consent of the holder of such certificate or which are required to be distributed to a holder of a Companion Loan without the consent of such holder, (2) reduce the aforesaid percentage of certificates of any class the holders of which are required to consent to the amendment or remove the requirement to obtain consent of any holder of a Companion Loan, without the consent of the holders of all certificates of that class then-outstanding or such holder of the related Companion Loan, (3) adversely affect the Voting Rights of any class of certificates, without the consent of the holders of all certificates of that class then-outstanding, (4) change in any manner any defined term used in any MLPA or the obligations or rights of any mortgage loan seller under any MLPA without the consent of the applicable mortgage loan seller, or (5) amend the Servicing Standard without, in each case, the consent of 100% of the holders of certificates or a Rating Agency Confirmation by each Rating Agency and confirmation of the applicable rating agencies that such action will not result in the downgrade, withdrawal or qualification of its then-current ratings of any securities related to a Companion Loan, if any (provided that such rating agency confirmation may be considered satisfied in the same manner as any Rating Agency Confirmation may be considered satisfied with respect to the certificates as described in this prospectus).
Notwithstanding the foregoing, no amendment to the PSA may be made that changes in any manner the obligations of any mortgage loan seller under any MLPA or the rights of any mortgage loan seller, including as a third party beneficiary, under the PSA, without the consent of such mortgage loan seller. In addition, no amendment to the PSA may be made that changes any provisions specifically required to be included in the PSA by any Intercreditor Agreement without the consent of the holder(s) of the related Non-Serviced Companion Loan(s).
Also, notwithstanding the foregoing, no party will be required to consent to any amendment to the PSA without the trustee, the certificate administrator, the master servicer, the special servicer, the asset representations reviewer and the operating advisor having first received an opinion of counsel (at the issuing entity’s expense) to the effect that the amendment does not conflict with the terms of the PSA, and that the amendment or the exercise of any power granted to the master servicer, the special servicer, the depositor, the certificate administrator, the trustee, the operating advisor, the asset representations reviewer or any other specified person in accordance with the amendment will not result in the imposition of a tax on any portion of the issuing entity or cause the Prudential Plaza Loan REMIC or either Trust
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REMIC to fail to qualify as a REMIC or cause the Grantor Trust to fail to qualify as a grantor trust under the relevant provisions of the Code.
Resignation and Removal of the Trustee and the Certificate Administrator
Each of the trustee and the certificate administrator will at all times be, and will be required to resign if it fails to: (i) be a corporation, national bank, national banking association or a trust company, organized and doing business under the laws of any state or the United States of America, (ii) be authorized under such laws to exercise corporate trust powers and to accept the trust conferred under the PSA, (iii) have a combined capital and surplus of at least $50,000,000, (iv) be subject to supervision or examination by federal or state authority and, in the case of the trustee, will not be an affiliate of the master servicer or the special servicer (except during any period when the trustee has assumed the duties of the master servicer or the special servicer, as the case may be), (v) be an entity that is not on the depositor’s “prohibited party” list, (vi) be an institution insured by the Federal Deposit Insurance Corporation, and (vii) have a rating on its long-term senior unsecured debt of at least “A2” by Moody’s, “A” by Fitch and “A” by DBRS; provided that the trustee will not become ineligible to serve based on a failure to satisfy such rating requirements as long as (a) it has a rating on its long-term unsecured debt of at least “Baa2” by Moody’s, “A-” by Fitch and “A(low)” by DBRS, (b) it has a rating on its short-term debt obligations of at least “P-2” by Moody’s, “F1” by Fitch and “R-1(low)” by DBRS, and (c) the master servicer has a rating on its long-term senior unsecured debt of at least “A2” by Moody’s, “A+” by Fitch and “A” by DBRS; provided, further, that if any such institution is not rated by DBRS, such institution maintains an equivalent (or higher) rating by any two other NRSROs or such other rating with respect to which the Rating Agencies have provided a Rating Agency Confirmation.
The trustee and the certificate administrator will be also permitted at any time to resign from their obligations and duties under the PSA by giving written notice (which notice will be posted to the certificate administrator’s website pursuant to the PSA) to the depositor, the master servicer, the special servicer, the trustee or the certificate administrator, as applicable, all Certificateholders, the operating advisor, the asset representations reviewer and the 17g-5 Information Provider (who will promptly post such notice to the 17g-5 Information Provider’s website). Upon receiving this notice of resignation, the depositor will be required to use its reasonable best efforts to promptly appoint a successor trustee or certificate administrator which, prior to the occurrence and continuance of a Control Termination Event, is acceptable to the Directing Certificateholder. If no successor trustee or certificate administrator has accepted an appointment within 30 days after the giving of notice of resignation, the resigning trustee or certificate administrator, as applicable, may petition any court of competent jurisdiction to appoint a successor trustee or certificate administrator, as applicable.
If at any time the trustee or certificate administrator ceases to be eligible to continue as trustee or certificate administrator, as applicable, under the PSA, and fails to resign after written request therefor by the depositor or the master servicer, or if at any time the trustee or certificate administrator becomes incapable of acting, or if certain events of, or proceedings in respect of, bankruptcy or insolvency occur with respect to the trustee or certificate administrator, or if the trustee or certificate administrator fails to timely publish any report to be delivered, published, or otherwise made available by the certificate administrator pursuant to the PSA, and such failure continues unremedied for a period of five (5) days, or if the certificate administrator fails to make distributions required pursuant to the PSA, the depositor will be authorized to remove the trustee or certificate administrator, as applicable, and appoint a successor trustee or certificate administrator acceptable to the master servicer. If no successor trustee or certificate administrator has accepted an appointment within 30 days after the giving of notice of removal, the removed trustee or certificate administrator, as applicable, may appoint or petition any court of competent jurisdiction to appoint a successor trustee or certificate administrator, as applicable.
In addition, holders of the certificates entitled to at least 50% of the Voting Rights may, with cause (at any time) or without cause (at any time with 30 days’ prior written notice), remove the trustee or certificate administrator under the PSA and appoint a successor trustee or certificate administrator. In the event that holders of the certificates entitled to at least 50% of the Voting Rights elect to remove the trustee or certificate administrator without cause and appoint a successor, the successor trustee or certificate
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administrator, as applicable, will be responsible for all expenses necessary to effect the transfer of responsibilities from its predecessor.
Any resignation or removal of the trustee or certificate administrator and appointment of a successor trustee or certificate administrator will not become effective until (i) acceptance of appointment by the successor trustee or certificate administrator, as applicable, and (ii) the certificate administrator files any required Form 8-K. Further, the resigning trustee or certificate administrator, as the case may be, must pay all costs and expenses associated with the transfer of its duties.
The PSA will prohibit the appointment of the asset representations reviewer or one of its affiliates as successor to the trustee or certificate administrator.
Governing Law; Waiver of Jury Trial; and Consent to Jurisdiction
The PSA will be governed by the laws of the State of New York. Each party to the PSA will waive its respective right to a jury trial for any claim or cause of action based upon or arising out of or related to the PSA or certificates. Additionally each party to the PSA will consent to the jurisdiction of any New York State and Federal courts sitting in New York City with respect to matters arising out of or related to the PSA.
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Certain Legal Aspects of Mortgage Loans
The following discussion contains general summaries of certain legal aspects of mortgage loans secured by commercial and multifamily residential properties. Because such legal aspects are governed by applicable local law (which laws may differ substantially), the summaries do not purport to be complete, to reflect the laws of any particular jurisdiction, or to encompass the laws of all jurisdictions in which the security for the mortgage loans is situated.
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 (so long as it is permitted under a specific provision in the deed of trust) or by judicial foreclosure, in each case subject to and in accordance with the applicable procedures and requirements of California law. 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 sale pursuant to a trustee’s power of sale. California’s “security first” and “one action” rules require the lender to complete foreclosure of all real estate provided as security under the deed of trust in a single action 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. This restriction may apply to property which is not located in California if a single promissory note is secured by property located in California and other jurisdictions. California case law has held that acts such as (but not limited to) 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. A sale by the trustee under the deed of trust does not constitute an “action” for purposes of the “one action rule”. 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.
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 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 owed.
Georgia
Real property loans in Georgia are customarily secured by deeds to secure debt and are generally foreclosed pursuant to a private, non-judicial sale under the power of sale remedy, which must be contained in the deed to secure debt. Judicial foreclosure is also an available, but rarely exercised, remedy. In the power of sale foreclosure, the lender must provide notice of the sale by advertisement in a
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newspaper in which sheriff’s notices of sale are published in the county in which the property is located once a week for four (4) consecutive weeks immediately preceding the date of sale. The advertisement must contain certain information, including a description of the property and the instrument pursuant to which the sale is being conducted, and the name, address, and telephone number of the individual or entity who shall have full authority to negotiate, amend, and modify all terms of the mortgage with the debtor (provided that the lender is under no obligation to negotiate, amend or modify the terms of the deed to secure debt). A copy of the notice of sale to the public must be given to the debtor not less than (30) days prior to the date of the proposed foreclosure sale. If the loan has been assigned, the assignment vesting title to the deed to secure debt must be filed for record prior to the time of the sale. The foreclosure sale is conducted by the lender or its representatives, must occur between the hours of 10:00 a.m. and 4:00 p.m. on the first Tuesday of a month (except, if the first Tuesday of a month falls on New Year’s Day or Independence Day, then the sale must be conducted on the immediately following Wednesday) and is held on the courthouse steps of the court in the county in which the property is located. At the sale the property is sold to the highest bidder, and the lender may “credit bid” the amount of its debt at the sale, so long as the loan documents permit the lender to bid at the sale. The debtor’s right of redemption is extinguished by the power of the sale foreclosure. In order to obtain a deficiency judgment for a recourse loan, the lender must first report the foreclosure sale to a judge of the Superior Court of the county in which the property is located within thirty (30) days after the date of sale. The judge will then conduct a “confirmation hearing,” notice of which must be served at least five (5) days prior to the hearing on all obligors. The purpose of the confirmation hearing is to prove that (a) the real property sold for its “true market value” (which has been interpreted to mean “fair market value”) and (b) the foreclosure sale was conducted in accordance with law. The judge may (a) confirm the sale (in which case the creditor may pursue the deficiency claim in a separate action against the obligors), (b) set the sale aside (in which case the parties are returned to their respective positions immediately prior to the sale and a new foreclosure sale must be conducted) or (c) deny confirmation of the sale and refuse to permit a resale (in which case the sale stands as completed but the creditor may not pursue a deficiency claim against the obligors). Georgia has no “one action” rule or statute.
Texas
Commercial mortgage loans in Texas are generally secured by deeds of trust on the related real estate. Foreclosure of a deed of trust in Texas may be accomplished by either a non-judicial trustee’s sale under a specific power-of-sale provision set forth in the deed of trust or by judicial foreclosure. Due to the relatively short period of time involved in a non-judicial foreclosure, the judicial foreclosure process is rarely used in Texas. A judicial foreclosure action must be initiated, and a non-judicial foreclosure must be completed, within four years from the date the cause of action accrues. The cause of action for the unpaid balance of the indebtedness accrues upon the maturity of the indebtedness (by acceleration or otherwise).
Unless expressly waived in the deed of trust, the lender must provide the debtor with a written demand for payment, a notice of intent to accelerate the indebtedness, and a notice of acceleration prior to commencing any foreclosure action. It is customary practice in Texas for the demand for payment to be combined with the notice of intent to accelerate the indebtedness. In addition, with respect to a non-judicial foreclosure sale and notwithstanding any waiver by debtor to the contrary, the lender is statutorily required to (i) provide each debtor obligated to pay the indebtedness a notice of foreclosure sale via certified mail, postage prepaid and addressed to each debtor at such debtor’s last known address at least 21 days before the date of the foreclosure sale; (ii) post a notice of foreclosure sale at the courthouse of each county in which the property is located; and (iii) file a notice of foreclosure sale with the county clerk of each county in which the property is located. Such 21 day period includes the entire calendar day on which the notice is deposited with the United States mail and excludes the entire calendar day of the foreclosure sale. The statutory foreclosure notice may be combined with the notice of acceleration of the indebtedness and must contain the location of the foreclosure sale and a statement of the earliest time at which the foreclosure sale will begin. To the extent the note or deed of trust contains additional notice requirements, the lender must comply with such requirements in addition to the statutory requirements set forth above.
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The trustee’s sale must be performed pursuant to the terms of the deed of trust and statutory law and must take place between the hours of 10 a.m. and 4 p.m. on the first Tuesday of the month, in the area designated for such sales by the county commissioners’ court of the county in which the property is located, and must begin at the time set forth in the notice of foreclosure sale or not later than three hours after that time. If the property is located in multiple counties, the sale may occur in any county in which a portion of the property is located. Under Texas law applicable to the subject property, the debtor does not have the right to redeem the property after foreclosure. Any action for deficiency must be brought within two years of the foreclosure sale. If the foreclosure sale price is less than the fair market value of the property, the debtor or any obligor (including any guarantor) may be entitled to an offset against the deficiency in the amount by which the fair market value of the property, less the amount of any claim, indebtedness, or obligation of any kind that is secured by a lien or encumbrance on the real property that was not extinguished by the foreclosure, exceeds the foreclosure sale price.
General
Each mortgage loan will be evidenced by a promissory note and secured by an instrument granting a security interest in real property, which may be a mortgage, deed of trust or a deed to secure debt, depending upon the prevailing practice and law in the state in which the related Mortgaged Property is located. Mortgages, deeds of trust and deeds to secure debt are in this prospectus collectively referred to as “mortgages”. A mortgage creates a lien upon, or grants a title interest in, the real property covered thereby, and represents the security for the repayment of the indebtedness customarily evidenced by a promissory note. The priority of the lien created or interest granted will depend on the terms of the mortgage and, in some cases, on the terms of separate subordination agreements or intercreditor agreements with others that hold interests in the real property, the knowledge of the parties to the mortgage and, generally, the order of recordation of the mortgage in the appropriate public recording office. However, the lien of a recorded mortgage will generally be subordinate to later-arising liens for real estate taxes and assessments and other charges imposed under governmental police powers.
Types of Mortgage Instruments
There are two parties to a mortgage: a mortgagor (the borrower and usually the owner of the applicable property) and a mortgagee (the lender). In contrast, a deed of trust is a three-party instrument, among a trustor (the equivalent of a borrower), a trustee to whom the real property is conveyed, and a beneficiary (the lender) for whose benefit the conveyance is made. Under a deed of trust, the trustor grants the property, irrevocably until the debt is paid, in trust and generally with a power of sale, to the trustee to secure repayment of the indebtedness evidenced by the related note. A deed to secure debt typically has two parties, pursuant to which the borrower, or grantor, conveys title to the real property to the grantee, or lender generally with a power of sale, until such time as the debt is repaid. In a case where the borrower is a land trust, there would be an additional party because legal title to the property is held by a land trustee under a land trust agreement for the benefit of the borrower. At origination of a mortgage loan involving a land trust, the borrower may execute a separate undertaking to make payments on the promissory note. The land trustee would not be personally liable for the promissory note obligation. The mortgagee’s authority under a mortgage, the trustee’s authority under a deed of trust and the grantee’s authority under a deed to secure debt are governed by the express provisions of the related instrument, the law of the state in which the real property is located, certain federal laws and, in some deed of trust transactions, the directions of the beneficiary.
Leases and Rents
Mortgages that encumber income-producing property often contain an assignment of rents and leases, and/or may be accompanied by a separate assignment of rents and leases, pursuant to which the borrower assigns to the lender the borrower’s right, title and interest as landlord under each lease and the income derived from the lease, while (unless rents are to be paid directly to the lender) retaining a revocable license to collect the rents for so long as there is no default. If the borrower defaults, the license terminates and the lender is entitled to collect the rents. Local law may require that the lender take possession of the property and/or obtain a court-appointed receiver before becoming entitled to collect the rents.
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In most states, hospitality property and motel room rates are considered accounts receivable under the Uniform Commercial Code (“UCC”). In cases where hospitality properties or motels constitute loan security, the revenues are generally pledged by the borrower as additional security for the loan. In general, the lender must file financing statements in order to perfect its security interest in the room revenues and must file continuation statements, generally every five years, to maintain perfection of such security interest. In certain cases, mortgage loans secured by hospitality properties or motels may be included in the issuing entity even if the security interest in the room revenues was not perfected. Even if the lender’s security interest in room revenues is perfected under applicable nonbankruptcy law, it will generally be required to commence a foreclosure action or otherwise take possession of the property in order to enforce its rights to collect the room revenues following a default. In the bankruptcy setting, however, the lender will be stayed from enforcing its rights to collect room revenues, but those room revenues constitute “cash collateral” and therefore generally cannot be used by the bankruptcy debtor without a hearing or lender’s consent or unless the lender’s interest in the room revenues is given adequate protection (e.g., cash payment for otherwise encumbered funds or a replacement lien on unencumbered property, in either case in value equivalent to the amount of room revenues that the debtor proposes to use, or other similar relief). See “—Bankruptcy Laws” below.
Personalty
In the case of certain types of mortgaged properties, such as hospitality properties, motels, nursing homes and manufactured housing, personal property (to the extent owned by the borrower and not previously pledged) may constitute a significant portion of the property’s value as security. The creation and enforcement of liens on personal property are governed by the UCC. Accordingly, if a borrower pledges personal property as security for a mortgage loan, the lender generally must file UCC financing statements in order to perfect its security interest in that personal property, and must file continuation statements, generally every five years, to maintain that perfection. Certain mortgage loans secured in part by personal property may be included in the issuing entity even if the security interest in such personal property was not perfected.
Foreclosure
General
Foreclosure is a legal procedure that allows the lender to recover its mortgage debt by enforcing its rights and available legal remedies under the mortgage. If the borrower defaults in payment or performance of its obligations under the promissory note or mortgage, the lender has the right to institute foreclosure proceedings to sell the real property at public auction to satisfy the indebtedness.
Foreclosure Procedures Vary from State to State
Two primary methods of foreclosing a mortgage are judicial foreclosure, involving court proceedings, and nonjudicial foreclosure pursuant to a power of sale granted in the mortgage instrument. Other foreclosure procedures are available in some states, but they are either infrequently used or available only in limited circumstances.
A foreclosure action is subject to most of the delays and expenses of other lawsuits if defenses are raised or counterclaims are interposed, and sometimes requires several years to complete.
Judicial Foreclosure
A judicial foreclosure proceeding is conducted in a court having jurisdiction over the mortgaged property. Generally, the action is initiated by the service of legal pleadings upon all parties having a subordinate interest of record in the real property and all parties in possession of the property, under leases or otherwise, whose interests are subordinate to the mortgage. Delays in completion of the foreclosure may occasionally result from difficulties in locating defendants. When the lender’s right to foreclose is contested, the legal proceedings can be time-consuming. Upon successful completion of a judicial foreclosure proceeding, the court generally issues a judgment of foreclosure and appoints a
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referee or other officer to conduct a public sale of the mortgaged property, the proceeds of which are used to satisfy the judgment. Such sales are made in accordance with procedures that vary from state to state.
Equitable and Other Limitations on Enforceability of Certain Provisions
United States courts have traditionally imposed general equitable principles to limit the remedies available to lenders in foreclosure actions. These principles are generally designed to relieve borrowers from the effects of mortgage defaults perceived as harsh or unfair. Relying on such principles, a court may alter the specific terms of a loan to the extent it considers necessary to prevent or remedy an injustice, undue oppression or overreaching, or may require the lender to undertake affirmative actions to determine the cause of the borrower’s default and the likelihood that the borrower will be able to reinstate the loan. In some cases, courts have substituted their judgment for the lender’s and have required that lenders reinstate loans or recast payment schedules in order to accommodate borrowers who are suffering from a temporary financial disability. In other cases, courts have limited the right of the lender to foreclose in the case of a nonmonetary default, such as a failure to adequately maintain the mortgaged property or an impermissible further encumbrance of the mortgaged property. Finally, some courts have addressed the issue of whether federal or state constitutional provisions reflecting due process concerns for adequate notice require that a borrower receive notice in addition to statutorily-prescribed minimum notice. For the most part, these cases have upheld the reasonableness of the notice provisions or have found that a public sale under a mortgage providing for a power of sale does not involve sufficient state action to trigger constitutional protections.
In addition, some states may have statutory protection such as the right of the borrower to reinstate a mortgage loan after commencement of foreclosure proceedings but prior to a foreclosure sale.
Nonjudicial Foreclosure/Power of Sale
In states permitting nonjudicial foreclosure proceedings, foreclosure of a deed of trust is generally accomplished by a nonjudicial trustee’s sale pursuant to a power of sale typically granted in the deed of trust. A power of sale may also be contained in any other type of mortgage instrument if applicable law so permits. A power of sale under a deed of trust allows a nonjudicial public sale to be conducted generally following a request from the beneficiary/lender to the trustee to sell the property upon default by the borrower and after notice of sale is given in accordance with the terms of the mortgage and applicable state law. In some states, prior to such sale, the trustee under the deed of trust must record a notice of default and notice of sale and send a copy to the borrower and to any other party who has recorded a request for a copy of a notice of default and notice of sale. In addition, in some states the trustee must provide notice to any other party having an interest of record in the real property, including junior lienholders. A notice of sale must be posted in a public place and, in most states, published for a specified period of time in one or more newspapers. The borrower or junior lienholder may then have the right, during a reinstatement period required in some states, to cure the default by paying the entire actual amount in arrears (without regard to the acceleration of the indebtedness), plus the lender’s expenses incurred in enforcing the obligation. In other states, the borrower or the junior lienholder is not provided a period to reinstate the loan, but has only the right to pay off the entire debt to prevent the foreclosure sale. Generally, state law governs the procedure for public sale, the parties entitled to notice, the method of giving notice and the applicable time periods.
Public Sale
A third party may be unwilling to purchase a mortgaged property at a public sale because of the difficulty in determining the exact status of title to the property (due to, among other things, redemption rights that may exist) and because of the possibility that physical deterioration of the mortgaged property may have occurred during the foreclosure proceedings. Potential buyers may also be reluctant to purchase mortgaged property at a foreclosure sale as a result of the 1980 decision of the United States Court of Appeals for the Fifth Circuit inDurrett v. Washington National Insurance Co., 621 F.2d 2001 (5th Cir. 1980) and other decisions that have followed its reasoning. The court inDurrett held that even a non-collusive, regularly conducted foreclosure sale was a fraudulent transfer under the federal bankruptcy
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code and, thus, could be rescinded in favor of the bankrupt’s estate, if (1) the foreclosure sale was held while the debtor was insolvent and not more than one year prior to the filing of the bankruptcy petition and (2) the price paid for the foreclosed property did not represent “fair consideration”, which is “reasonably equivalent value” under the federal bankruptcy code. Although the reasoning and result ofDurrett in respect of the federal bankruptcy code was rejected by the United States Supreme Court inBFP v. Resolution Trust Corp., 511 U.S. 531 (1994), the case could nonetheless be persuasive to a court applying a state fraudulent conveyance law which has provisions similar to those construed inDurrett. Therefore, it is common for the lender to purchase the mortgaged property for an amount equal to the secured indebtedness and accrued and unpaid interest plus the expenses of foreclosure, in which event the borrower’s debt will be extinguished, or for a lesser amount in order to preserve its right to seek a deficiency judgment if such is available under state law and under the terms of the mortgage loan documents. Thereafter, subject to the borrower’s right in some states to remain in possession during a redemption period, the lender will become the owner of the property and have both the benefits and burdens of ownership, including the obligation to pay debt service on any senior mortgages, to pay taxes, to obtain casualty insurance and to make such repairs as are necessary to render the property suitable for sale. Frequently, the lender employs a third-party management company to manage and operate the property. The costs of operating and maintaining a property may be significant and may be greater than the income derived from that property. The costs of management and operation of those mortgaged properties which are hotels, motels, restaurants, nursing or convalescent homes, hospitals or casinos may be particularly significant because of the expertise, knowledge and, with respect to certain property types, regulatory compliance, required to run those operations and the effect which foreclosure and a change in ownership may have on the public’s and the industry’s, including franchisors’, perception of the quality of those operations. The lender also will commonly obtain the services of a real estate broker and pay the broker’s commission in connection with the sale or lease of the property. Depending upon market conditions, the ultimate proceeds of the sale of a property may not equal the lender’s investment in the property. Moreover, a lender commonly incurs substantial legal fees and court costs in acquiring a mortgaged property through contested foreclosure and/or bankruptcy proceedings. Because of the expenses associated with acquiring, owning and selling a mortgaged property, a lender could realize an overall loss on a mortgage loan even if the mortgaged property is sold at foreclosure, or resold after it is acquired through foreclosure, for an amount equal to the full outstanding principal amount of the loan plus accrued interest.
Furthermore, an increasing number of states require that any environmental contamination at certain types of properties be cleaned up before a property may be resold. In addition, a lender may be responsible under federal or state law for the cost of cleaning up a mortgaged property that is environmentally contaminated. See “—Environmental Considerations” below.
The holder of a junior mortgage that forecloses on a mortgaged property does so subject to senior mortgages and any other prior liens, and may be obliged to keep senior mortgage loans current in order to avoid foreclosure of its interest in the property. In addition, if the foreclosure of a junior mortgage triggers the enforcement of a “due-on-sale” clause contained in a senior mortgage, the junior mortgagee could be required to pay the full amount of the senior mortgage indebtedness or face foreclosure.
Rights of Redemption
The purposes of a foreclosure action are to enable the lender to realize upon its security and to bar the borrower, and all persons who have interests in the property that are subordinate to that of the foreclosing lender, from exercise of their “equity of redemption”. The doctrine of equity of redemption provides that, until the property encumbered by a mortgage has been sold in accordance with a properly conducted foreclosure and foreclosure sale, those having interests that are subordinate to that of the foreclosing lender have an equity of redemption and may redeem the property by paying the entire debt with interest. Those having an equity of redemption must generally be made parties and joined in the foreclosure proceeding in order for their equity of redemption to be terminated.
The equity of redemption is a common-law (nonstatutory) right which should be distinguished from post-sale statutory rights of redemption. In some states, after sale pursuant to a deed of trust or foreclosure of a mortgage, the borrower and foreclosed junior lienors are given a statutory period in which
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to redeem the property. In some states, statutory redemption may occur only upon payment of the foreclosure sale price. In other states, redemption may be permitted if the former borrower pays only a portion of the sums due. The effect of a statutory right of redemption is to diminish the ability of the lender to sell the foreclosed property because the exercise of a right of redemption would defeat the title of any purchaser through a foreclosure. Consequently, the practical effect of the redemption right is to force the lender to maintain the property and pay the expenses of ownership until the redemption period has expired. In some states, a post-sale statutory right of redemption may exist following a judicial foreclosure, but not following a trustee’s sale under a deed of trust.
Anti-Deficiency Legislation
Some or all of the mortgage loans are nonrecourse loans, as to which recourse in the case of default will be limited to the mortgaged property and such other assets, if any, that were pledged to secure the mortgage loan. However, even if a mortgage loan by its terms provides for recourse to the borrower’s other assets, a lender’s ability to realize upon those assets may be limited by state law. For example, in some states a lender cannot obtain a deficiency judgment against the borrower following foreclosure or sale under a deed of trust.
A deficiency judgment is a personal judgment against the former borrower equal to the difference between the net amount realized upon the public sale of the real property and the amount due to the lender. Other statutes may require the lender to exhaust the security afforded under a mortgage before bringing a personal action against the borrower. In certain other states, the lender has the option of bringing a personal action against the borrower on the debt without first exhausting that security; however, in some of those states, the lender, following judgment on that personal action, may be deemed to have elected a remedy and thus may be precluded from foreclosing upon the security. Consequently, lenders in those states where such an election of remedy provision exists will usually proceed first against the security. Finally, other statutory provisions, designed to protect borrowers from exposure to large deficiency judgments that might result from bidding at below-market values at the foreclosure sale, limit any deficiency judgment to the excess of the outstanding debt over the fair market value of the property at the time of the sale.
Leasehold Considerations
Mortgage loans may be secured by a mortgage on the borrower’s leasehold interest in a ground lease. Leasehold mortgage loans are subject to certain risks not associated with mortgage loans secured by a lien on the fee estate of the borrower. The most significant of these risks is that if the borrower’s leasehold were to be terminated upon a lease default, the leasehold mortgagee would lose its security. This risk may be lessened if the ground lease requires the lessor to give the leasehold mortgagee notices of lessee defaults and an opportunity to cure them, permits the leasehold estate to be assigned to and by the leasehold mortgagee or the purchaser at a foreclosure sale, and contains certain other protective provisions typically included in a “mortgageable” ground lease. Certain mortgage loans, however, may be secured by ground leases which do not contain these provisions.
In addition, where a lender has as its security both the fee and leasehold interest in the same property, the grant of a mortgage lien on its fee interest by the land owner/ground lessor to secure the debt of a borrower/ground lessee may be subject to challenge as a fraudulent conveyance. Among other things, a legal challenge to the granting of the liens may focus on the benefits realized by the land owner/ground lessor from the loan. If a court concluded that the granting of the mortgage lien was an avoidable fraudulent conveyance, it might take actions detrimental to the holders of the offered certificates, including, under certain circumstances, invalidating the mortgage lien on the fee interest of the land owner/ground lessor.
Cooperative Shares
Mortgage loans may be secured by a security interest on the borrower’s ownership interest in shares, and the related proprietary leases, allocable to cooperative dwelling units that may be vacant or occupied by non-owner tenants. Such loans are subject to certain risks not associated with mortgage loans
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secured by a lien on the fee estate of a borrower in real property. Such a loan typically is subordinate to the mortgage, if any, on the cooperative’s building which, if foreclosed, could extinguish the equity in the building and the proprietary leases of the dwelling units derived from ownership of the shares of the cooperative. Further, transfer of shares in a cooperative are subject to various regulations as well as to restrictions under the governing documents of the cooperative, and the shares may be cancelled in the event that associated maintenance charges due under the related proprietary leases are not paid. Typically, a recognition agreement between the lender and the cooperative provides, among other things, the lender with an opportunity to cure a default under a proprietary lease.
Under the laws applicable in many states, “foreclosure” on cooperative shares is accomplished by a sale in accordance with the provisions of Article 9 of the UCC and the security agreement relating to the shares. Article 9 of the UCC requires that a sale be conducted in a “commercially reasonable” manner, which may be dependent upon, among other things, the notice given the debtor and the method, manner, time, place and terms of the sale. Article 9 of the UCC provides that the proceeds of the sale will be applied first to pay the costs and expenses of the sale and then to satisfy the indebtedness secured by the lender’s security interest. A recognition agreement, however, generally provides that the lender’s right to reimbursement is subject to the right of the cooperative to receive sums due under the proprietary leases.
Bankruptcy Laws
Operation of the federal bankruptcy code and related state laws may interfere with or affect the ability of a lender to obtain payment of a loan, realize upon collateral and/or to enforce a deficiency judgment. For example, under the federal bankruptcy code, virtually all actions (including foreclosure actions and deficiency judgment proceedings) are automatically stayed upon the filing of the bankruptcy petition, and, usually, no interest or principal payments are made during the course of the bankruptcy case. The delay and the consequences of a delay caused by an automatic stay can be significant. For example, the filing of a petition in bankruptcy by or on behalf of a junior mortgage lien holder may stay the senior lender from taking action to foreclose out such junior lien. At a minimum, the senior lender would suffer delay due to its need to seek bankruptcy court approval before taking any foreclosure or other action that could be deemed in violation of the automatic stay under the federal bankruptcy code.
Under the federal bankruptcy code, a bankruptcy trustee, or a borrower as debtor-in-possession, may under certain circumstances sell the related mortgaged property or other collateral free and clear of all liens, claims, encumbrances and interests, which liens would then attach to the proceeds of such sale, despite the provisions of the related mortgage or other security agreement to the contrary. Such a sale may be approved by a bankruptcy court even if the proceeds are insufficient to pay the secured debt in full.
Under the federal bankruptcy code, provided certain substantive and procedural safeguards for a lender are met, the amount and terms of a mortgage or other security agreement secured by property of a debtor may be modified under certain circumstances. Pursuant to a confirmed plan of reorganization, lien avoidance or claim objection proceeding, the secured claim arising from a loan secured by real property or other collateral may be reduced to the then-current value of the property (with a corresponding partial reduction of the amount of lender’s security interest), thus leaving the lender a secured creditor to the extent of the then current value of the property and a general unsecured creditor for the difference between such value and the outstanding balance of the loan. Such general unsecured claims may be paid less than 100% of the amount of the debt or not at all, depending upon the circumstances. Other modifications may include the reduction in the amount of each scheduled payment, which reduction may result from a reduction in the rate of interest and/or the alteration of the repayment schedule (with or without affecting the unpaid principal balance of the loan), and/or an extension (or reduction) of the final maturity date. Some courts have approved bankruptcy plans, based on the particular facts of the reorganization case, that effected the curing of a mortgage loan default by paying arrearages over a number of years. Also, under the federal bankruptcy code, a bankruptcy court may permit a debtor through its plan of reorganization to reinstate the loan even though the lender accelerated the mortgage loan and final judgment of foreclosure had been entered in state court (provided no sale of the property had yet occurred) prior to the filing of the debtor’s petition. This may be done even if the plan of
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reorganization does not provide for payment of the full amount due under the original loan. Thus, the full amount due under the original loan may never be repaid. Other types of significant modifications to the terms of mortgage loan may be acceptable to the bankruptcy court, such as making distributions to the mortgage holder of property other than cash, or the substitution of collateral which is the “indubitable equivalent” of the real property subject to the mortgage, or the subordination of the mortgage to liens securing new debt (provided that the lender’s secured claim is “adequately protected” as such term is defined and interpreted under the federal bankruptcy code), often depending on the particular facts and circumstances of the specific case.
Federal bankruptcy law may also interfere with or otherwise adversely affect the ability of a secured mortgage lender to enforce an assignment by a borrower of rents and leases (which “rents” may include revenues from hotels and other lodging facilities specified in the federal bankruptcy code) related to a mortgaged property if the related borrower is in a bankruptcy proceeding. Under the federal bankruptcy code, a lender may be stayed from enforcing the assignment, and the legal proceedings necessary to resolve the issue can be time consuming and may result in significant delays in the receipt of the rents. Rents (including applicable hotel and other lodging revenues) and leases may also escape such an assignment, among other things, (i) if the assignment is not fully perfected under state law prior to commencement of the bankruptcy proceeding, (ii) to the extent such rents and leases are used by the borrower to maintain the mortgaged property, or for other court authorized expenses, (iii) to the extent other collateral may be substituted for the rents and leases, (iv) to the extent the bankruptcy court determines that the lender is adequately protected, or (v) to the extent the court determines based on the equities of the case that the post-petition rents are not subject to the lender’s pre-petition securities interest.
Under the federal bankruptcy code, a security interest in real property acquired before the commencement of the bankruptcy case does not extend to income received after the commencement of the bankruptcy case unless such income is a proceed, product or rent of such property. Therefore, to the extent a business conducted on the mortgaged property creates accounts receivable rather than rents or results from payments under a license rather than payments under a lease, a valid and perfected pre-bankruptcy lien on such accounts receivable or license income generally would not continue as to post-bankruptcy accounts receivable or license income.
The federal bankruptcy code provides that a lender’s perfected pre-petition security interest in leases, rents and hotel revenues continues in the post-petition leases, rents and hotel revenues, unless a bankruptcy court orders to the contrary “based on the equities of the case”. The equities of a particular case may permit the discontinuance of security interests in pre-petition leases and rents. Thus, unless a court orders otherwise, revenues from a mortgaged property generated after the date the bankruptcy petition is filed will constitute “cash collateral” under the federal bankruptcy code. Debtors may only use cash collateral upon obtaining the lender’s consent or a prior court order finding that the lender’s interest in the mortgaged hotel, motel or other lodging property and the cash collateral is “adequately protected” as the term is defined and interpreted under the federal bankruptcy code. In addition to post-petition rents, any cash held by a lender in a lockbox or reserve account generally would also constitute “cash collateral” under the federal bankruptcy code. So long as the lender is adequately protected, a debtor’s use of cash collateral may be for its own benefit or for the benefit of any affiliated entity group that is also subject to bankruptcy proceedings, including use as collateral for new debt. It should be noted, however, that the court may find that the lender has no security interest in either pre-petition or post-petition revenues if the court finds that the loan documents do not contain language covering accounts, room rents, or other forms of personality necessary for a security interest to attach to such revenues.
The federal bankruptcy code provides generally that rights and obligations under an unexpired lease of the debtor/lessee may not be terminated or modified at any time after the commencement of a case under the federal bankruptcy code solely because of a provision in the lease to that effect or because of certain other similar events. This prohibition on so-called “ipso facto” clauses could limit the ability of a lender to exercise certain contractual remedies with respect to the leases on any mortgaged property. In addition, section 362 of the federal bankruptcy code operates as an automatic stay of, among other things, any act to obtain possession of property from a debtor’s estate, which may delay a lender’s
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exercise of those remedies, including foreclosure, in the event that a lessee becomes the subject of a proceeding under the federal bankruptcy code. Thus, the filing of a petition in bankruptcy by or on behalf of a lessee of a mortgaged property would result in a stay against the commencement or continuation of any state court proceeding for past due rent, for accelerated rent, for damages or for a summary eviction order with respect to a default under the related lease that occurred prior to the filing of the lessee’s petition. While relief from the automatic stay to enforce remedies may be requested, it can be denied for a number of reasons, including where the collateral is “necessary to an effective reorganization” for the debtor, and if a debtor’s case has been administratively consolidated with those of its affiliates, the court may also consider whether the property is “necessary to an effective reorganization” of the debtor and its affiliates, taken as a whole.
The federal bankruptcy code generally provides that a trustee in bankruptcy or debtor-in-possession may, with respect to an unexpired lease of non-residential real property, before the earlier of (i) 120 days after the filing of a bankruptcy case or (ii) the entry of an order confirming a plan, subject to approval of the court, (a) assume the lease and retain it or assign it to a third party or (b) reject the lease. If the trustee or debtor-in-possession fails to assume or reject the lease within the time specified in the preceding sentence, subject to any extensions by the bankruptcy court, the lease will be deemed rejected and the property will be surrendered to the lessor. The bankruptcy court may for cause shown extend the 120-day period up to 90 days for a total of 210 days. If the lease is assumed, the trustee in bankruptcy on behalf of the lessee, or the lessee as debtor-in-possession, or the assignee, if applicable, must cure any defaults under the lease, compensate the lessor for its losses and provide the lessor with “adequate assurance” of future performance. These remedies may be insufficient, however, as the lessor may be forced to continue under the lease with a lessee that is a poor credit risk or an unfamiliar tenant (if the lease was assigned), and any assurances provided to the lessor may, in fact, be inadequate. If the lease is rejected, the rejection generally constitutes a breach of the executory contract or unexpired lease as of the date immediately preceding the filing date of the bankruptcy petition. As a consequence, the other party or parties to the lease, such as the borrower, as lessor under a lease, generally would have only an unsecured claim against the debtor, as lessee, for damages resulting from the breach, which could adversely affect the security for the related mortgage loan. In addition, under the federal bankruptcy code, a lease rejection damages claim is limited to the “(a) rent reserved by the lease, without acceleration, for the greater of one year, or 15 percent, not to exceed three years, of the remaining term of such lease, following the earlier of the date of the bankruptcy petition and the date on which the lessor regained possession of the real property, (b) plus any unpaid rent due under such lease, without acceleration, on the earlier of such dates”.
If a trustee in bankruptcy on behalf of a lessor, or a lessor as debtor-in-possession, rejects an unexpired lease of real property, the lessee may treat the lease as terminated by the rejection or, in the alternative, the lessee may remain in possession of the leasehold for the balance of the term and for any renewal or extension of the term that is enforceable by the lessee under applicable non-bankruptcy law. The federal bankruptcy code provides that if a lessee elects to remain in possession after a rejection of a lease, the lessee may offset against rents reserved under the lease for the balance of the term after the date of rejection of the lease, and the related renewal or extension of the lease, any damages occurring after that date caused by the nonperformance of any obligation of the lessor under the lease after that date.
Similarly, bankruptcy risk is associated with an insolvency proceeding under the federal bankruptcy code of either a borrower ground lessee or a ground lessor. In general, upon the bankruptcy of a lessor or a lessee under a lease of nonresidential real property, including a ground lease, that has not been terminated prior to the bankruptcy filing date, the debtor entity has the statutory right to assume or reject the lease. Given that the federal bankruptcy code generally invalidates clauses that terminate contracts automatically upon the filing by one of the parties of a bankruptcy petition or that are conditioned on a party’s insolvency, following the filing of a bankruptcy petition, a debtor would ordinarily be required to perform its obligations under such lease until the debtor decides whether to assume or reject the lease. The federal bankruptcy code provides certain additional protections with respect to non-residential real property leases, such as establishing a specific timeframe in which a debtor must determine whether to assume or reject the lease. The bankruptcy court may extend the time to perform for up to 60 days for
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cause shown. Even if the agreements were terminated prior to bankruptcy, a bankruptcy court may determine that the agreement was improperly terminated and therefore remains part of the debtor’s bankruptcy estate. The debtor also can seek bankruptcy court approval to assume and assign the lease to a third party, and to modify the lease in connection with such assignment. In order to assume the lease, the debtor or assignee generally will have to cure outstanding defaults and provide “adequate assurance of future performance” in addition to satisfying other requirements imposed under the federal bankruptcy code. Under the federal bankruptcy code, subject to certain exceptions, once a lease is rejected by a debtor lessee, it is deemed breached, and the non-debtor lessor will have a claim for lease rejection damages, as described above.
If the ground lessor files for bankruptcy, it may determine until the confirmation of its plan of reorganization whether to reject the ground lease. On request of any party to the lease, the bankruptcy court may order the debtor to determine within a specific period of time whether to assume or reject the lease or to comply with the terms of the lease pending its decision to assume or reject. In the event of rejection, the non-debtor lessee will have the right to treat the lease as terminated by virtue of its terms, applicable nonbankruptcy law, or any agreement made by the lessee. The non-debtor lessee may also, if the lease term has begun, retain its rights under the lease, including its rights to remain in possession of the leased premises under the rent reserved in the lease for the balance of the term of the lease (including renewals). The term “lessee” includes any “successor, assign or mortgagee permitted under the terms of such lease”. If, pre-petition, the ground lessor had specifically granted the leasehold mortgagee such right, the leasehold mortgagee may have the right to succeed to the lessee/borrower’s position under the lease.
In the event of concurrent bankruptcy proceedings involving the ground lessor and the lessee/borrower, actions by creditors against the borrower/lessee debtor would be subject to the automatic stay, and a lender may be unable to enforce both the bankrupt lessee/borrower’s pre-petition agreement to refuse to treat a ground lease rejected by a bankrupt lessor as terminated and any agreement by the ground lessor to grant the lender a new lease upon such termination. In such circumstances, a lease could be terminated notwithstanding lender protection provisions contained in that lease or in the mortgage. A lender could lose its security unless the lender holds a fee mortgage or the bankruptcy court, as a court of equity, allows the mortgagee to assume the ground lessee’s obligations under the ground lease and succeed to the ground lessee’s position. Although consistent with the federal bankruptcy code, such position may not be adopted by the bankruptcy court.
Further, in an appellate 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 leased property occurs under the federal bankruptcy code upon the bankruptcy of a landlord, that 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 the federal bankruptcy code, 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, at least where a memorandum of lease had not been recorded, 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. As a result, we cannot assure you that, in the event of a statutory sale of leased property pursuant to the federal bankruptcy code, the lessee would be able to maintain possession of the property under the ground lease. In addition, we cannot assure you that a leasehold mortgagor and/or a leasehold mortgagee (to the extent it has standing to intervene) would be able to recover the full value of the leasehold interest in bankruptcy court.
Because of the possible termination of the related ground lease, whether arising from a bankruptcy, the expiration of a lease term or an uncured defect under the related ground lease, lending on a leasehold interest in a real property is riskier than lending on the fee interest in the property.
In a bankruptcy or similar proceeding involving a borrower, action may be taken seeking the recovery as a preferential transfer of any payments made by such borrower, or made directly by the related lessee, under the related mortgage loan to the issuing entity. Payments on long term debt may be protected from
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recovery as preferences if they qualify for the “ordinary course” exception under the federal bankruptcy code or if certain other defenses in the federal bankruptcy code are applicable. Whether any particular payment would be protected depends upon the facts specific to a particular transaction.
In addition, in a bankruptcy or similar proceeding involving any borrower or an affiliate, an action may be taken to avoid the transaction (or any component of the transaction, such as joint and several liability on the related mortgage loan) as an actual or constructive fraudulent conveyance under state or federal law. Any payment by a borrower in excess of its allocated share of the loan could be challenged as a fraudulent conveyance by creditors of that borrower in an action outside a bankruptcy case or by the representative of the borrower’s bankruptcy estate in a bankruptcy case. Generally, under federal and most state fraudulent conveyance statutes, the incurrence of an obligation or the transfer of property by a person will be subject to avoidance under certain circumstances if the person transferred such property with the intent to hinder, delay or defraud its creditors or the person did not receive fair consideration or reasonably equivalent value in exchange for such obligation or transfer and (i) was insolvent or was rendered insolvent by such obligation or transfer, (ii) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the person constituted unreasonably small capital, or (iii) intended to, or believed that it would, incur debts that would be beyond the person’s ability to pay as such debts matured. The measure of insolvency will vary depending on the law of the applicable jurisdiction. However, an entity will generally be considered insolvent if the present fair salable value of its assets is less than (x) the sum of its debts or (y) the amount that would be required to pay its probable liabilities on its existing debts as they become absolute and matured. Accordingly, a lien granted by a borrower to secure repayment of the loan in excess of its allocated share could be avoided if a court were to determine that (i) such borrower was insolvent at the time of granting the lien, was rendered insolvent by the granting of the lien, was left with inadequate capital, or was not able to pay its debts as they matured and (ii) the borrower did not, when it allowed its property to be encumbered by a lien securing the entire indebtedness represented by the loan, receive fair consideration or reasonably equivalent value for pledging such property for the equal benefit of each other borrower.
A bankruptcy court may, under certain circumstances, authorize a debtor to obtain credit after the commencement of a bankruptcy case, secured among other things, by senior, equal or junior liens on property that is already subject to a lien. In the bankruptcy case of General Growth Properties filed on April 16, 2009, the debtors initially sought approval of a debtor-in-possession loan to the corporate parent entities guaranteed by the property-level single purpose entities and secured by second liens on their properties. Although the debtor-in-possession loan subsequently was modified to eliminate the subsidiary guarantees and second liens, we cannot assure you that, in the event of a bankruptcy of the borrower sponsor, the borrower sponsor would not seek approval of a similar debtor-in-possession loan, or that a bankruptcy court would not approve a debtor-in-possession loan that included such subsidiary guarantees and second liens on such subsidiaries’ properties.
Certain of the borrowers may be partnerships. The laws governing limited partnerships in certain states provide that the commencement of a case under the federal bankruptcy code with respect to a general partner will cause a person to cease to be a general partner of the limited partnership, unless otherwise provided in writing in the limited partnership agreement. This provision may be construed as an “ipso facto” clause and, in the event of the general partner’s bankruptcy, may not be enforceable. Certain limited partnership agreements of the borrowers may provide that the commencement of a case under the federal bankruptcy code with respect to the related general partner constitutes an event of withdrawal (assuming the enforceability of the clause is not challenged in bankruptcy proceedings or, if challenged, is upheld) that might trigger the dissolution of the limited partnership, the winding up of its affairs and the distribution of its assets, unless (i) at the time there was at least one other general partner and the written provisions of the limited partnership permit the business of the limited partnership to be carried on by the remaining general partner and that general partner does so or (ii) the written provisions of the limited partnership agreement permit the limited partners to agree within a specified time frame (often 60 days) after the withdrawal to continue the business of the limited partnership and to the appointment of one or more general partners and the limited partners do so. In addition, the laws governing general partnerships in certain states provide that the commencement of a case under the federal bankruptcy code or state
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bankruptcy laws with respect to a general partner of the partnerships triggers the dissolution of the partnership, the winding up of its affairs and the distribution of its assets. Those state laws, however, may not be enforceable or effective in a bankruptcy case. Limited liability companies may be subjected to similar treatment as that described in this prospectus with respect to limited partnerships. The dissolution of a borrower, the winding up of its affairs and the distribution of its assets could result in an acceleration of its payment obligation under the borrower’s mortgage loan, which may reduce the yield on the Offered Certificates in the same manner as a principal prepayment.
In addition, the bankruptcy of the general or limited partner of a borrower that is a partnership, or the bankruptcy of a member of a borrower that is a limited liability company or the bankruptcy of a shareholder of a borrower that is a corporation may provide the opportunity in the bankruptcy case of the partner, member or shareholder to obtain an order from a court consolidating the assets and liabilities of the partner, member or shareholder with those of the mortgagor pursuant to the doctrines of substantive consolidation or piercing the corporate veil. In such a case, the respective mortgaged property, for example, would become property of the estate of the bankrupt partner, member or shareholder. Not only would the mortgaged property be available to satisfy the claims of creditors of the partner, member or shareholder, but an automatic stay would apply to any attempt by the trustee to exercise remedies with respect to the mortgaged property. However, such an occurrence should not affect a lender’s status as a secured creditor with respect to the mortgagor or its security interest in the mortgaged property.
A borrower that is a limited partnership, in many cases, may be required by the loan documents to have a single purpose entity as its sole general partner, and a borrower that is a general partnership, in many cases, may be required by the loan documents to have as its general partners only entities that are single purpose entities. A borrower that is a limited liability company may be required by the loan documents to have a single purpose member or a springing member. All borrowers that are tenants-in-common may be required by the loan documents to be single purpose entities. These provisions are designed to mitigate the risk of the dissolution or bankruptcy of the borrower partnership or its general partner, a borrower limited liability company or its member (if applicable), or a borrower that is a tenant-in-common. However, we cannot assure you that any borrower partnership or its general partner, or any borrower limited liability company or its member (if applicable), or a borrower that is a tenant-in-common, will not dissolve or become a debtor under the federal bankruptcy code.
Environmental Considerations
General
A lender may be subject to environmental risks when taking a security interest in real property. Of particular concern may be properties that are or have been used for industrial, manufacturing, military or disposal activity. Such environmental risks include the possible diminution of the value of a contaminated property or, as discussed below, potential liability for clean-up costs or other remedial actions that could exceed the value of the property or the amount of the lender’s loan. In certain circumstances, a lender may decide to abandon a contaminated mortgaged property as collateral for its loan rather than foreclose and risk liability for clean-up costs.
Superlien Laws
Under the laws of many states, contamination on a property may give rise to a lien on the property for clean-up costs. In several states, such a lien has priority over all existing liens, including those of existing mortgages. In these states, the lien of a mortgage may lose its priority to such a “superlien”.
CERCLA
The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), imposes strict liability on present and past “owners” and “operators” of contaminated real property for the costs of clean-up. A secured lender may be liable as an “owner” or “operator” of a contaminated mortgaged property if agents or employees of the lender have participated in the management or operation of such mortgaged property. Such liability may exist even if the lender did
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not cause or contribute to the contamination and regardless of whether the lender has actually taken possession of a mortgaged property through foreclosure, deed in lieu of foreclosure or otherwise. Moreover, such liability is not limited to the original or unamortized principal balance of a loan or to the value of the property securing a loan. Excluded from CERCLA’s definition of “owner” or “operator, “ however, is a person “who, without participating in the management of the facility, holds indicia of ownership primarily to protect his security interest”. This is the so called “secured creditor exemption”.
The Asset Conservation, Lender Liability and Deposit Insurance Protection Act of 1996 (the “1996 Act”) amended, among other things, the provisions of CERCLA with respect to lender liability and the secured creditor exemption. The 1996 Act offers protection to lenders by defining the activities in which a lender can engage and still have the benefit of the secured creditor exemption. In order for a lender to be deemed to have participated in the management of a mortgaged property, the lender must actually participate in the operational affairs of the property of the borrower. The 1996 Act provides that “merely having the capacity to influence, or unexercised right to control” operations does not constitute participation in management. A lender will lose the protection of the secured creditor exemption if it exercises decision-making control over the borrower’s environmental compliance and hazardous substance handling or disposal practices, or assumes day-to-day management of environmental or substantially all other operational functions of the mortgaged property. The 1996 Act also provides that a lender will continue to have the benefit of the secured creditor exemption even if it forecloses on a mortgaged property, purchases it at a foreclosure sale or accepts a deed-in-lieu of foreclosureprovided that the lender seeks to sell the mortgaged property at the earliest practicable commercially reasonable time on commercially reasonable terms.
Certain Other Federal and State Laws
Many states have statutes similar to CERCLA, and not all of those statutes provide for a secured creditor exemption. In addition, under federal law, there is potential liability relating to hazardous wastes and underground storage tanks under the federal Resource Conservation and Recovery Act.
Some federal, state and local laws, regulations and ordinances govern the management, removal, encapsulation or disturbance of asbestos-containing materials. These laws, as well as common law standards, may impose liability for releases of or exposure to asbestos-containing materials, and provide for third parties to seek recovery from owners or operators of real properties for personal injuries associated with those releases.
Federal legislation requires owners of residential housing constructed prior to 1978 to disclose to potential residents or purchasers any known lead-based paint hazards and will impose treble damages for any failure to disclose. In addition, the ingestion of lead-based paint chips or dust particles by children can result in lead poisoning. If lead-based paint hazards exist at a property, then the owner of that property may be held liable for injuries and for the costs of removal or encapsulation of the lead-based paint.
In a few states, transfers of some types of properties are conditioned upon clean-up of contamination prior to transfer. In these cases, a lender that becomes the owner of a property through foreclosure, deed in lieu of foreclosure or otherwise, may be required to clean-up the contamination before selling or otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law causes of action (for example, actions based on nuisance or on toxic tort resulting in death, personal injury or damage to property) related to hazardous environmental conditions on a property. While it may be more difficult to hold a lender liable under common law causes of action, unanticipated or uninsured liabilities of the borrower may jeopardize the borrower’s ability to meet its loan obligations or may decrease the re-sale value of the collateral.
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Additional Considerations
The cost of remediating hazardous substance contamination at a property can be substantial. If a lender becomes liable, it can bring an action for contribution against the owner or operator who created the environmental hazard, but that individual or entity may be without substantial assets. Accordingly, it is possible that such costs could become a liability of the issuing entity and occasion a loss to the certificateholders.
If a lender forecloses on a mortgage secured by a property, the operations on which are subject to environmental laws and regulations, the lender will be required to operate the property in accordance with those laws and regulations. Such compliance may entail substantial expense, especially in the case of industrial or manufacturing properties.
In addition, a lender may be obligated to disclose environmental conditions on a property to government entities and/or to prospective buyers (including prospective buyers at a foreclosure sale or following foreclosure). Such disclosure may decrease the amount that prospective buyers are willing to pay for the affected property, sometimes substantially, and thereby decrease the ability of the lender to recover its investment in a loan upon foreclosure.
Due-on-Sale and Due-on-Encumbrance Provisions
Certain of the mortgage loans may contain “due-on-sale” and “due-on-encumbrance” clauses that purport to permit the lender to accelerate the maturity of the loan if the borrower transfers or encumbers the related mortgaged property. The Garn-St Germain Depository Institutions Act of 1982 (the “Garn Act”) generally preempts state laws that prohibit the enforcement of due-on-sale clauses and permits lenders to enforce these clauses in accordance with their terms, subject to certain limitations as set forth in the Garn Act and related regulations. Accordingly, a lender may nevertheless have the right to accelerate the maturity of a mortgage loan that contains a “due-on-sale” provision upon transfer of an interest in the property, without regard to the lender’s ability to demonstrate that a sale threatens its legitimate security interest.
Subordinate Financing
The terms of certain of the mortgage loans may not restrict the ability of the borrower to use the mortgaged property as security for one or more additional loans, or such restrictions may be unenforceable. Where a borrower encumbers a mortgaged property with one or more junior liens, the senior lender is subjected to additional risk. First, the borrower may have difficulty servicing and repaying multiple loans. Moreover, if the subordinate financing permits recourse to the borrower (as-is frequently the case) and the senior loan does not, a borrower may have more incentive to repay sums due on the subordinate loan. Second, acts of the senior lender that prejudice the junior lender or impair the junior lender’s security may create a superior equity in favor of the junior lender. For example, if the borrower and the senior lender agree to an increase in the principal amount of or the interest rate payable on the senior loan, the senior lender may lose its priority to the extent any existing junior lender is harmed or the borrower is additionally burdened. Third, if the borrower defaults on the senior loan and/or any junior loan or loans, the existence of junior loans and actions taken by junior lenders can impair the security available to the senior lender and can interfere with or delay the taking of action by the senior lender. Moreover, the bankruptcy of a junior lender may operate to stay foreclosure or similar proceedings by the senior lender.
Default Interest and Limitations on Prepayments
Promissory notes and mortgages may contain provisions that obligate the borrower to pay a late charge or additional interest if payments are not timely made, and in some circumstances, may prohibit prepayments for a specified period and/or condition prepayments upon the borrower’s payment of prepayment fees or yield maintenance penalties. In certain states, there are or may be specific limitations upon the late charges which a lender may collect from a borrower for delinquent payments. Certain states also limit the amounts that a lender may collect from a borrower as an additional charge if the loan is
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prepaid. In addition, the enforceability of provisions that provide for prepayment fees or penalties upon an involuntary prepayment is unclear under the laws of many states.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980 (“Title V”) provides that state usury limitations will not apply to certain types of residential (including multifamily) first mortgage loans originated by certain lenders after March 31, 1980. Title V authorized any state to reimpose interest rate limits by adopting, before April 1, 1983, a law or constitutional provision that expressly rejects application of the federal law. In addition, even where Title V is not so rejected, any state is authorized by the law to adopt a provision limiting discount points or other charges on mortgage loans covered by Title V. Certain states have taken action to reimpose interest rate limits and/or to limit discount points or other charges.
Statutes differ in their provisions as to the consequences of a usurious loan. One group of statutes requires the lender to forfeit the interest due above the applicable limit or impose a specified penalty. Under this statutory scheme, the borrower may cancel the recorded mortgage or deed of trust upon paying its debt with lawful interest, and the lender may foreclose, but only for the debt plus lawful interest. A second group of statutes is more severe. A violation of this type of usury law results in the invalidation of the transaction, thereby permitting the borrower to cancel the recorded mortgage or deed of trust without any payment or prohibiting the lender from foreclosing.
Americans with Disabilities Act
Under Title III of the Americans with Disabilities Act of 1990 and related regulations (collectively, the “ADA”), in order to protect individuals with disabilities, public accommodations (such as hospitality properties, restaurants, shopping centers, hospitals, schools and social service center establishments) must remove architectural and communication barriers which are structural in nature from existing places of public accommodation to the extent “readily achievable”. In addition, under the ADA, alterations to a place of public accommodation or a commercial facility are to be made so that, to the maximum extent feasible, such altered portions are readily accessible to and usable by disabled individuals. The “readily achievable” standard takes into account, among other factors, the financial resources of the affected site, owner, landlord or other applicable person. In addition to imposing a possible financial burden on the borrower in its capacity as owner or landlord, the ADA may also impose such requirements on a foreclosing lender who succeeds to the interest of the borrower as owner or landlord. Furthermore, since the “readily achievable” standard may vary depending on the financial condition of the owner or landlord, a foreclosing lender who is financially more capable than the borrower of complying with the requirements of the ADA may be subject to more stringent requirements than those to which the borrower is subject.
Servicemembers Civil Relief Act
Under the terms of the Servicemembers Civil Relief Act as amended (the “Relief Act”), a borrower who enters military service after the origination of such borrower’s mortgage loan (including a borrower who was in reserve status and is called to active duty after origination of the mortgage loan), upon notification by such borrower, will not be charged interest, including fees and charges, in excess of 6%per annum during the period of such borrower’s active duty status. In addition to adjusting the interest, the lender must forgive any such interest in excess of 6% unless a court or administrative agency orders otherwise upon application of the lender. The Relief Act applies to individuals who are members of the Army, Navy, Air Force, Marines, National Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service or the National Oceanic and Atmospheric Administration assigned to duty with the military. Because the Relief Act applies to individuals who enter military service (including reservists who are called to active duty) after origination of the related mortgage loan, no information can be provided as to the number of loans with individuals as borrowers that may be affected by the Relief Act. Application of the Relief Act would adversely affect, for an indeterminate period of time, the ability of a master servicer or special servicer to collect full amounts of interest on certain of the mortgage loans. Any shortfalls in interest collections resulting from the application of the Relief Act would result in a reduction of the amounts distributable to the holders of certificates, and would not be covered by advances or, any form of
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credit support provided in connection with the certificates. In addition, the Relief Act imposes limitations that would impair the ability of a lender to foreclose on an affected mortgage loan during the borrower’s period of active duty status, and, under certain circumstances, during an additional three-month period thereafter.
Anti-Money Laundering, Economic Sanctions and Bribery
Many jurisdictions have adopted wide-ranging anti-money laundering, economic and trade sanctions, and anti-corruption and anti-bribery laws, and regulations (collectively, the “Requirements”). Any of the depositor, the issuing entity, the underwriters or other party to the PSA could be requested or required to obtain certain assurances from prospective investors intending to purchase certificates and to retain such information or to disclose information pertaining to them to governmental, regulatory or other authorities or to financial intermediaries or engage in due diligence or take other related actions in the future. Failure to honor any request by the depositor, the issuing entity, the underwriters or other party to the PSA to provide requested information or take such other actions as may be necessary or advisable for the depositor, the issuing entity, the underwriters or other party to the PSA to comply with any Requirements, related legal process or appropriate requests (whether formal or informal) may result in, among other things, a forced sale to another investor of such investor’s certificates. In addition, it is expected that each of the depositor, the issuing entity, the underwriters and the other parties to the PSA will comply with the U.S. Bank Secrecy Act, U.S. Bank Secrecy Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (also known as the “Patriot Act”) and any other anti-money laundering and anti-terrorism, economic and trade sanctions, and anti-corruption or anti-bribery laws, and regulations of the United States and other countries, and will disclose any information required or requested by authorities in connection with such compliance.
Potential Forfeiture of Assets
Federal law provides that assets (including property purchased or improved with assets) derived from criminal activity or otherwise tainted, or used in the commission of certain offenses, is subject to the blocking requirements of economic sanctions laws and regulations, and can be blocked and/or seized and ordered forfeited to the United States of America. The offenses that can trigger such a blocking and/or seizure and forfeiture include, among others, violations of the Racketeer Influenced and Corrupt Organizations Act, the U.S. Bank Secrecy Act, the anti-money laundering, anti-terrorism, economic sanctions, and anti-bribery laws and regulations, including the Patriot Act and the regulations issued pursuant to that act, as well as the narcotic drug laws. In many instances, the United States may seize the property even before a conviction occurs.
In the event of a forfeiture proceeding, a lender may be able to establish its interest in the property by proving that (a) its mortgage was executed and recorded before the commission of the illegal conduct from which the assets used to purchase or improve the property were derived or before the commission of any other crime upon which the forfeiture is based, or (b) the lender, at the time of the execution of the mortgage, “did not know or was reasonably without cause to believe that the property was subject to forfeiture”. However, there is no assurance that such a defense will be successful.
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Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties
GACC and its affiliates are playing several roles in this transaction. Deutsche Bank Securities Inc., an underwriter, is an affiliate of Deutsche Mortgage & Asset Receiving Corporation, the depositor, and GACC, a mortgage loan seller and a sponsor. CGMRC and its affiliates are playing several roles in this transaction. Citigroup Global Markets Inc., an underwriter, is an affiliate of CGMRC, a mortgage loan seller and a sponsor.
Deutsche Bank AG, New York Branch (an affiliate of GACC) or GACC currently holds certain of the 10 Hudson Yards Companion Loans, certain of the Westfield San Francisco Centre Companion Loans, certain of the Prudential Plaza Companion Loans, one of the U-Haul AREC Portfolio Companion Loans and certain of the Birch Run Premium Outlets Companion Loans. However, GACC intends to sell such Companion Loans in connection with one or more future securitizations. CGMRC currently holds certain of the Vertex Pharmaceuticals HQ Companion Loans. However, CGMRC intends to sell such Companion Loans in connection with one or more future securitizations.
Pursuant to certain interim servicing agreements between GACC and/or certain of its affiliates, on the one hand, and Wells Fargo Bank, National Association, on the other hand, Wells Fargo Bank, National Association acts as interim servicer with respect to certain mortgage loans, including, prior to their inclusion in the issuing entity, 11 of the Mortgage Loans to be contributed to this securitization by GACC, representing approximately 48.3% of the Initial Pool Balance.
Pursuant to certain interim servicing agreements between GACC and/or certain of its affiliates, on the one hand, and Midland Loan Services, a Division of PNC Bank, National Association, on the other hand, Midland Loan Services, a Division of PNC Bank, National Association acts as interim servicer with respect to certain mortgage loans, including, prior to their inclusion in the issuing entity, 4 of the Mortgage Loans to be contributed to this securitization by GACC, representing approximately 5.5% of the Initial Pool Balance.
Wells Fargo Bank, National Association is the interim custodian of the loan documents with respect to four (4) Mortgage Loans to be contributed to this securitization by GACC, representing approximately 11.0% of the Initial Pool Balance.
Pursuant to certain interim servicing agreements between CGMRC and certain of its affiliates, on the one hand, and Wells Fargo Bank, National Association, on the other hand, Wells Fargo Bank, National Association acts (or has acted) as interim servicer with respect to certain mortgage loans, including, prior to their inclusion in the issuing entity, 7 of the Mortgage Loans to be contributed to this securitization by CGMRC, representing approximately 16.7% of the Initial Pool Balance.
Wells Fargo Bank, National Association is or was the interim custodian of the loan documents with respect to eight (8) Mortgage Loans to be contributed to this securitization by CGMRC, representing approximately 17.3% of the Initial Pool Balance.
Rialto Capital Advisors, LLC, or an affiliate, assisted RREF III Debt AIV, LP, or its affiliate, with due diligence relating to the Mortgage Loans in the Mortgage Pool.
Wells Fargo Bank, National Association, the trustee and certificate administrator, is or is expected to be the master servicer under (i) the Hudson Yards 2016-10HY Trust and Servicing Agreement with respect to the 10 Hudson Yards Whole Loan, (ii) the DBJPM 2016-SFC Trust and Servicing Agreement with respect to the Westfield San Francisco Centre Whole Loan, (iii) the COMM 2015-CCRE26 Pooling and Servicing Agreement with respect to the Prudential Plaza Whole Loan, (iv) prior to the Birch Run Premium Outlets Control Note Securitization Date, the COMM 2016-DC2 Pooling and Servicing Agreement with respect to the Birch Run Premium Outlets Whole Loan, (v) the WFCM 2016-BNK1 Pooling and Servicing Agreement with respect to the Vertex Pharmaceuticals HQ Whole Loan and (vi) the CGCMT 2016-P4 Pooling and Servicing Agreement with respect to the 401 South State Street Whole Loan.
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Park Bridge Lender Services LLC is also the operating advisor under the COMM 2015-CCRE26 Pooling and Servicing Agreement with respect to the Prudential Plaza Whole Loan.
Park Bridge Lender Services LLC is also the operating advisor and asset representations reviewer under (i) the COMM 2016-DC2 Pooling and Servicing Agreement with respect to the Birch Run Premium Outlets Whole Loan and (ii) the CGCMT 2016-P4 Pooling and Servicing Agreement with respect to the 401 South State Street Whole Loan, and is expected to be the operating advisor and asset representations reviewer under the WFCM 2016-BNK1 Pooling and Servicing Agreement with respect to the Vertex Pharmaceuticals HQ Whole Loan.
Three (3) of the GACC Mortgage Loans were originated by Pillar Funding LLC and subsequently sold to GACC. The Mortgage Loans were underwritten by GACC in accordance with GACC’s underwriting guidelines. See “Transaction Parties—The Sponsors and Mortgage Loan Sellers—German American Capital Corporation” above.
See “Risk Factors—Risks Related to Conflicts of Interest—Potential Conflicts of Interest of the Master Servicer and the Special Servicer”, “—Potential Conflicts of Interest of the Operating Advisor”,
“—Potential Conflicts of Interest of the Asset Representations Reviewer”, “—Potential Conflicts of Interest of the Directing Certificateholder and the Companion Loan Holders”and “—Risks Relating to the Mortgage Loans—Performance of the Mortgage Loans Will Be Highly Dependent on the Performance of Tenants and Tenant Leases—Mortgaged Properties Leased to Borrowers or Borrower Affiliated Entities Also Have Risks”. For a description of certain other affiliations, relationships and related transactions, to the extent known and material, among the transaction parties, see the individual descriptions of the transaction parties under “Transaction Parties”.
Pending Legal Proceedings Involving Transaction Parties
While the sponsors have been involved in, and are currently involved in, certain litigation or potential litigation, including actions relating to repurchase claims, there are no legal proceedings pending, or any proceedings known to be contemplated by any governmental authorities, against the sponsors that are material to Certificateholders.
For a description of certain other material legal proceedings pending against the transaction parties, see the individual descriptions of the transaction parties under “Transaction Parties”.
Use of Proceeds
Certain of the net proceeds from the sale of the Offered Certificates, together with the net proceeds from the sale of the other certificates not being offered by this prospectus, will be used by the depositor to purchase the mortgage loans from the mortgage loan sellers and to pay certain expenses in connection with the issuance of the certificates.
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Yield and Maturity Considerations
Yield Considerations
General
The yield to maturity on the Offered Certificates will depend upon the price paid by the investors, the rate and timing of the distributions in reduction of the Certificate Balance or Notional Amount of the applicable class of Offered Certificates, the extent to which yield maintenance charges and prepayment premiums allocated to the class of Offered 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 Balance or Notional Amount of the class of Offered Certificates, as well as prevailing interest rates at the time of payment or loss realization.
Rate and Timing of Principal Payments
The rate and amount of distributions in reduction of the Certificate Balance of any class of Offered Certificates that are also Principal Balance 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, as well as borrower defaults and the severity of losses occurring upon a default and the resulting rate and timing of collections made in connection with liquidations of Mortgage Loans due to these defaults. Principal payments on the Mortgage Loans will be affected by their amortization schedules, lockout periods, defeasance provisions, provisions relating to the release and/or application of earnout reserves, provisions requiring prepayments in connection with the release of real property collateral, requirements to pay yield maintenance charges or prepayment premiums in connection with principal payments, the dates on which balloon payments are due, incentives for a borrower to repay an ARD Loan by the related Anticipated Repayment Date, property release provisions, provisions relating to the application or release of earnout reserves, and any extensions of maturity dates by the master servicer or the special servicer. While voluntary prepayments of some Mortgage Loans are generally prohibited during applicable prepayment lockout periods, effective prepayments may occur if a sufficiently significant portion of a mortgaged property is lost due to casualty or condemnation. In addition, such distributions in reduction of Certificate Balances of the respective classes of Offered Certificates that are also Principal Balance Certificates may result from repurchases of, or substitutions for, Mortgage Loans made by the sponsors due to missing or defective documentation or breaches of representations and warranties with respect to the Mortgage Loans as described under “Description of the Mortgage Loan Purchase Agreements”, purchases of the Mortgage Loans in the manner described under “Pooling and Servicing Agreement—Termination; Retirement of Certificates”, and the exercise of purchase options by the holder of companion loan or a mezzanine loan, if any. See “Description of the Mortgage Pool—The Whole Loans”. To the extent a Mortgage Loan requires payment of a yield maintenance charge or prepayment premium in connection with a voluntary prepayment, any such yield maintenance charge or prepayment premium 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 or otherwise, and may not be enforceable or collectible upon a default.
Because the certificates with Notional Amounts are not entitled to distributions of principal, the yield on such certificates will be extremely sensitive to prepayments received in respect of the Mortgage Loans to the extent distributed to reduce the related Notional Amount of the applicable class of certificates. In addition, although the borrower under an ARD Loan may have certain incentives to prepay such ARD Loan on its Anticipated Repayment Date, we cannot assure you that the borrower will be able to prepay such ARD Loan on its related Anticipated Repayment Date. The failure of the borrower to prepay an ARD Loan on its Anticipated Repayment Date will not be an event of default under the terms of such ARD Loan. Pursuant to the terms of the PSA, with respect to the U-Haul AREC Portfolio Whole Loan, neither the master servicer nor the special servicer will be permitted to take enforcement action with respect to the borrower’s failure to pay Excess Interest until the scheduled maturity of such ARD Loan;providedthat the master servicer or the special servicer, as the case may be, may take action to enforce the issuing entity’s right to apply excess cash flow to principal in accordance with the terms of the respective ARD
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Loan documents. With respect to the Vertex Pharmaceuticals HQ Whole Loan, pursuant to the terms of the WFCM 2016-BNK1 Pooling and Servicing Agreement, the WFCM 2016-BNK1 Master Servicer or the WFCM 2016-BNK1 Special Servicer, as the case may be, will be permitted to take enforcement action with respect to the borrower’s failure to pay Excess Interest to the extent permitted under the related ARD Loan documents and may take action to enforce the lender’s right to apply excess cash flow to principal in accordance with the terms of the related ARD Loan documents. With respect to the Class A-SB certificates, the extent to which the planned balances are achieved and the sensitivity of the Class A-SB certificates to principal prepayments of the Mortgage Loans will depend in part on the period of time during which the Class A-1, Class A-2, Class A-3 and Class A-4 certificates remain outstanding. As such, the Class A-SB certificates will become more sensitive to the rate of prepayments on the mortgage loans than they were when the Class A-1, Class A-2, Class A-3 and Class A-4 certificates were outstanding.
The extent to which the yield to maturity of any class of Offered Certificates may vary from the anticipated yield will depend upon the degree to which the certificates are purchased at a discount or premium and when, and to what degree, payments of principal on the Mortgage Loans are in turn distributed on the certificates or, in the case of the Class X Certificates, applied to reduce their Notional Amounts. An investor should consider, in the case of any certificate (other than a certificate with a Notional Amount) 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 certificate purchased at a premium (including certificates with Notional Amounts), the risk that a faster than anticipated rate of principal payments could result in an actual yield to such investor that is lower than the anticipated yield. In general, the earlier a payment of principal on the Mortgage Loans is distributed or otherwise results in reduction of the Certificate Balance of a certificate purchased at a discount or premium, the greater will be the effect on an investor’s yield to maturity. As a result, the effect on an investor’s yield of principal payments distributed on an investor’s certificates occurring at a rate higher (or lower) than the rate anticipated by the investor during any particular period would not be fully offset by a subsequent like reduction (or increase) in the rate of principal payments.
The yield on each of the classes of certificates that have a Pass-Through Rate equal to, limited by, or based on, the WAC Rate could (or in the case of any class of certificates with a Pass-Through Rate equal to, or based on, the WAC Rate, would) be adversely affected if Mortgage Loans with higher Mortgage Rates prepay faster than Mortgage Loans with lower Mortgage Rates. The Pass-Through Rates on these classes of certificates may be adversely affected by a decrease in the WAC Rate even if principal prepayments do not occur.
Losses and Shortfalls
The Certificate Balance or Notional 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 principal on the Offered Certificates that are Principal Balance Certificates as well as the amount of interest that would have otherwise been payable on the Offered Certificates in the absence of such reduction. In general, a Realized Loss occurs when the principal balance of a Mortgage Loan is reduced without an equal distribution to applicable Certificateholders in reduction of the Certificate Balances of the certificates. Realized Losses may occur in connection with a default on a Mortgage Loan, acceptance of a discounted pay-off, the liquidation of the related Mortgaged Properties, a reduction in the principal balance of a Mortgage Loan by a bankruptcy court or pursuant to a modification, a recovery by the master servicer or trustee of a Nonrecoverable Advance on a Distribution Date or the incurrence of certain unanticipated or default-related costs and expenses (such as interest on Advances, Workout Fees, Liquidation Fees and Special Servicing Fees). Any reduction of the Certificate Balances of the classes of certificates indicated in the following table as a result of the application of Realized Losses will also reduce the Notional Amount of the related certificates.
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Interest-Only | Class Notional Amount | Underlying Class | ||
| Class X-A | $ 566,092,000 | Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class A-M | ||
| Class X-B | $ 59,773,000 | Class B, Class C | ||
| Class X-C | $ 31,645,000 | Class D | ||
| Class X-D | $ 15,823,000 | Class E | ||
| Class X-E | $ 6,153,000 | Class F | ||
| Class X-F | $ 23,733,985 | Class G |
Certificateholders are not entitled to receive distributions of Periodic Payments when due except to the extent they are either covered by a P&I Advance or actually received. Consequently, any defaulted Periodic Payment for which no such P&I Advance is made will tend to extend the weighted average lives of the Offered Certificates, whether or not a permitted extension of the due date of the related Mortgage Loan has been completed.
Certain Relevant Factors Affecting Loan Payments and Defaults
The rate and timing of principal payments and defaults and the severity of losses on the Mortgage Loans may be affected by a number of factors, including, without limitation, the availability of credit for commercial or multifamily real estate, prevailing interest rates, the terms of the Mortgage Loans (for example, due-on-sale clauses, lockout periods or yield maintenance charges, release of property provisions and amortization terms that require balloon payments and incentives for a borrower to repay its mortgage loan by an anticipated repayment date), the demographics and relative economic vitality of the areas in which the Mortgaged Properties are located and the general supply and demand for rental properties in those areas, the quality of management of the Mortgaged Properties, the servicing of the Mortgage Loans, possible changes in tax laws and other opportunities for investment. See “Risk Factors” and “Description of the Mortgage Pool”.
The rate of prepayment on the pool of Mortgage Loans is likely to be affected by prevailing market interest rates for Mortgage Loans of a comparable type, term and risk level as the Mortgage Loans. When the prevailing market interest rate is below a mortgage interest rate, a borrower may have an increased incentive to refinance its Mortgage Loan. Although the Mortgage Loans contain provisions designed to mitigate the likelihood of an early loan repayment, we cannot assure you that the related borrowers will refrain from prepaying their Mortgage Loans due to the existence of these provisions, or that involuntary prepayments will not occur. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans”.
With respect to certain Mortgage Loans, the related Mortgage Loan documents allow for the sale of individual properties and the severance of the related debt and the assumption by the transferee of such portion of the Mortgage Loan as-is allocable to the individual property acquired by that transferee, subject to the satisfaction of certain conditions. In addition, with respect to certain Mortgage Loans, the related Mortgage Loan documents allow for partial releases of individual Mortgaged Properties during a lockout period or during such time as a yield maintenance charge would otherwise be payable, which could result in a prepayment of a portion of the initial principal balance of the related Mortgage Loan without payment of a yield maintenance charge or prepayment premium. Additionally, in the case of a partial release of an individual Mortgaged Property, the related release amount in many cases is greater than the Allocated Loan Amount for the Mortgaged Property being released, which would result in a greater than proportionate paydown of the Mortgage Loan. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—Partial Releases”.
Depending on prevailing market interest rates, the outlook for market interest rates and economic conditions generally, some borrowers may sell Mortgaged Properties in order to realize their equity in the Mortgaged Property, to meet cash flow needs or to make other investments. In addition, some borrowers
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may be motivated by federal and state tax laws (which are subject to change) to sell Mortgaged Properties prior to the exhaustion of tax depreciation benefits.
We make no representation as to the particular factors that will affect the rate and timing of prepayments and defaults on the Mortgage Loans, as to the relative importance of those factors, as to the percentage of the principal balance of the Mortgage Loans that will be prepaid or as to which a default will have occurred as of any date or as to the overall rate of prepayment or default on the Mortgage Loans.
Delay in Payment of Distributions
Because each monthly distribution is made on each Distribution Date, which is at least 10 days after the end of the related Interest Accrual Period for the certificates, the effective yield to the holders of such certificates will be lower than the yield that would otherwise be produced by the applicable Pass-Through Rates and purchase prices (assuming the prices did not account for the delay).
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Yield on the Certificates with Notional Amounts
The yield to maturity of the certificates with Notional Amounts will be highly sensitive to the rate and timing of reductions made to the Certificate Balances of the classes of certificates indicated in the following table, including by reason of prepayments and principal losses on the Mortgage Loans and other factors described above. The yield to maturity of the certificates with Notional Amounts will be highly sensitive to the rate and timing of reductions made to the Certificate Balances of the related certificates indicated in the following table, including by reason of prepayments and principal losses on the Mortgage Loans and other factors described above.
| Interest-Only Class of Certificates | Class Notional Amount | Underlying Class | ||
| Class X-A | $ 566,092,000 | Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4 and Class A-M | ||
| Class X-B | $59,773,000 | Class B and Class C | ||
| Class X-C | $31,645,000 | Class D | ||
| Class X-D | $15,823,000 | Class E | ||
| Class X-E | $ 6,153,000 | Class F | ||
| Class X-F | $23,733,985 | Class G |
Any optional termination by the holders of the Controlling Class, the special servicer, the master servicer or the holders of the Class R certificates would result in prepayment in full of the Offered Certificates and would have an adverse effect on the yield of a class of the certificates with Notional Amounts because a termination would have an effect similar to a principal prepayment in full of the Mortgage Loans and, as a result, investors in these certificates and any other Offered Certificates purchased at premium might not fully recoup their initial investment. See “Pooling and Servicing Agreement—Termination; Retirement of Certificates”.
Investors in the certificates with Notional Amounts should fully consider the associated risks, including the risk that an extremely rapid rate of prepayment or other liquidation of the Mortgage Loans could result in the failure of such investors to recoup fully their initial investments.
Weighted Average Life
The weighted average life of a Regular Certificate (other than the Class X Certificates) refers to the average amount of time that will elapse from the date of its issuance until each dollar allocable to principal of the certificate is distributed to the related investor. The weighted average life of a Regular Certificate (other than the Class X Certificates) will be influenced by, among other things, the rate at which principal on the mortgage loans is paid or otherwise received, which may be in the form of scheduled amortization, voluntary prepayments, Insurance and Condemnation Proceeds and Liquidation Proceeds. Distributions among the various classes of certificates will be made as set forth under “Description of the Certificates—Distributions—Priority of Distributions”.
Prepayments on Mortgage Loans may be measured by a prepayment standard or model. The “Constant Prepayment Rate” or “CPR” model represents an assumed constant annual rate of prepayment each month, expressed as aper annum percentage of the then-scheduled principal balance of the pool of Mortgage Loans. As used in each of the following tables, the column headed “0% CPR” assumes that none of the Mortgage Loans is prepaid before its maturity date or Anticipated Repayment Date, as the case may be. The columns headed “25% CPR”, “50% CPR”, “75% CPR” and “100% CPR” assume that no prepayments are made on any Mortgage Loan during such Mortgage Loan’s lockout period, defeasance period, yield maintenance period or prepayment premium lock-out period (in each case, if any), and that prepayments are otherwise made on each of the Mortgage Loans at the indicated CPR percentages. We cannot assure you, however, that prepayments of the Mortgage Loans will conform to any level of CPR, and we make no representation that the Mortgage Loans will prepay at the levels of CPR shown or at any other prepayment rate or that Mortgage Loans that are in a lockout period,
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defeasance period, yield maintenance period or prepayment premium lock-out period will not prepay as a result of involuntary liquidations upon default or otherwise.
The following tables indicate the percentage of the initial Certificate Balance of each class of the Offered Certificates that would be outstanding after each of the dates shown at various CPRs and the corresponding weighted average life of each class of Offered Certificates. The tables have been prepared on the basis of the following assumptions (the “Modeling Assumptions”), among others:
| · | scheduled Periodic Payments of principal and/or interest due at maturity on the Mortgage Loans will be received on a timely basis and will be distributed on the 10th day of the related month, beginning in September 2016; |
| · | the Mortgage Rate in effect for each Mortgage Loan as of the Cut-off Date will remain in effect to the related maturity date or Anticipated Repayment Date, as the case may be, and will be adjusted as required pursuant to the definition of Mortgage Rate; |
| · | the Mortgage Loan sellers will not be required to repurchase any Mortgage Loan, and none of the holders of the Controlling Class (or any other Certificateholder), the special servicer, the master servicer or the holders of the Class R certificates will exercise its option to purchase all the Mortgage Loans and thereby cause an early termination of the issuing entity and no holder of any mezzanine debt or other indebtedness will exercise its option to purchase the related Mortgage Loan; |
| · | any principal prepayments on the Mortgage Loans will be received on their respective Due Dates after the expiration of any applicable lockout period, any applicable period in which defeasance is permitted, and any applicable yield maintenance period, in each case, at the respective levels of CPR set forth in the tables (without regard to any limitations in such Mortgage Loans on partial voluntary principal prepayment); |
| · | no Prepayment Interest Shortfalls are incurred and no prepayment premiums or yield maintenance charges are collected; |
| · | the Closing Date occurs on August 25, 2016; |
| · | each ARD Loan prepays in full on the related Anticipated Repayment Date; |
| · | the Pass-Through Rates, initial Certificate Balances and initial Notional Amount of the respective classes of Offered Certificates are as described in this prospectus; |
| · | the Administrative Cost Rate is calculated on the Stated Principal Balance of the Mortgage Loans and in the same manner as interest is calculated on the Mortgage Loans; |
| · | no reserves, earnouts, holdbacks, insurance proceeds or condemnation proceeds are applied to prepay any related Mortgage Loan in whole or in part; |
| · | no additional trust fund expenses are incurred; |
| · | no property releases (or related re-amortizations) occur; |
| · | the optional termination is not exercised; and |
| · | there are no modifications or maturity date extensions in respect of the Mortgage Loans. |
To the extent that the Mortgage Loans have characteristics that differ from those assumed in preparing the tables set forth below, a class of Offered Certificates may mature earlier or later than indicated by the tables. The tables set forth below are for illustrative purposes only and it is highly unlikely that the Mortgage Loans will actually prepay at any constant rate until maturity or that all the Mortgage
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Loans will prepay at the same rate. 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 Balances (and weighted average lives) shown in the following tables. These variations may occur even if the average prepayment experience of the Mortgage Loans were to equal any of the specified CPR percentages. Investors should not rely on the prepayment assumptions set forth in this prospectus and are urged to conduct their own analyses of the rates at which the Mortgage Loans may be expected to prepay, based on their own assumptions. Based on the foregoing assumptions, the following tables indicate the resulting weighted average lives of each class of Offered Certificates and set forth the percentage of the initial Certificate Balance of the class of the certificate that would be outstanding after each of the dates shown at the indicated CPRs.
Percent of the Initial Certificate Balance
of the Class A-1 Certificates at the Respective CPRs
Set Forth Below:
| Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
| Initial Percentage | 100% | 100% | 100% | 100% | 100% | |||||
| August 2017 | 87% | 87% | 87% | 87% | 87% | |||||
| August 2018 | 73% | 73% | 73% | 73% | 73% | |||||
| August 2019 | 55% | 55% | 55% | 55% | 55% | |||||
| August 2020 | 28% | 28% | 28% | 28% | 28% | |||||
| August 2021 and thereafter | 0% | 0% | 0% | 0% | 0% | |||||
| Weighted Average Life (years)(1) | 2.94 | 2.92 | 2.92 | 2.92 | 2.92 |
| (1) | The weighted average life of the Class A-1 certificates is determined by (a) multiplying the amount of each principal distribution on it by the number of years from the date of issuance of the Class A-1 certificates to the related Distribution Date, (b) summing the results and (c) dividing the sum by the aggregate amount of the reductions in the principal balance of the Class A-1 certificates. |
Percent of the Initial Certificate Balance
of the Class A-2 Certificates at the Respective CPRs
Set Forth Below:
Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
| Initial Percentage | 100% | 100% | 100% | 100% | 100% | |||||
| August 2017 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2018 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2019 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2020 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2021 and thereafter | 0% | 0% | 0% | 0% | 0% | |||||
| Weighted Average Life (years)(1) | 4.96 | 4.93 | 4.88 | 4.79 | 4.64 |
| (1) | The weighted average life of the Class A-2 certificates is determined by (a) multiplying the amount of each principal distribution on it by the number of years from the date of issuance of the Class A-2 certificates to the related Distribution Date, (b) summing the results and (c) dividing the sum by the aggregate amount of the reductions in the principal balance of the Class A-2 certificates. |
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Percent of the Initial Certificate Balance
of the Class A-SB Certificates at the Respective CPRs
Set Forth Below:
| Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
| Initial Percentage | 100% | 100% | 100% | 100% | 100% | |||||
| August 2017 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2018 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2019 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2020 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2021 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2022 | 80% | 80% | 80% | 80% | 80% | |||||
| August 2023 | 60% | 60% | 60% | 60% | 60% | |||||
| August 2024 | 39% | 39% | 39% | 39% | 39% | |||||
| August 2025 | 16% | 16% | 16% | 16% | 16% | |||||
| August 2026 and thereafter | 0% | 0% | 0% | 0% | 0% | |||||
| Weighted Average Life (years)(1) | 7.44 | 7.44 | 7.44 | 7.44 | 7.43 |
| (1) | The weighted average life of the Class A-SB certificates is determined by (a) multiplying the amount of each principal distribution on it by the number of years from the date of issuance of the Class A- SB certificates to the related Distribution Date, (b) summing the results and (c) dividing the sum by the aggregate amount of the reductions in the principal balance of the Class A- SB certificates. |
Percent of the Initial Certificate Balance
of the Class A-3 Certificates at the Respective CPRs
Set Forth Below:
Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
| Initial Percentage | 100% | 100% | 100% | 100% | 100% | |||||
| August 2017 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2018 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2019 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2020 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2021 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2022 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2023 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2024 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2025 | 73% | 72% | 71% | 69% | 39% | |||||
| August 2026 and thereafter | 0% | 0% | 0% | 0% | 0% | |||||
| Weighted Average Life (years)(1) | 9.32 | 9.28 | 9.24 | 9.20 | 8.95 |
| (1) | The weighted average life of the Class A-3 certificates is determined by (a) multiplying the amount of each principal distribution on it by the number of years from the date of issuance of the Class A-3 certificates to the related Distribution Date, (b) summing the results and (c) dividing the sum by the aggregate amount of the reductions in the principal balance of the Class A-3 certificates. |
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Percent of the Initial Certificate Balance
of the Class A-4 Certificates at the Respective CPRs
Set Forth Below:
| Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
| Initial Percentage | 100% | 100% | 100% | 100% | 100% | |||||
| August 2017 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2018 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2019 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2020 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2021 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2022 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2023 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2024 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2025 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2026 and thereafter | 0% | 0% | 0% | 0% | 0% | |||||
| Weighted Average Life (years)(1) | 9.93 | 9.91 | 9.86 | 9.79 | 9.60 |
| (1) | The weighted average life of the Class A-4 certificates is determined by (a) multiplying the amount of each principal distribution on it by the number of years from the date of issuance of the Class A-4 certificates to the related Distribution Date, (b) summing the results and (c) dividing the sum by the aggregate amount of the reductions in the principal balance of the Class A-4 certificates. |
Percent of the Initial Certificate Balance
of the Class A-M Certificates at the Respective CPRs
Set Forth Below:
Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
| Initial Percentage | 100% | 100% | 100% | 100% | 100% | |||||
| August 2017 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2018 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2019 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2020 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2021 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2022 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2023 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2024 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2025 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2026 and thereafter | 0% | 0% | 0% | 0% | 0% | |||||
| Weighted Average Life (years)(1) | 9.96 | 9.96 | 9.96 | 9.95 | 9.64 |
| (1) | The weighted average life of the Class A-M certificates is determined by (a) multiplying the amount of each principal distribution on it by the number of years from the date of issuance of the Class A-M certificates to the related Distribution Date, (b) summing the results and (c) dividing the sum by the aggregate amount of the reductions in the principal balance of the Class A-M certificates. |
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Percent of the Initial Certificate Balance
of the Class B Certificates at the Respective CPRs
Set Forth Below:
Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
| Initial Percentage | 100% | 100% | 100% | 100% | 100% | |||||
| August 2017 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2018 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2019 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2020 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2021 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2022 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2023 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2024 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2025 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2026 and thereafter | 0% | 0% | 0% | 0% | 0% | |||||
| Weighted Average Life (years)(1) | 9.96 | 9.96 | 9.96 | 9.96 | 9.71 |
| (1) | The weighted average life of the Class B certificates is determined by (a) multiplying the amount of each principal distribution on it by the number of years from the date of issuance of the Class B certificates to the related Distribution Date, (b) summing the results and (c) dividing the sum by the aggregate amount of the reductions in the principal balance of the Class B certificates. |
Percent of the Initial Certificate Balance
of the Class C Certificates at the Respective CPRs
Set Forth Below:
Distribution Date | 0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |||||
| Initial Percentage | 100% | 100% | 100% | 100% | 100% | |||||
| August 2017 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2018 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2019 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2020 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2021 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2022 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2023 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2024 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2025 | 100% | 100% | 100% | 100% | 100% | |||||
| August 2026 and thereafter | 0% | 0% | 0% | 0% | 0% | |||||
| Weighted Average Life (years)(1) | 9.96 | 9.96 | 9.96 | 9.96 | 9.71 |
| (1) | The weighted average life of the Class C certificates is determined by (a) multiplying the amount of each principal distribution on it by the number of years from the date of issuance of the Class C certificates to the related Distribution Date, (b) summing the results and (c) dividing the sum by the aggregate amount of the reductions in the principal balance of the Class C certificates. |
Pre-Tax Yield to Maturity Tables
The following tables indicate the approximate pre-tax yield to maturity on a corporate bond equivalent basis on the Offered Certificates for the specified CPRs based on the assumptions set forth under “—Weighted Average Life” above. It was further assumed that the purchase price of the Offered Certificates is as specified in the tables below, expressed as a percentage of the initial Certificate Balance or Notional Amount, as applicable, plus accrued interest from and including August 1, 2016 to but excluding the Closing Date.
The yields set forth in the following tables were calculated by determining the monthly discount rates that, when applied to the assumed streams of cash flows to be paid on the applicable class of Offered Certificates, would cause the discounted present value of such assumed stream of cash flows to equal the assumed purchase price of such class, and by converting such monthly rates to semi-annual corporate bond equivalent rates. Such calculations do not take into account shortfalls in collection of interest due to prepayments (or other liquidations) of the Mortgage Loans or the interest rates at which
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investors may be able to reinvest funds received by them as distributions on the applicable class of certificates (and, accordingly, do not purport to reflect the return on any investment in the applicable class of Offered Certificates when such reinvestment rates are considered).
The characteristics of the Mortgage Loans may differ from those assumed in preparing the tables below. In addition, we cannot assure you that the Mortgage Loans will prepay in accordance with the above assumptions at any of the rates shown in the tables or at any other particular rate, that the cash flows on the applicable class of Offered Certificates will correspond to the cash flows shown in this prospectus or that the aggregate purchase price of such class of Offered Certificates will be as assumed. In addition, it is unlikely that the Mortgage Loans will prepay in accordance with the above assumptions at any of the specified CPRs until maturity or that all the Mortgage Loans will so prepay at the same rate. Timing of changes in the rate of prepayments may significantly affect the actual yield to maturity to investors, even if the average rate of principal prepayments is consistent with the expectations of investors. Investors must make their own decisions as to the appropriate prepayment assumption to be used in deciding whether to purchase any class of Offered Certificates.
For purposes of this prospectus, prepayment assumptions with respect to the Mortgage Loans are presented in terms of the CPR model described under “—Weighted Average Life” above.
Pre-Tax Yield to Maturity for the Class A-1 Certificates
Assumed Purchase Price | Prepayment Assumption (CPR) | ||||
0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |
| 99.5000% | 1.6111% | 1.6120% | 1.6121% | 1.6121% | 1.6121% |
| 99.7500% | 1.5227% | 1.5231% | 1.5232% | 1.5232% | 1.5232% |
| 100.0000% | 1.4347% | 1.4346% | 1.4346% | 1.4346% | 1.4346% |
| 100.2500% | 1.3469% | 1.3463% | 1.3463% | 1.3463% | 1.3463% |
| 100.5000% | 1.2595% | 1.2584% | 1.2583% | 1.2583% | 1.2583% |
| Weighted Average Life (years) | 2.94 | 2.92 | 2.92 | 2.92 | 2.92 |
Pre-Tax Yield to Maturity for the Class A-2 Certificates
Assumed Purchase Price | Prepayment Assumption (CPR) | ||||
0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |
| 102.5000% | 1.9188% | 1.9157% | 1.9100% | 1.9010% | 1.8835% |
| 102.7500% | 1.8662% | 1.8629% | 1.8567% | 1.8468% | 1.8276% |
| 103.0000% | 1.8139% | 1.8102% | 1.8034% | 1.7927% | 1.7719% |
| 103.2500% | 1.7616% | 1.7577% | 1.7504% | 1.7388% | 1.7163% |
| 103.5000% | 1.7095% | 1.7053% | 1.6974% | 1.6850% | 1.6608% |
| Weighted Average Life (years) | 4.96 | 4.93 | 4.88 | 4.79 | 4.64 |
Pre-Tax Yield to Maturity for the Class A-SB Certificates
Assumed Purchase Price | Prepayment Assumption (CPR) | ||||
0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |
| 102.5000% | 2.2566% | 2.2566% | 2.2566% | 2.2566% | 2.2565% |
| 102.7500% | 2.2202% | 2.2202% | 2.2202% | 2.2202% | 2.2201% |
| 103.0000% | 2.1839% | 2.1839% | 2.1839% | 2.1839% | 2.1838% |
| 103.2500% | 2.1477% | 2.1477% | 2.1477% | 2.1477% | 2.1476% |
| 103.5000% | 2.1116% | 2.1116% | 2.1116% | 2.1116% | 2.1115% |
| Weighted Average Life (years) | 7.44 | 7.44 | 7.44 | 7.44 | 7.43 |
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Pre-Tax Yield to Maturity for the Class A-3 Certificates
Assumed Purchase Price | Prepayment Assumption (CPR) | ||||
0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |
| 100.5000% | 2.4037% | 2.4034% | 2.4032% | 2.4029% | 2.4011% |
| 100.7500% | 2.3736% | 2.3731% | 2.3728% | 2.3724% | 2.3699% |
| 101.0000% | 2.3435% | 2.3430% | 2.3426% | 2.3420% | 2.3387% |
| 101.2500% | 2.3136% | 2.3129% | 2.3124% | 2.3117% | 2.3077% |
| 101.5000% | 2.2837% | 2.2829% | 2.2823% | 2.2815% | 2.2767% |
| Weighted Average Life (years) | 9.32 | 9.28 | 9.24 | 9.20 | 8.95 |
Pre-Tax Yield to Maturity for the Class A-4 Certificates
Assumed Purchase Price | Prepayment Assumption (CPR) | ||||
0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |
| 102.5000% | 2.4449% | 2.4444% | 2.4432% | 2.4413% | 2.4361% |
| 102.7500% | 2.4167% | 2.4161% | 2.4148% | 2.4127% | 2.4071% |
| 103.0000% | 2.3885% | 2.3879% | 2.3864% | 2.3842% | 2.3781% |
| 103.2500% | 2.3604% | 2.3597% | 2.3582% | 2.3558% | 2.3492% |
| 103.5000% | 2.3324% | 2.3317% | 2.3301% | 2.3275% | 2.3203% |
| Weighted Average Life (years) | 9.93 | 9.91 | 9.86 | 9.79 | 9.60 |
Pre-Tax Yield to Maturity for the Class X-A Certificates
Assumed Purchase Price | Prepayment Assumption (CPR) | ||||
0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |
| 10.5750% | 4.1676% | 4.1142% | 4.0498% | 3.9540% | 3.5054% |
| 10.5875% | 4.1396% | 4.0861% | 4.0216% | 3.9258% | 3.4768% |
| 10.6000% | 4.1116% | 4.0581% | 3.9936% | 3.8977% | 3.4483% |
| 10.6125% | 4.0836% | 4.0301% | 3.9655% | 3.8696% | 3.4199% |
| 10.6250% | 4.0557% | 4.0022% | 3.9376% | 3.8416% | 3.3915% |
Pre-Tax Yield to Maturity for the Class A-M Certificates
Assumed Purchase Price | Prepayment Assumption (CPR) | ||||
0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |
| 102.5000% | 2.6465% | 2.6465% | 2.6465% | 2.6463% | 2.6379% |
| 102.7500% | 2.6180% | 2.6180% | 2.6180% | 2.6178% | 2.6087% |
| 103.0000% | 2.5897% | 2.5897% | 2.5897% | 2.5895% | 2.5795% |
| 103.2500% | 2.5614% | 2.5614% | 2.5614% | 2.5612% | 2.5504% |
| 103.5000% | 2.5332% | 2.5332% | 2.5332% | 2.5330% | 2.5214% |
| Weighted Average Life (years) | 9.96 | 9.96 | 9.96 | 9.95 | 9.64 |
Pre-Tax Yield to Maturity for the Class B Certificates
Assumed Purchase Price | Prepayment Assumption (CPR) | ||||
0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |
| 102.5000% | 2.7966% | 2.7966% | 2.7966% | 2.7966% | 2.7900% |
| 102.7500% | 2.7679% | 2.7679% | 2.7679% | 2.7679% | 2.7607% |
| 103.0000% | 2.7394% | 2.7394% | 2.7394% | 2.7394% | 2.7315% |
| 103.2500% | 2.7109% | 2.7109% | 2.7109% | 2.7109% | 2.7024% |
| 103.5000% | 2.6825% | 2.6825% | 2.6825% | 2.6825% | 2.6733% |
| Weighted Average Life (years) | 9.96 | 9.96 | 9.96 | 9.96 | 9.71 |
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Pre-Tax Yield to Maturity for the Class C Certificates
Assumed Purchase Price | Prepayment Assumption (CPR) | ||||
0% CPR | 25% CPR | 50% CPR | 75% CPR | 100% CPR | |
| 102.5000% | 3.3481% | 3.3481% | 3.3481% | 3.3481% | 3.3415% |
| 102.7500% | 3.3187% | 3.3187% | 3.3187% | 3.3187% | 3.3114% |
| 103.0000% | 3.2893% | 3.2893% | 3.2893% | 3.2893% | 3.2814% |
| 103.2500% | 3.2600% | 3.2600% | 3.2600% | 3.2600% | 3.2515% |
| 103.5000% | 3.2308% | 3.2308% | 3.2308% | 3.2308% | 3.2216% |
| Weighted Average Life (years) | 9.96 | 9.96 | 9.96 | 9.96 | 9.71 |
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Material Federal Income Tax Considerations
General
The following is a general discussion of the anticipated material federal income tax consequences of the purchase, ownership and disposition of the certificates. The discussion below does not purport to address all federal income tax consequences that may be applicable to particular categories of investors (such as banks, insurance companies, securities dealers, foreign persons, investors whose functional currency is not the U.S. dollar, and investors that hold the certificates as part of a “straddle” or “conversion transaction”), some of which may be subject to special rules. The authorities on which this discussion is based are subject to change or differing interpretations, and any such change or interpretation could apply retroactively. This discussion reflects the applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), as well as regulations (the “REMIC Regulations”) promulgated by the U.S. Department of the Treasury and the IRS. Investors are encouraged to consult their tax advisors in determining the federal, state, local or any other tax consequences to them of the purchase, ownership and disposition of the certificates.
Two separate real estate mortgage investment conduit (“REMIC”) elections will be made with respect to designated portions of the issuing entity (the “Lower-Tier REMIC” and the “Upper-Tier REMIC”, and, together, the “Trust REMICs”). In addition, a REMIC election (the “Prudential Plaza Loan REMIC”) will be made with respect to the Prudential Plaza Mortgage Loan, evidenced by the promissory note designated as Note A-2-1, and certain of the Prudential Plaza Companion Loans, evidenced by the promissory notes designated as Note A-2-2, Note A-3 and Note A-4, the proceeds thereof and any property that secured such notes that was acquired by foreclosure or deed in lieu of foreclosure (to the extent of the Prudential Plaza Loan REMIC’s interest in such property securing the Prudential Plaza Mortgage Loan). The Prudential Plaza Loan REMIC will issue a single regular interest (the “Prudential Plaza Loan REMIC Regular Interest”) and a single uncertificated residual interest, represented by the Class R certificates (the “Prudential Plaza Loan REMIC Residual Interest”). The Prudential Plaza Mortgage Loan represents a percentage interest in the Prudential Plaza Loan REMIC Regular Interest corresponding to the outstanding principal balance of the Prudential Plaza Mortgage Loan. The Lower-Tier REMIC will hold the Mortgage Loans (in the case of the Prudential Plaza Mortgage Loan, the percentage interest in the Prudential Plaza Loan REMIC Regular Interest represented thereby) (excluding Excess Interest) and certain other assets and will issue (i) classes of regular interests (the “Lower-Tier Regular Interests”) to the Upper-Tier REMIC and (ii) an uncertificated interest represented by the Class R certificates as 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 (i) the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B, Class X-C, Class X-D, Class X-E, Class X-F, Class A-M, Class B, Class C, Class D, Class E, Class F and Class G certificates, each representing a regular interest in the Upper-Tier REMIC (the “Regular Interests”) and (ii) an uncertificated interest represented by the Class R certificates as the sole class of “residual interest” in the Upper-Tier REMIC.
Qualification as a REMIC requires ongoing compliance with certain conditions. Assuming (i) the making of appropriate elections, (ii) compliance with the PSA and each Intercreditor Agreement, (iii) compliance with each Non-Serviced PSA and the continued qualification of each respective REMIC formed thereunder and (iv) compliance with any changes in the law, including any amendments to the Code or applicable Treasury regulations thereunder, in the opinion of Cadwalader, Wickersham & Taft LLP, special tax counsel to the depositor, (a) the Prudential Plaza Loan REMIC and each Trust REMIC will qualify as a REMIC on the Closing Date and thereafter, (b) the Prudential Plaza Loan REMIC Regular Interest will constitute a “regular interest” in the Prudential Plaza Loan REMIC, (c) each of the Lower-Tier Regular Interests will constitute a “regular interest” in the Lower-Tier REMIC, (d) each of the Regular Interests will constitute a “regular interest” in the Upper-Tier REMIC and (e) the Class R certificates will evidence the sole class of “residual interests” in the Prudential Plaza Loan REMIC and each Trust REMIC and beneficial ownership of the Prudential Plaza Loan REMIC Residual Interest.
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In addition, in the opinion of Cadwalader, Wickersham & Taft LLP, special tax counsel to the depositor, (i)(a) the Excess Interest and the Excess Interest Distribution Account and (b) the Prudential Plaza Loan REMIC Residual Interest and the Prudential Plaza Loan REMIC Residual Interest Distribution Account will be treated as a grantor trust (the “Grantor Trust”) for federal income tax purposes under subpart E, part I of subchapter J of the Code, and (ii)(a) the Class V certificates will represent undivided beneficial interests in the Excess Interest and the Excess Distribution Account and (b) the Class R certificates will represent undivided beneficial interests in the Prudential Plaza Loan REMIC Residual Interest and the Prudential Plaza Loan REMIC Residual Interest Distribution Account.
Qualification as a REMIC
In order for the Prudential Plaza Loan REMIC and each Trust REMIC to qualify as a REMIC, there must be ongoing compliance on the part of such REMIC with the requirements set forth in the Code. The Prudential Plaza Loan REMIC and each Trust REMIC must fulfill an asset test, which requires that no more than ade minimis portion of the assets of such REMIC, as of the close of the third calendar month beginning after the Closing Date (which for purposes of this discussion is the date of the issuance of the Regular Interests, the “Startup Day”) and at all times thereafter, may consist of assets other than “qualified mortgages” and “permitted investments”. The REMIC Regulations provide a safe harbor pursuant to which thede minimis requirements will be met if at all times the aggregate adjusted basis of the nonqualified assets is less than 1% of the aggregate adjusted basis of all such REMIC’s assets. The Prudential Plaza Loan REMIC and each Trust REMIC also must provide “reasonable arrangements” to prevent its residual interest from being held by “disqualified organizations” or their agents and must furnish applicable tax information to transferors or agents that violate this restriction. The PSA will provide that no legal or beneficial interest in the Class R certificates may be transferred or registered unless certain conditions, designed to prevent violation of this restriction, are met. Consequently, it is expected that the Prudential Plaza Loan REMIC and each Trust REMIC will qualify as a REMIC at all times that any of the Regular Interests are outstanding.
A qualified mortgage is any obligation that is principally secured by an interest in real property and that is either transferred to a REMIC on the startup day or is purchased by a REMIC within a three month period thereafter pursuant to a fixed price contract in effect on the startup day. Qualified mortgages include (i) whole mortgage loans such as the Mortgage Loans;provided that, in general, (a) the fair market value of the real property security (including buildings and structural components of the real property security) is at least 80% of the aggregate principal balance of such Mortgage Loan either at origination or as of the startup day (a loan-to-value ratio of not more than 125% with respect to the real property security) or (b) substantially all the proceeds of the mortgage loan or the underlying mortgages were used to acquire, improve or protect an interest in real property that, at the date of origination, was the only security for the mortgage loan, and (ii) regular interests in another REMIC (or percentage interests therein), such as the Prudential Plaza Loan REMIC Regular Interest evidenced by the Prudential Plaza Mortgage Loan and the Lower-Tier Regular Interests that will be held by the Lower-Tier REMIC and Upper-Tier REMIC, respectively. If a mortgage loan was not in fact principally secured by real property or is otherwise not a qualified mortgage, it must be disposed of within 90 days of discovery of such defect, or otherwise ceases to be a qualified mortgage after such 90-day period.
Permitted investments include “cash flow investments”, “qualified reserve assets” and “foreclosure property”. A cash flow investment is an investment, earning a return in the nature of interest, of amounts received on or with respect to qualified mortgages for a temporary period, not exceeding 13 months, until the next scheduled distribution to holders of interests in the REMICs. A qualified reserve asset is any intangible property held for investment that is part of any reasonably required reserve maintained by the REMIC to provide for payments of expenses of the REMIC or amounts due on the regular or residual interests in the event of defaults (including delinquencies) on the qualified mortgages, lower than expected reinvestment returns, prepayment interest shortfalls and certain other contingencies. The Prudential Plaza Loan REMIC and the Trust REMICs will not hold any qualified reserve assets. Foreclosure property is real property acquired by a REMIC in connection with the default or imminent default of a qualified mortgage and maintained by the REMIC in compliance with applicable rules and personal property that is incidental to such real property;provided that the mortgage loan sellers had no
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knowledge or reason to know, as of the startup day, that such a default had occurred or would occur. Foreclosure property may generally not be held after the close of the third calendar year beginning after the date the issuing entity acquires such property, with one extension that may be granted by the IRS.
A mortgage loan held by a REMIC will fail to be a qualified mortgage if it is “significantly modified” unless default is “reasonably foreseeable” or where the servicer believes there is a “significant risk of default” upon maturity of the mortgage loan or at an earlier date, and that by making such modification the risk of default is substantially reduced. A mortgage loan held by a REMIC will not be considered to have been “significantly modified” following the release of the lien on a portion of the real property collateral if (a) the release is pursuant to a defeasance permitted under the mortgage loan documents that occurs more than two years after the startup day of the REMIC or (b) following the release the loan-to-value ratio for the mortgage loan is not more than 125% with respect to the real property security. Furthermore, if the release is not pursuant to a defeasance and following the release the loan-to-value ratio for the mortgage loan is greater than 125%, the mortgage loan will continue to be a qualified mortgage if the release is part of a “qualified paydown transaction” in accordance with Revenue Procedure 2010-30.
In addition to the foregoing requirements, the various interests in a REMIC also must meet certain requirements. All of the interests in a REMIC must be either of the following: (i) one or more classes of regular interests or (ii) a single class of residual interests on which distributions, if any, are madepro rata. A regular interest is an interest in a REMIC that is issued on the startup day with fixed terms, is designated as a regular interest, and unconditionally entitles the holder to receive a specified principal amount (or other similar amount), and provides that interest payments (or other similar amounts), if any, at or before maturity either are payable based on a fixed rate or a qualified variable rate, or consist of a specified, nonvarying portion of the interest payments on the qualified mortgages. The rate on the specified portion may be a fixed rate, a variable rate, or the difference between one fixed or qualified variable rate and another fixed or qualified variable rate. The specified principal amount of a regular interest that provides for interest payments consisting of a specified, nonvarying portion of interest payments on qualified mortgages may be zero. An interest in a REMIC may be treated as a regular interest even if payments of principal with respect to such interest are subordinated to payments on other regular interests or the residual interest in the REMIC, and are dependent on the absence of defaults or delinquencies on qualified mortgages or permitted investments, lower than reasonably expected returns on permitted investments, expenses incurred by REMIC or prepayment interest shortfalls. A residual interest is an interest in a REMIC other than a regular interest that is issued on the startup day that is designated as a residual interest. Accordingly, the Prudential Plaza Loan REMIC Regular Interest will constitute the class of regular interests in the Prudential Plaza Loan REMIC, each of the Lower-Tier Regular Interests will constitute a class of regular interests in the Lower-Tier REMIC, each class of the Regular Interests will constitute a class of regular interests in the Upper-Tier REMIC, and the Class R certificates will represent the sole class of residual interest in the Prudential Plaza Loan REMIC and each Trust REMIC.
If an entity fails to comply with one or more of the ongoing requirements of the Code for status as a REMIC during any taxable year, the Code provides that the entity or applicable portion of it will not be treated as a REMIC for such year and thereafter. In this event, any entity with debt obligations with two or more maturities, such as the Trust REMICs, may be treated as a separate association taxable as a corporation under Treasury regulations, and the certificates may be treated as equity interests in that association. The Code, however, authorizes the Treasury Department to issue regulations that address situations where failure to meet one or more of the requirements for REMIC status occurs inadvertently and in good faith. Investors should be aware, however, that the Conference Committee Report to the Tax Reform Act of 1986 (the “1986 Act”) indicates that the relief may be accompanied by sanctions, such as the imposition of a corporate tax on all or a portion of a REMIC’s income for the period of time in which the requirements for REMIC status are not satisfied.
Status of Offered Certificates
Offered Certificates held by a real estate investment trust will constitute “real estate assets” within the meaning of Code Section 856(c)(5)(B), and interest (including original issue discount) on the Offered Certificates will be considered “interest on obligations secured by mortgages on real property or on
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interests in real property” within the meaning of Code Section 856(c)(3)(B) in the same proportion that, for both purposes, the assets of the issuing entity would be so treated. For purposes of Code Section 856(c)(5)(B), payments of principal and interest on the Mortgage Loans that are reinvested pending distribution to holders of Offered Certificates qualify for such treatment. For the purposes of the foregoing determinations, the Trust REMICs will be treated as a single REMIC. Offered Certificates held by a domestic building and loan association will be treated as “loans . . . secured by an interest in real property which is . . . residential real property” within the meaning of Code Section 7701(a)(19)(C)(v) or as other assets described in Code Section 7701(a)(19)(C) only to the extent the Mortgage Loans are secured by residential real property. As of the Cut-off Date, 4 of the Mortgaged Properties securing 4 Mortgage Loans representing 5.3% of the Initial Pool Balance, are multifamily properties. Holders of Offered Certificates should consult their tax advisors whether the foregoing percentage or some other percentage applies to their Offered Certificates. If at all times 95% or more of the assets of the issuing entity qualify for each of the foregoing treatments, the Offered Certificates will qualify for the corresponding status in their entirety. In addition, Mortgage Loans that have been defeased with government securities will not qualify for such treatment. Offered Certificates will be “qualified mortgages” within the meaning of Code Section 860G(a)(3) for another REMIC. Moreover, Offered Certificates held by certain financial institutions will constitute an “evidence of indebtedness” within the meaning of Code Section 582(c)(1).
Taxation of Regular Interests
General
Each class of Regular Interests represents a regular interest in the Upper-Tier REMIC. The Regular Interest will represent newly originated debt instruments for federal income tax purposes. In general, interest, original issue discount and market discount on a Regular Interest will be treated as ordinary income to the holder of a Regular Interest (a “Regular Interest Holder”), and principal payments on a Regular Interest will be treated as a return of capital to the extent of the Regular Interest Holder’s basis in the Regular Interest. Regular Interest Holders must use the accrual method of accounting with regard to the Regular Interests, regardless of the method of accounting otherwise used by such Regular Interest Holders.
Original Issue Discount
Holders of Regular Interests issued with original issue discount generally must include original issue discount in ordinary income for federal income tax purposes as it accrues in accordance with the constant yield method, which takes into account the compounding of interest, in advance of receipt of the cash attributable to such income. The following discussion is based in part on temporary and final Treasury regulations (the “OID Regulations”) under Code Sections 1271 through 1273 and 1275 and in part on the provisions of the Conference Committee Report to the 1986 Act. Regular Interest Holders should be aware, however, that the OID Regulations do not adequately address certain issues relevant to prepayable securities, such as the Regular Interests. To the extent such issues are not addressed in the OID Regulations, the certificate administrator will apply the methodology described in the Conference Committee Report to the 1986 Act. No assurance can be provided that the IRS will not take a different position as to those matters not currently addressed by the OID Regulations. Moreover, the OID Regulations include an anti-abuse rule allowing the IRS to apply or depart from the OID Regulations if necessary or appropriate to ensure a reasonable tax result in light of the applicable statutory provisions. A tax result will not be considered unreasonable under the anti-abuse rule, however, in the absence of a substantial effect on the present value of a taxpayer’s tax liability. Investors are advised to consult their own tax advisors as to the discussion in this prospectus and the appropriate method for reporting interest and original issue discount with respect to the Regular Interests.
Each Regular Interest will be treated as a single installment obligation for purposes of determining the original issue discount includible in a Regular Interests Holder’s income. The total amount of original issue discount on a Regular Interest is the excess of the “stated redemption price at maturity of the Regular Interest over its “issue price”. The issue price of a class of Regular Interests is the first price at which a substantial amount of Regular Interests of such class is sold to investors (excluding bond houses, brokers and underwriters). Although unclear under the OID Regulations, the certificate administrator will
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treat the issue price of Regular Interests for which there is no substantial sale as of the issue date as the fair market value of such Regular Interests as of the issue date. The issue price of the Regular Interests also includes the amount paid by an initial Regular Interest Holder for accrued interest that relates to a period prior to the issue date of such class of Regular Interests. The stated redemption price at maturity of a Regular Interest is the sum of all payments provided by the debt instrument other than any qualified stated interest payments. Under the OID Regulations, qualified stated interest generally means interest payable at a single fixed rate or a qualified variable rate;provided that such interest payments are unconditionally payable at intervals of one year or less during the entire term of the obligation. Because there is no penalty or default remedy in the case of nonpayment of interest with respect to a Regular Interest, it is possible that no interest on any class of Regular Interests will be treated as qualified stated interest. However, because the Mortgage Loans provide for remedies in the event of default, the certificate administrator will treat all payments of stated interest on the Regular Interests (other than the Class X Certificates) as qualified stated interest (other than accrued interest distributed on the first Distribution Date for the number of days that exceed the interval between the Closing Date and the first Distribution Date).
It is anticipated that the certificate administrator will treat the Class X Certificates as having no qualified stated interest. Accordingly, such classes will be considered to be issued with original issue discount in an amount equal to the excess of all distributions of interest expected to be received on such classes over their respective issue prices (including interest accrued prior to the Closing Date). Any “negative” amounts of original issue discount on such classes attributable to rapid prepayments with respect to the Mortgage Loans will not be deductible currently. The holder of any such class may be entitled to a deduction for a loss, which may be a capital loss, to the extent it becomes certain that such holder will not recover a portion of its basis in such class, assuming no further prepayments. In the alternative, it is possible that rules similar to the “noncontingent bond method” of the contingent interest rules of the OID Regulations may be promulgated with respect to such classes. Unless and until required otherwise by applicable authority, it is not anticipated that the contingent interest rules will apply.
Under ade minimis rule, original issue discount on a Regular Interest will be considered to be zero if such original issue discount is less than 0.25% of the stated redemption price at maturity of the Regular Interest multiplied by the weighted average maturity of the Regular Interest. For this purpose, the weighted average maturity is computed as the sum of the amounts determined by multiplying the number of full years (i.e., rounding down partial years) from the issue date until each distribution in reduction of stated redemption price at maturity is scheduled to be made by a fraction, the numerator of which is the amount of each distribution included in the stated redemption price at maturity of the Regular Interest and the denominator of which is the stated redemption price at maturity of the Regular Interest. The Conference Committee Report to the 1986 Act provides that the schedule of such distributions should be determined in accordance with the assumed rate of prepayment on the Mortgage Loans used in pricing the transaction,i.e., 0% CPR;provided that it is assumed that the ARD Loan prepays on its anticipated repayment date (the “Prepayment Assumption”). See “Yield and Maturity Considerations—Weighted Average Life”. Holders generally must reportde minimis original issue discountpro rata as principal payments are received, and such income will be capital gain if the Regular Interest is held as a capital asset. Under the OID Regulations, however, Regular Interest Holders may elect to accrue allde minimis original issue discount, as well as market discount and premium, under the constant yield method. See “—Election To Treat All Interest Under the Constant Yield Method” below.
A holder of a Regular Interest issued with original issue discount generally must include in gross income for any taxable year the sum of the “daily portions”, as defined below, of the original issue discount on the Regular Interest accrued during an accrual period for each day on which it holds the Regular Interest, including the date of purchase but excluding the date of disposition. With respect to each such Regular Interest, a calculation will be made of the original issue discount that accrues during each successive full accrual period that ends on the day prior to each Distribution Date with respect to the Regular Interests, assuming that prepayments and extensions with respect to the Mortgage Loans will be made in accordance with the Prepayment Assumption. The original issue discount accruing in a full accrual period will be the excess, if any, of (i) the sum of (a) the present value of all of the remaining distributions to be made on the Regular Interest as of the end of that accrual period and (b) the
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distributions made on the Regular Interest during the accrual period that are included in the Regular Interest’s stated redemption price at maturity, over (ii) the adjusted issue price of the Regular Interest at the beginning of the accrual period. The present value of the remaining distributions referred to in the preceding sentence is calculated based on (i) the yield to maturity of the Regular Interest as of the Startup Day, (ii) events (including actual prepayments) that have occurred prior to the end of the accrual period and (iii) the assumption that the remaining payments will be made in accordance with the original Prepayment Assumption. For these purposes, the adjusted issue price of a Regular Interest at the beginning of any accrual period equals the issue price of the Regular Interest, increased by the aggregate amount of original issue discount with respect to the Regular Interest that accrued in all prior accrual periods and reduced by the amount of distributions included in the Regular Interest’s stated redemption price at maturity that were made on the Regular Interest that were attributable to such prior periods. The original issue discount accruing during any accrual period (as determined in this paragraph) will then be divided by the number of days in the period to determine the daily portion of original issue discount for each day in the period.
Under the method described above, the daily portions of original issue discount required to be included as ordinary income by a Regular Interest Holder (other than a holder of a Class X Certificate) generally will increase to take into account prepayments on the Regular Interests as a result of prepayments on the Mortgage Loans that exceed the Prepayment Assumption, and generally will decrease (but not below zero for any period) if the prepayments are slower than the Prepayment Assumption. Due to the unique nature of interest only certificates, the preceding sentence may not apply in the case of the Class X Certificates.
Acquisition Premium
A purchaser of a Regular Interest at a price greater than its adjusted issue price and less than its remaining stated redemption price at maturity will be required to include in gross income the daily portions of the original issue discount on the Regular Interest reducedpro rata by a fraction, the numerator of which is the excess of its purchase price over such adjusted issue price and the denominator of which is the excess of the remaining stated redemption price at maturity over the adjusted issue price. Alternatively, such a purchaser may elect to treat all such acquisition premium under the constant yield method, as described under the heading “��Election To Treat All Interest Under the Constant Yield Method” below.
Market Discount
A purchaser of a Regular Interest also may be subject to the market discount rules of Code Sections 1276 through 1278. Under these Code sections and the principles applied by the OID Regulations in the context of original issue discount, “market discount” is the amount by which the purchaser’s original basis in the Regular Interest (i) is exceeded by the remaining outstanding principal payments and non-qualified stated interest payments due on a Regular Interest, or (ii) in the case of a Regular Interest having original issue discount, is exceeded by the adjusted issue price of such Regular Interest at the time of purchase. Such purchaser generally will be required to recognize ordinary income to the extent of accrued market discount on such Regular Interest as distributions includible in its stated redemption price at maturity are received, in an amount not exceeding any such distribution. Such market discount would accrue in a manner to be provided in Treasury regulations and should take into account the Prepayment Assumption. The Conference Committee Report to the 1986 Act provides that until such regulations are issued, such market discount would accrue, at the election of the holder, either (i) on the basis of a constant interest rate or (ii) in the ratio of interest accrued for the relevant period to the sum of the interest accrued for such period plus the remaining interest after the end of such period, or, in the case of classes issued with original issue discount, in the ratio of original issue discount accrued for the relevant period to the sum of the original issue discount accrued for such period plus the remaining original issue discount after the end of such period. Such purchaser also generally will be required to treat a portion of any gain on a sale or exchange of the Regular Interest as ordinary income to the extent of the market discount accrued to the date of disposition under one of the foregoing methods, less any accrued market discount previously reported as ordinary income as partial distributions in reduction of the stated redemption price at maturity were received. Such purchaser will be required to defer deduction of a portion of the excess of the
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interest paid or accrued on indebtedness incurred to purchase or carry the Regular Interest over the interest (including original issue discount) distributable on the Regular Interest. The deferred portion of such interest expense in any taxable year generally will not exceed the accrued market discount on the Regular Interest for such year. Any such deferred interest expense is, in general, allowed as a deduction not later than the year in which the related market discount income is recognized or the Regular Interest is disposed of. As an alternative to the inclusion of market discount in income on the foregoing basis, the Regular Interest Holder may elect to include market discount in income currently as it accrues on all market discount instruments acquired by such Regular Interest Holder in that taxable year or thereafter, in which case the interest deferral rule will not apply. See “—Election To Treat All Interest Under the Constant Yield Method” below regarding making the election under Code Section 171 and an alternative manner in which such election may be deemed to be made.
Market discount with respect to a Regular Interest will be considered to be zero if such market discount is less than 0.25% of the remaining stated redemption price at maturity of such Regular Interest multiplied by the weighted average maturity of the Regular Interest remaining after the date of purchase. For this purpose, the weighted average maturity is determined by multiplying the number of full years (i.e., rounding down partial years) from the issue date until each distribution in reduction of stated redemption price at maturity is scheduled to be made by a fraction, the numerator of which is the amount of each such distribution included in the stated redemption price at maturity of the Regular Interest and the denominator of which is the total stated redemption price at maturity of the Regular Interest. It appears thatde minimis market discount would be reportedpro rata as principal payments are received. Treasury regulations implementing the market discount rules have not yet been proposed, and investors should therefore consult their own tax advisors regarding the application of these rules as well as the advisability of making any of the elections with respect to such rules. Investors should also consult Revenue Procedure 92-67 concerning the elections to include market discount in income currently and to accrue market discount on the basis of the constant yield method.
Premium
A Regular Interest purchased upon initial issuance or in the secondary market at a cost greater than its remaining stated redemption price at maturity generally is considered to be purchased at a premium. If the Regular Interest Holder holds such Regular Interest as a “capital asset” within the meaning of Code Section 1221, the Regular Interest Holder may elect under Code Section 171 to amortize such premium under the constant yield method. See “—Election To Treat All Interest Under the Constant Yield Method” below regarding making the election under Code Section 171 and an alternative manner in which the Code Section 171 election may be deemed to be made. Final Treasury regulations under Code Section 171 do not, by their terms, apply to prepayable obligations such as the Regular Interests. The Conference Committee Report to the 1986 Act indicates a Congressional intent that the same rules that will apply to the accrual of market discount on installment obligations will also apply to amortizing bond premium under Code Section 171 on installment obligations such as the Regular Interests, although it is unclear whether the alternatives to the constant interest method described above under “—Market Discount” are available. Amortizable bond premium will be treated as an offset to interest income on a Regular Interest rather than as a separate deduction item. Based on the foregoing, it is anticipated that the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class A-M, Class B and Class C certificates will be issued at a premium for federal income tax purposes.
Election To Treat All Interest Under the Constant Yield Method
A holder of a debt instrument such as a Regular Interest may elect to treat all interest that accrues on the instrument using the constant yield method, with none of the interest being treated as qualified stated interest. For purposes of applying the constant yield method to a debt instrument subject to such an election, (i) “interest” includes stated interest, original issue discount,de minimis original issue discount, market discount andde minimis market discount, as adjusted by any amortizable bond premium or acquisition premium and (ii) the debt instrument is treated as if the instrument were issued on the holder’s acquisition date in the amount of the holder’s adjusted basis immediately after acquisition. It is unclear whether, for this purpose, the initial Prepayment Assumption would continue to apply or if a new prepayment assumption as of the date of the holder’s acquisition would apply. A holder generally may
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make such an election on an instrument by instrument basis or for a class or group of debt instruments. However, if the holder makes such an election with respect to a debt instrument with amortizable bond premium or with market discount, the holder is deemed to have made elections to amortize bond premium or to report market discount income currently as it accrues under the constant yield method, respectively, for all premium bonds held or acquired or market discount bonds acquired by the holder on the first day of the year of the election or thereafter. The election is made on the holder’s federal income tax return for the year in which the debt instrument is acquired and is irrevocable except with the approval of the IRS. Investors are encouraged to consult their tax advisors regarding the advisability of making such an election.
Treatment of Losses
Holders of the Regular Interests will be required to report income with respect to the Regular Interests on the accrual method of accounting, without giving effect to delays or reductions in distributions attributable to defaults or delinquencies on the Mortgage Loans, except to the extent it can be established that such losses are uncollectible. Accordingly, a Regular Interest Holder may have income, or may incur a diminution in cash flow as a result of a default or delinquency, but may not be able to take a deduction (subject to the discussion below) for the corresponding loss until a subsequent taxable year. In this regard, investors are cautioned that while they generally may cease to accrue interest income if it reasonably appears that the interest will be uncollectible, the IRS may take the position that original issue discount must continue to be accrued in spite of its uncollectibility until the debt instrument is disposed of in a taxable transaction or becomes worthless in accordance with the rules of Code Section 166. The following discussion does not apply to holders of Class X Certificates. Under Code Section 166, it appears that the holders of Regular Interests that are corporations or that otherwise hold the Regular Interests in connection with a trade or business should in general be allowed to deduct as an ordinary loss any such loss sustained (and not previously deducted) during the taxable year on account of any such Regular Interests becoming wholly or partially worthless, and that, in general, the Regular Interest Holders that are not corporations and do not hold the Regular Interests in connection with a trade or business will be allowed to deduct as a short term capital loss any loss with respect to principal sustained during the taxable year on account of a portion of any class of such Regular Interests becoming wholly worthless. Although the matter is not free from doubt, such non-corporate holders of Regular Interests should be allowed a bad debt deduction at such time as the principal balance of any class of such Regular Interests is reduced to reflect losses on the Mortgage Loans below such holder’s basis in the Regular Interests. The IRS, however, could take the position that non-corporate holders will be allowed a bad debt deduction to reflect such losses only after the classes of Regular Interests have been otherwise retired. The IRS could also assert that losses on a class of Regular Interests are deductible based on some other method that may defer such deductions for all holders, such as reducing future cash flow for purposes of computing original issue discount. This may have the effect of creating “negative” original issue discount that, with the possible exception of the method discussed in the following sentence, would be deductible only against future positive original issue discount or otherwise upon termination of the applicable class. Although not free from doubt, a holder of Regular Interests with negative original issue discount may be entitled to deduct a loss to the extent that its remaining basis would exceed the maximum amount of future payments to which such holder was entitled, assuming no further prepayments. No bad debt losses will be allowed with respect to the Class X Certificates. Regular Interest Holders are urged to consult their own tax advisors regarding the appropriate timing, amount and character of any loss sustained with respect to such Regular Interests. Special loss rules are applicable to banks and thrift institutions, including rules regarding reserves for bad debts. Such taxpayers are advised to consult their tax advisors regarding the treatment of losses on the Regular Interests.
Yield Maintenance Charges and Prepayment Provisions
Yield maintenance charges and prepayment premiums actually collected on the Mortgage Loans will be distributed to the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B, Class X-C, Class X-D, Class X-E, Class X-F, Class A-M, Class B, Class C and Class D certificates as described in “Description of the Certificates—Allocation of Yield Maintenance Charges and Prepayment Premiums”. It is not entirely clear under the Code when the amount of yield maintenance charges and
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prepayment premiums so allocated should be taxed to the holders of the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B, Class X-C, Class X-D, Class X-E, Class X-F, Class A-M, Class B, Class C and Class D certificates, but it is not expected, for federal income tax reporting purposes, that yield maintenance charges and prepayment premiums will be treated as giving rise to any income to the holder of such class of certificates prior to the certificate administrator’s actual receipt of yield maintenance charges and prepayment premiums. Yield maintenance charges and prepayment premiums, if any, may be treated as paid upon the retirement or partial retirement of the Class A-1, Class A-2, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B, Class X-C, Class X-D, Class X-E, Class X-F, Class A-M, Class B, Class C and Class D certificates. The IRS may disagree with these positions. Certificateholders should consult their own tax advisors concerning the treatment of yield maintenance charges and prepayment premiums.
Sale or Exchange of Regular Interests
If a Regular Interest Holder sells or exchanges a Regular Interest, such Regular Interest Holder will recognize gain or loss equal to the difference, if any, between the amount received and its adjusted basis in the Regular Interest. The adjusted basis of a Regular Interest generally will equal the cost of the Regular Interest to the seller, increased by any original issue discount or market discount previously included in the seller’s gross income with respect to the Regular Interest and reduced by amounts included in the stated redemption price at maturity of the Regular Interest that were previously received by the seller, by any amortized premium, and by any deductible losses on the Regular Interest.
Except as described above with respect to market discount, and except as provided in this paragraph, any gain or loss on the sale or exchange of a Regular Interest realized by an investor that holds the Regular Interest as a capital asset will be capital gain or loss and will be long term or short term depending on whether the Regular Interest has been held for the long term capital gain holding period (more than one year). Such gain will be treated as ordinary income: (i) if the Regular Interest is held as part of a “conversion transaction” as defined in Code Section 1258(c), up to the amount of interest that would have accrued on the Regular Interest Holder’s net investment in the conversion transaction at 120% of the appropriate applicable federal rate under Code Section 1274(d) in effect at the time the taxpayer entered into the transaction minus any amount previously treated as ordinary income with respect to any prior disposition of property that was held as part of such transaction; (ii) in the case of a non-corporate taxpayer, to the extent such taxpayer has made an election under Code Section 163(d)(4) to have net capital gains taxed as investment income at ordinary income rates; or (iii) to the extent that such gain does not exceed the excess, if any, of (a) the amount that would have been includible in the gross income of the Regular Interest Holder if his yield on such Regular Interest were 110% of the applicable federal rate as of the date of purchase, over (b) the amount of income actually includible in the gross income of such Regular Interest Holder with respect to the Regular Interest. In addition, gain or loss recognized from the sale of a Regular Interest by certain banks or thrift institutions will be treated as ordinary income or loss pursuant to Code Section 582(c). Long-term capital gains of certain non-corporate taxpayers generally are subject to a lower maximum tax rate than ordinary income of such taxpayers for property held for more than one year. The maximum tax rate for corporations is the same with respect to both ordinary income and capital gains.
Taxes That May Be Imposed on a REMIC
Prohibited Transactions
Income from certain transactions by the Prudential Plaza Loan REMIC or either Trust REMIC, called prohibited transactions, will not be part of the calculation of income or loss includible in the federal income tax returns of holders of the Class R certificates, but rather will be taxed directly to such REMIC at a 100% rate. Prohibited transactions generally include (i) the disposition of a qualified mortgage other than for (a) substitution within two years of the Startup Day for a defective (including a defaulted) obligation (or repurchase in lieu of substitution of a defective (including a defaulted) obligation at any time) or for any qualified mortgage within three months of the Startup Day, (b) foreclosure, default or imminent default of a qualified mortgage, (c) bankruptcy or insolvency of the REMIC, or (d) a qualified (complete) liquidation, (ii) the receipt of income from assets that are not the type of mortgages or investments that the REMIC is
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permitted to hold, (iii) the receipt of compensation for services or (iv) the receipt of gain from disposition of cash flow investments other than pursuant to a qualified liquidation. Notwithstanding (i) and (iv), it is not a prohibited transaction to sell REMIC property to prevent a default on regular interests as a result of a default on qualified mortgages or to facilitate a qualified liquidation or a clean-up call. The REMIC Regulations indicate that the modification of a mortgage loan generally will not be treated as a disposition if it is occasioned by a default or reasonably foreseeable default, an assumption of a mortgage loan or the waiver of a “due-on-sale” or “due-on-encumbrance” clause. It is not anticipated that the Prudential Plaza Loan REMIC or the Trust REMICs will engage in any prohibited transactions.
Contributions to a REMIC After the Startup Day
In general, a REMIC will be subject to a tax at a 100% rate on the value of any property contributed to the REMIC after its startup day. Exceptions are provided for cash contributions to the REMIC (i) during the three months following its startup day, (ii) made to a qualified reserve fund by a holder of a Class R certificate, (iii) in the nature of a guarantee, (iv) made to facilitate a qualified liquidation or clean-up call, and (v) as otherwise permitted in Treasury regulations yet to be issued. It is not anticipated that there will be any taxable contributions to the Prudential Plaza Loan REMIC or the Trust REMICs.
Net Income from Foreclosure Property
The Prudential Plaza Loan REMIC and Lower-Tier REMIC will be subject to federal income tax at the highest corporate rate on “net income from foreclosure property”, determined by reference to the rules applicable to real estate investment trusts. Generally, property acquired by foreclosure or deed-in-lieu of foreclosure would be treated as “foreclosure property” until the close of the third calendar year beginning after the Lower-Tier REMIC’s acquisition of a REO Property, with a possible extension. Net income from foreclosure property generally means gain from the sale of a foreclosure property that is inventory property and gross income from foreclosure property other than qualifying rents and other qualifying income for a real estate investment trust.
In order for a foreclosed property to qualify as foreclosure property, any operation of the foreclosed property by the Lower-Tier REMIC generally must be conducted through an independent contractor. Further, operation of foreclosed property, even if conducted through an independent contractor, may give rise to “net income from foreclosure property”, taxable at the highest corporate rate. Payment of such tax by the Prudential Plaza Loan REMIC or the Lower-Tier REMIC would reduce amounts available for distribution to Certificateholders.
The special servicer will be required to determine generally whether the operation of foreclosed property in a manner that would subject the Lower-Tier REMIC to such tax would be expected to result in higher after-tax proceeds than an alternative method of operating such property that would not subject the Lower-Tier REMIC to such tax.
Bipartisan Budget Act of 2015
On November 2, 2015 President Obama signed into law the Bipartisan Budget Act of 2015 (the “2015 Budget Act”), which includes new audit rules affecting entities treated as partnerships, their partners and the persons that are authorized to represent entities treated as partnerships in IRS audits and related procedures. Under the 2015 Budget Act, these rules will also apply to REMICs, the holders of their residual interests and the trustees and administrators authorized to represent REMICs in IRS audits and related procedures (“TMPs”). These new audit rules are scheduled to become effective for taxable years beginning with 2018 and will apply to both new and existing REMICs.
In addition to other changes, under the 2015 Budget Act, (1) unless a REMIC elects otherwise, taxes arising from IRS audit adjustments are required to be paid by the REMIC rather than by its residual interest holders, (2) a REMIC appoints one person to act as its sole representative in connection with IRS audits and related procedures and that representative’s actions, including agreeing to adjustments to REMIC taxable income, will be binding on residual interest holders more so than a TMP’s actions under the current rules and (3) if the IRS makes an adjustment to a REMIC’s taxable year, the holders of
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residual interests for the audited taxable year may have to take the adjustment into account for the taxable year in which the adjustment is made rather than for the audited taxable year.
The certificate administrator will have the authority to utilize, and will be directed to utilize, any exceptions available under the new provisions (including any changes) and Treasury regulations so that holders of the Class R certificates, to the fullest extent possible, rather than the Prudential Plaza Loan REMIC or either Trust REMIC itself, will be liable for any taxes arising from audit adjustments to such REMICs’ taxable income. It is unclear how any such exceptions may affect the procedural rules available to challenge any audit adjustment that would otherwise be available in the absence of any such exceptions.
Certificateholders should discuss with their own tax advisors the possible effect of the new rules on them.
Taxation of Certain Foreign Investors
Interest, including original issue discount, distributable to the Regular Interest Holders that are nonresident aliens, foreign corporations or other Non-U.S. Persons will be considered “portfolio interest” and, therefore, generally will not be subject to a 30% United States withholding tax;provided that such Non-U.S. Person (i) is not a “10 percent shareholder” within the meaning of Code Section 871(h)(3)(B) or a controlled foreign corporation described in Code Section 881(c)(3)(C) with respect to the Trust REMICs and (ii) provides the certificate administrator, or the person that would otherwise be required to withhold tax from such distributions under Code Section 1441 or 1442, with an appropriate statement, signed under penalties of perjury, identifying the beneficial owner and stating, among other things, that the beneficial owner of the Regular Interest is a Non-U.S. Person. The appropriate documentation includes IRS Form W-8BEN-E or W-8BEN, if the Non-U.S. Person is an entity (such as a corporation) or individual, respectively, eligible for the benefits of the portfolio interest exemption or an exemption based on a treaty; IRS Form W-8ECI if the Non-U.S. Person is eligible for an exemption on the basis of its income from the Regular Interest being effectively connected to a United States trade or business; IRS Form W-8BEN-E or W-8IMY if the Non-U.S. Person is a trust, depending on whether such trust is classified as the beneficial owner of the Regular Interest; and Form W-8IMY, with supporting documentation as specified in the Treasury regulations, required to substantiate exemptions from withholding on behalf of its partners, if the Non-U.S. Person is a partnership. With respect to IRS Forms W-8BEN, W-8BEN-E, W-8IMY and W-8ECI, each (other than IRS Form W-8IMY) expires after three full calendar years or as otherwise provided by applicable law. An intermediary (other than a partnership) must provide IRS Form W-8IMY, revealing all required information, including its name, address, taxpayer identification number, the country under the laws of which it is created, and certification that it is not acting for its own account. A “qualified intermediary” must certify that it has provided, or will provide, a withholding statement as required under Treasury regulations Section 1.1441-1(e)(5)(v), but need not disclose the identity of its account holders on its IRS Form W-8IMY, and may certify its account holders’ status without including each beneficial owner’s certification. A “non-qualified intermediary” must additionally certify that it has provided, or will provide, a withholding statement that is associated with the appropriate IRS Forms W-8 and W-9 required to substantiate exemptions from withholding on behalf of its beneficial owners. The term “intermediary” means a person acting as a custodian, a broker, nominee or otherwise as an agent for the beneficial owner of a Regular Interest. A “qualified intermediary” is generally a foreign financial institution or clearing organization or a non-U.S. branch or office of a U.S. financial institution or clearing organization that is a party to a withholding agreement with the IRS.
If such statement, or any other required statement, is not provided, 30% withholding will apply unless reduced or eliminated pursuant to an applicable tax treaty or unless the interest on the Regular Interest is effectively connected with the conduct of a trade or business within the United States by such Non-U.S. Person. In the latter case, such Non-U.S. Person will be subject to United States federal income tax at regular rates. Investors that are Non-U.S. Persons should consult their own tax advisors regarding the specific tax consequences to them of owning a Regular Interest.
“U.S. Person” means a citizen or resident of the United States, a corporation, partnership (except to the extent provided in the applicable Treasury regulations) or other entity created or organized in or under
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the laws of the United States, any State or the District of Columbia, including any entity treated as a corporation or partnership for federal income tax purposes, an estate that is subject to U.S. federal income tax regardless of the source of income, or a trust if a court within the United States is able to exercise primary supervision over the administration of such trust, and one or more such U.S. Persons have the authority to control all substantial decisions of such trust (or, to the extent provided in the applicable Treasury regulations, certain trusts in existence on August 20, 1996 that have elected to be treated as U.S. Persons). A “Non-U.S. Person” is a person other than a U.S. Person.
FATCA
Under the “Foreign Account Tax Compliance Act” (“FATCA”) provisions of the Hiring Incentives to Restore Employment Act, a 30% withholding tax is generally imposed on certain payments, including U.S.-source interest and, on or after January 1, 2019, gross proceeds from the disposition of debt obligations that give rise to U.S.-source interest to “foreign financial institutions” and certain other foreign financial entities if those foreign entities fail to comply with the requirements of FATCA. The trustee or certificate administrator will be required to withhold amounts under FATCA on payments made to holders who are subject to the FATCA requirements and who fail to provide the trustee or certificate administrator with proof that they have complied with such requirements. Prospective investors should consult their tax advisors regarding the applicability of FATCA to their certificates.
Backup Withholding
Distributions made on the certificates, and proceeds from the sale of the certificates to or through certain brokers, may be subject to a “backup” withholding tax under Code Section 3406 at the rate of 28% on “reportable payments” (including interest distributions, original issue discount and, under certain circumstances, principal distributions) unless the Certificateholder is a U.S. Person and provides IRS Form W-9 with the correct taxpayer identification number; in the case of the Regular Interests, is a Non-U.S. Person and provides IRS Form W-8BEN or W-8BEN-E, as applicable, identifying the Non-U.S. Person and stating that the beneficial owner is not a U.S. Person; or can be treated as an exempt recipient within the meaning of Treasury regulations Section 1.6049-4(c)(1)(ii). Any amounts to be withheld from distribution on the certificates would be refunded by the IRS or allowed as a credit against the Certificateholder’s federal income tax liability. Information reporting requirements may also apply regardless of whether withholding is required. Holders are urged to contact their own tax advisors regarding the application to them of backup withholding and information reporting.
Information Reporting
Holders who are individuals (and certain domestic entities that are formed or availed of for purposes of holding, directly or indirectly, “specified foreign financial assets”) may be subject to certain foreign financial asset reporting obligations with respect to their certificates held through a financial account maintained by a foreign financial institution if the aggregate value of their certificates and their other “specified foreign financial assets” exceeds $50,000. Significant penalties can apply if a holder fails to disclose its specified foreign financial assets. We urge you to consult your tax advisor with respect to this and other reporting obligations with respect to your certificates.
3.8% Medicare Tax on “Net Investment Income”
Certain non-corporate U.S. holders will be subject to an additional 3.8% tax on all or a portion of their “net investment income”, which may include the interest payments and any gain realized with respect to the certificates, to the extent of their net investment income that, when added to their other modified adjusted gross income, exceeds $200,000 for an unmarried individual, $250,000 for a married taxpayer filing a joint return (or a surviving spouse), or $125,000 for a married individual filing a separate return. The 3.8% Medicare tax is determined in a different manner than the regular income tax. U.S. holders should consult their tax advisors with respect to their consequences with respect to the 3.8% Medicare tax.
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Reporting Requirements
The Prudential Plaza Loan REMIC and each Trust REMIC will be required to maintain its books on a calendar year basis and to file federal income tax returns in a manner similar to a partnership. The form for such returns is IRS Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return. The trustee will be required to sign the Prudential Plaza Loan REMIC and each Trust REMIC’s returns.
Reports of accrued interest, original issue discount, if any, and information necessary to compute the accrual of any market discount on the Regular Interests will be made annually to the IRS and to individuals, estates, non-exempt and non-charitable trusts, and partnerships that are either Regular Interest Holders or beneficial owners that own Regular Interests through a broker or middleman as nominee. All brokers, nominees and all other nonexempt Regular Interest Holders (including corporations, non-calendar year taxpayers, securities or commodities dealers, placement agents, real estate investment trusts, investment companies, common trusts, thrift institutions and charitable trusts) may request such information for any calendar quarter by telephone or in writing by contacting the person designated in IRS Publication 938 with respect to the Prudential Plaza Loan REMIC and the Trust REMICs. Holders through nominees must request such information from the nominee.
DUE TO THE COMPLEXITY OF THESE RULES AND THE CURRENT UNCERTAINTY AS TO THE MANNER OF THEIR APPLICATION TO THE ISSUING ENTITY AND CERTIFICATEHOLDERS, IT IS PARTICULARLY IMPORTANT THAT POTENTIAL INVESTORS CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX TREATMENT OF THEIR ACQUISITION, OWNERSHIP AND DISPOSITION OF THE CERTIFICATES.
Certain State and Local Tax Considerations
In addition to the federal income tax consequences described in “Material Federal Income Tax Considerations” above, purchasers of Offered Certificates should consider the state and local income tax consequences of the acquisition, ownership, and disposition of the Offered Certificates. State and local 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.
It is possible that one or more jurisdictions may attempt to tax nonresident holders of Offered Certificates solely by reason of the location in that jurisdiction of the depositor, the trustee, the certificate administrator, the sponsors, a related borrower or a mortgaged property or on some other basis, may require nonresident holders of certificates to file returns in such jurisdiction or may attempt to impose penalties for failure to file such returns; and it is possible that any such jurisdiction will ultimately succeed in collecting such taxes or penalties from nonresident holders of Offered Certificates. We cannot assure you that holders of Offered Certificates will not be subject to tax in any particular state, local or other taxing jurisdiction.
You should consult with your tax advisor with respect to the various state and local and any other tax consequences of an investment in the Offered Certificates.
Method of Distribution (Underwriter)
Subject to the terms and conditions set forth in an underwriting agreement (the “Underwriting Agreement”), among the depositor and the underwriters, 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 Balance or the Notional Amount, as applicable, of each class of Offered Certificates set forth below subject in each case to a variance of 5%.
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Class | Deutsche Bank Securities | Citigroup Global | J.P. Morgan | |||
| Class A-1 | $30,826,000 | $0 | $0 | |||
| Class A-2 | $40,000,000 | $0 | $0 | |||
| Class A-SB | $46,236,000 | $0 | $0 | |||
| Class A-3 | $168,000,000 | $0 | $0 | |||
| Class A-4 | $207,191,000 | $0 | $0 | |||
| Class X-A | $566,092,000 | $0 | $0 | |||
| Class A-M | $73,839,000 | $0 | $0 | |||
| Class B | $31,644,000 | $0 | $0 | |||
| Class C | $28,129,000 | $0 | $0 |
The Underwriting Agreement provides that the obligations of the underwriters will be subject to certain conditions precedent and that the underwriters will be obligated to purchase all Offered Certificates if any are purchased. In the event of a default by any underwriter, the Underwriting Agreement provides that, in certain circumstances, purchase commitments of the non-defaulting underwriter(s) may be increased or the Underwriting Agreement may be terminated.
The parties to the PSA have severally agreed to indemnify the underwriters, and the underwriters have agreed to indemnify the depositor and controlling persons of the depositor, against certain liabilities, including liabilities under the Securities Act, and will contribute to payments required to be made in respect of these liabilities.
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. Proceeds to the depositor from the sale of Offered Certificates will be approximately 111.902061033007% of the initial aggregate Certificate Balance of the Offered Certificates, plus accrued interest on the Offered Certificates from August 1, 2016, before deducting expenses payable by the depositor. 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. In connection with the purchase and sale of the Offered Certificates, the underwriters and dealers may be deemed to have received compensation from the depositor in the form of underwriting discounts and commissions.
Expenses payable by the depositor are estimated at $4,900,000, excluding underwriting discounts and commissions.
We anticipate that the Offered Certificates will be sold primarily to institutional investors. Purchasers of Offered Certificates, including dealers, may, depending on the facts and circumstances of those purchases, be deemed to be “underwriters” within the meaning of the Securities Act in connection with reoffers and resales by them of Offered Certificates. If you purchase Offered Certificates, you should consult with your legal advisors in this regard prior to any reoffer or resale. The underwriters expect to make, but are not obligated to make, a secondary market in the Offered Certificates. See “Risk Factors—Other Risks Relating to the Certificates—The Certificates May Have Limited Liquidity and the Market Value of the Certificates May Decline”.
The primary source of ongoing information available to investors concerning the Offered Certificates will be the monthly statements discussed under “Description of the Certificates—Reports to Certificateholders;Certain Available Information”. 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.
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Deutsche Bank Securities Inc., one of the underwriters, is an affiliate of the depositor and an affiliate of one of the sponsors. Citigroup Global Markets Inc., one of the underwriters, is an affiliate of one of the sponsors.
A substantial portion of the net proceeds of this offering (after the payment of underwriting compensation and transaction expenses) is expected to be directed to affiliates of Deutsche Bank Securities Inc. and Citigroup Global Markets Inc., which are underwriters for this offering. That flow of funds will occur by means of the collective effect of the payment by the underwriters to the depositor, an affiliate of Deutsche Bank Securities Inc., of the purchase price for the Offered Certificates, the payment described in the next paragraph and the following payments: (i) the payment by the depositor to GACC, an affiliate of Deutsche Bank Securities Inc., in its capacity as a sponsor, of the purchase price for the mortgage loans to be sold to the depositor by GACC and (ii) the payment by the depositor to CGMRC, an affiliate of Citigroup Global Markets Inc., in its capacity as a sponsor, of the purchase price for the mortgage loans sold to the depositor by CGMRC. See “Transaction Parties—The Sponsors and Mortgage Loan Sellers”.
As a result of the circumstances described above in this paragraph and the prior paragraph, Deutsche Bank Securities Inc. and Citigroup Global Markets Inc. have a “conflict of interest” within the meaning of Rule 5121 of the consolidated rules of The Financial Industry Regulatory Authority, Inc. In addition, other circumstances exist that result in the underwriters or their affiliates having conflicts of interest, notwithstanding that such circumstances may not constitute a “conflict of interest” within the meaning of such Rule 5121. See “Risk Factors—Risks Related to Conflicts of Interest—Interests and Incentives of the Underwriter Entities May Not Be Aligned With Your Interests”.
Incorporation of Certain Information by Reference
All reports filed or caused to be filed by the depositor with respect to the issuing entity before the termination of this offering pursuant to Section 13(a), 13(c) or 15(d) of the Securities Exchange Act of 1934, as amended, that relate to the Offered Certificates (other than Annual Reports on Form 10-K) will be deemed to be incorporated by reference into this prospectus, except that if a Non-Serviced PSA is entered into after termination of this offering, any Current Report on Form 8-K filed after termination of this offering that includes as an exhibit such Non-Serviced PSA will be deemed to be incorporated by reference into this prospectus.
The depositor will provide or cause to be provided without charge to each person to whom this prospectus is delivered in connection with this offering (including beneficial owners of the Offered Certificates), upon written or oral request of that person, a copy of any or all documents or reports incorporated in this prospectus by reference, in each case to the extent the documents or reports relate to the Offered Certificates, other than the exhibits to those documents (unless the exhibits are specifically incorporated by reference in those documents). Requests to the depositor should be directed in writing to its principal executive offices at 60 Wall Street, New York, New York 10005, Attention: President, or by telephone at (212) 250-2500.
Where You Can Find More Information
The depositor has filed a Registration Statement on Form SF-3 (SEC File No. 333-206705) (the “Registration Statement”) relating to multiple series of CMBS, including the Offered Certificates, with the SEC. This prospectus will form a part of the Registration Statement, but the Registration Statement includes additional information. Copies of the Registration Statement and other materials filed with or furnished to the SEC, including Distribution Reports on Form 10-D, Annual Reports on Form 10-K, Current Reports on Form 8-K, Forms ABS-15G, and any amendments to these reports may be read and copied at the Public Reference Section of the SEC, 100 F Street N.W., Washington, D.C. 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Information regarding the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site at “http://www.sec.gov” at which you can view and download copies of reports,
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proxy and information statements and other information filed or furnished electronically through the Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system. The SEC maintains computer terminals providing access to the EDGAR system at each of the offices referred to above.
The depositor has met the registrant requirements of Section I.A.1. of the General Instructions to the Registration Statement.
Copies of all reports of the issuing entity on Forms 10-D, 10-K and 8-K will also be made available on the website of the certificate administrator as soon as reasonably practicable after these materials are electronically filed with, or furnished to the SEC through the EDGAR system.
Financial Information
The issuing entity will be newly formed and will not have engage in any business activities or have any assets or obligations prior to the issuance of the Offered Certificates. Accordingly, no financial statements with respect to the issuing entity are included in this prospectus.
The depositor has determined that its financial statements will not be material to the offering of the Offered Certificates.
Certain ERISA Considerations
General
The Employee Retirement Income Security Act of 1974, as amended, or ERISA, and Code Section 4975 impose certain requirements on retirement plans, and on certain other employee benefit plans and arrangements, including individual retirement accounts and annuities, Keogh plans, collective investment funds, insurance company separate accounts and some insurance company general accounts in which those plans, accounts or arrangements are invested that are subject to the fiduciary responsibility provisions of ERISA or Code Section 4975 (all of which are referred to as “Plans”), and on persons who are fiduciaries with respect to Plans, in connection with the investment of Plan assets. Certain employee benefit plans, such as governmental plans (as defined in ERISA Section 3(32)), and, if no election has been made under Code Section 410(d), church plans (as defined in Section 3(33) of ERISA) are not subject to ERISA requirements. However, those plans may be subject to the provisions of other applicable federal, state or local law (“Similar Law”) materially similar to the foregoing provisions of ERISA or the Code. Moreover, those plans, if qualified and exempt from taxation under Code Sections 401(a) and 501(a), are subject to the prohibited transaction rules set forth in Code Section 503.
ERISA generally imposes on Plan fiduciaries certain general fiduciary requirements, including those of investment prudence and diversification and the requirement that a Plan’s investments be made in accordance with the documents governing the Plan. In addition, ERISA and the Code prohibit a broad range of transactions involving assets of a Plan and persons (“Parties in Interest”) who have certain specified relationships to the Plan, unless a statutory, regulatory or administrative exemption is available. Certain Parties in Interest that participate in a prohibited transaction may be subject to an excise tax imposed pursuant to Code Section 4975, unless a statutory, regulatory or administrative exemption is available. These prohibited transactions generally are set forth in Section 406 of ERISA and Code Section 4975. Special caution should be exercised before the assets of a Plan are used to purchase an Offered Certificate if, with respect to those assets, the depositor, any servicer or the trustee or any of their affiliates, either: (a) has investment discretion with respect to the investment of those assets of that Plan; or (b) has authority or responsibility to give, or regularly gives, investment advice with respect to those assets for a fee and pursuant to an agreement or understanding that the advice will serve as a primary basis for investment decisions with respect to those assets and that the advice will be based on the particular investment needs of the Plan; or (c) is an employer maintaining or contributing to the Plan.
Before purchasing any Offered Certificates with Plan assets, a Plan fiduciary should consult with its counsel and determine whether there exists any prohibition to that purchase under the requirements of
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ERISA or Code Section 4975, whether any prohibited transaction class exemption or any individual administrative prohibited transaction exemption (as described below) applies, including whether the appropriate conditions set forth in those exemptions would be met, or whether any statutory prohibited transaction exemption is applicable. Fiduciaries of plans subject to a Similar Law should consider the need for, and the availability of, an exemption under such applicable Similar Law.
Plan Asset Regulations
A Plan’s investment in Offered Certificates may cause the assets of the issuing entity to be deemed Plan assets. Section 2510.3-101 of the regulations of the United States Department of Labor (“DOL”), as modified by Section 3(42) of ERISA, provides that when a Plan acquires an equity interest in an entity, the Plan’s assets include both the equity interest and an undivided interest in each of the underlying assets of the entity, unless certain exceptions not applicable to this discussion apply, or unless the equity participation in the entity by “benefit plan investors” (that is, Plans and entities whose underlying assets include plan assets) is not “significant”. For this purpose, in general, equity participation in an entity will be “significant” on any date if, immediately after the most recent acquisition of any certificate, 25% or more of any class of certificates is held by benefit plan investors.
In general, any person who has discretionary authority or control respecting the management or disposition of Plan assets, and any person who provides investment advice with respect to those assets for a fee, is a fiduciary of the investing Plan. If the assets of the issuing entity constitute Plan assets, then any party exercising management or discretionary control regarding those assets, such as a master servicer, a special servicer or any sub-servicer, may be deemed to be a Plan “fiduciary” with respect to the investing Plan, and thus subject to the fiduciary responsibility provisions and prohibited transaction provisions of ERISA and Code Section 4975. In addition, if the assets of the issuing entity constitute Plan assets, the purchase of Offered Certificates by a Plan, as well as the operation of the issuing entity, may constitute or involve a prohibited transaction under ERISA or the Code.
Administrative Exemption
The U.S. Department of Labor has issued an administrative exemption to Deutsche Bank Securities Inc., as Department Final Authorization Number 97-03E, as amended by Prohibited Transaction Exemption 2013-08, 78 Fed. Reg. 41,090 (July 9, 2013) (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 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 held by the issuing entity, and the purchase, sale and holding of mortgage pass-through certificates, such as the Offered Certificates, underwritten by Deutsche Bank Securities Inc.,provided that certain conditions set forth in the Exemption are satisfied. The depositor expects that the Exemption generally will apply to the Offered Certificates.
The Exemption sets forth five general conditions that 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 (including the price paid for the Offered Certificates) 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 categories by at least one NRSRO that meets the requirements of the Exemption (an “Exemption Rating Agency”).
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 issuing entity and any borrower with respect to mortgage loans constituting more than 5% of the
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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 issuing entity 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 PSA and reimbursement of the person’s reasonable expenses in connection therewith.
Fifth, the investing Plan must be an accredited investor as defined in Rule 501(a)(1) of Regulation D under the Securities Act.
It is a condition of the issuance of the Offered Certificates that they have the ratings described above required by the Exemption and the depositor believes that each of the Rating Agencies qualifies as an Exemption Rating Agency. Consequently, the second general condition set forth above will be satisfied with respect to the Offered Certificates as of the Closing Date. As of the Closing Date, the third general condition set forth above will be satisfied with respect to the Offered Certificates. In addition, the depositor believes that the fourth 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 general condition set forth above. A fiduciary of a Plan contemplating purchasing an Offered Certificate, whether in the initial issuance of the Offered Certificates or in the secondary market, must make its own determination that the first and fifth general conditions set forth above will be satisfied with respect to the related Offered Certificate.
The Exemption also requires that the issuing entity meet the following requirements: (1) the issuing entity 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 by at least one of the Exemption Rating Agencies 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.
The depositor believes that the conditions to the applicability of the Exemption will generally be met with respect to the Offered Certificates, other than those conditions which are dependent on facts unknown to the depositor or which it cannot control, such as those relating to the circumstances of the Plan purchaser or the Plan fiduciary making the decision to purchase any such 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 Code Sections 4975(a) and (b) by reason of Code Sections 4975(c)(1)(A) through (D)) 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, 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 Code Section 4975(c)(1)(E) 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
449
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 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 Code Sections 4975(a) and (b) by reason of Code Section 4975(c) for transactions in connection with the servicing, management and operation of the pool of mortgage loans.
A fiduciary of a Plan should consult with its counsel with respect to the applicability of the Exemption. The fiduciary of a plan not subject to ERISA or Code Section 4975, such as a governmental plan, should determine the need for and availability of exemptive relief under applicable Similar Law. 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.
Insurance Company General Accounts
Sections I and III of Prohibited Transaction Class Exemption (“PTCE”) 95-60 exempt from the application of the prohibited transaction provisions of Sections 406(a), 406(b) and 407(a) of ERISA and Code Section 4975 transactions in connection with the acquisition of a security (such as a certificate issued by the issuing entity) as well as the servicing, management and operation of a trust (such as the issuing entity) in which an insurance company general account has an interest as a result of its acquisition of certificates issued by the issuing entity,providedthat certain conditions are satisfied. If these conditions are met, insurance company general accounts investing assets that are treated as assets of Plans would be allowed to purchase certain classes of certificates which do not meet the ratings requirements of the Exemption. All other conditions of the Exemption would have to be satisfied in order for PTCE 95-60 to be available. Before purchasing any class of Offered Certificates, an insurance company general account seeking to rely on Sections I and III of PTCE 95-60 should itself confirm that all applicable conditions and other requirements have been satisfied.
Section 401(c) of ERISA provides certain exemptive relief from the provisions of Part 4 of Title I of ERISA and Code Section 4975, including the prohibited transaction restrictions imposed by ERISA and the related excise taxes imposed by the Code, for transactions involving an insurance company general account. Pursuant to Section 401(c) of ERISA, the DOL issued regulations (“401(c) Regulations”), generally effective July 5, 2001, to provide guidance for the purpose of determining, in cases where insurance policies supported by an insurance company’s general account are issued to or for the benefit of a Plan on or before December 31, 1998, which general account assets constitute Plan assets. Any assets of an insurance company general account which support insurance policies issued to a Plan after December 31, 1998 or issued to Plans on or before December 31, 1998 for which the insurance company does not comply with the 401(c) Regulations may be treated as Plan assets. In addition, because Section 401(c) of ERISA does not relate to insurance company separate accounts, separate account assets are still generally treated as Plan assets of any Plan invested in that separate account. Insurance companies contemplating the investment of general account assets in the Offered Certificates should consult with their counsel with respect to the applicability of Section 401(c) of ERISA.
Due to the complexity of these rules and the penalties imposed upon persons involved in prohibited transactions, it is particularly important that potential investors who are Plan fiduciaries or who are investing Plan assets consult with their counsel regarding the consequences under ERISA and the Code of their acquisition and ownership of 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 ANY 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.
450
Legal Investment
None of the classes of Offered Certificates will constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended (“SMMEA”). Generally, the only classes of Offered Certificates which will qualify as “mortgage related securities” will be those that (1) are rated in one of the two highest rating categories by at least one nationally recognized statistical rating organization, as defined in Section 3(a)(62) of the Exchange Act (“NRSRO”); and (2) are part of a series evidencing interests in a trust consisting of loans originated by certain types of originators specified in SMMEA and secured by first liens on real estate.
Although Section 939(e) of the Dodd-Frank Act amended SMMEA, effective July 21, 2012, so as to require the SEC to establish creditworthiness standards by that date in substitution for the foregoing ratings test, the SEC has neither proposed nor adopted a rule establishing new creditworthiness standards for purposes of SMMEA as of the date of this prospectus. However, the SEC has issued a transitional interpretation (Release No. 34-67448 (effective July 20, 2012)), which provides that, until such time as final rules establishing new standards of creditworthiness become effective, the standard of creditworthiness for purposes of the definition of the term “mortgage related security” is a security that is rated in one of the two highest rating categories by at least one NRSRO. Depending on the standards of creditworthiness that are ultimately established by the SEC, it is possible that certain classes of Offered Certificates specified to be “mortgage related securities” for purposes of SMMEA may no longer qualify as such as of the time such new standards are effective.
The appropriate characterization of the Offered Certificates under various legal investment restrictions, and thus the ability of investors subject to those restrictions to purchase the Offered Certificates, are subject to significant interpretive uncertainties. We make no representation 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 any Offered Certificates under applicable legal investment restrictions. Further, any ratings downgrade of a class of Offered Certificates by an NRSRO to less than an “investment grade” rating (i.e., lower than the top four rating categories) may adversely affect the ability of an investor to purchase or retain, or otherwise impact the regulatory characteristics of, that class. The uncertainties described above (and any unfavorable future determinations concerning the legal investment or financial institution regulatory characteristics of the Offered Certificates) may adversely affect the liquidity and market value of the Offered Certificates.
Accordingly, if your investment activities are subject to legal investment laws and regulations, regulatory capital requirements, or review by regulatory authorities, you should consult with your own legal advisors in determining whether and to what extent the Offered Certificates constitute legal investments or are subject to investment, capital, or other regulatory restrictions.
The issuing entity will not be registered under the Investment Company Act of 1940, as amended. The issuing entity will be relying on an exclusion or exemption from the definition of “investment company” under the Investment Company Act of 1940, as amended contained in Section 3(c)(5) of the Investment Company Act of 1940, as amended, or Rule 3a-7 under the Investment Company Act of 1940, as amended, although there may be additional exclusions or exemptions available to the issuing entity. The issuing entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule under the Dodd-Frank Act.
Legal Matters
The validity of the certificates and material federal income tax matters will be passed upon for the depositor by Cadwalader, Wickersham & Taft LLP. Certain legal matters will be passed upon for the underwriters by Sidley Austin LLP.
451
Ratings
It is a condition to their issuance that the Offered Certificates receive investment grade credit ratings from each of the Rating Agencies engaged by the Depositor to rate such class of certificates.
We are not obligated to maintain any particular rating with respect to any class of Offered Certificates. Changes affecting the Mortgaged Properties, the parties to the PSA or another person may have an adverse effect on the ratings of the Offered Certificates, and thus on the liquidity, market value and regulatory characteristics of the Offered Certificates, although such adverse changes would not necessarily be an event of default under the applicable Mortgage Loan.
The ratings address the likelihood of full and timely receipt by the Certificateholders of all distributions of interest at the applicable Pass-Through Rate on the Offered Certificates to which they are entitled on each distribution date and the ultimate payment in full of the Certificate Balance of each class of Offered Certificates on a date that it not later than the Rated Final Distribution Date with respect to such class of certificates. The Rated Final Distribution Date will be the distribution date in August 2049. See “Yield and Maturity Considerations” and “Pooling and Servicing Agreement—Advances”. Any ratings of each Offered Certificates should be evaluated independently from similar ratings on other types of securities.
The ratings are not a recommendation to buy, sell or hold securities, a measure of asset value or an indication of the suitability of an investment, and may be subject to revision or withdrawal at any time by any Rating Agency. In addition, these ratings do not address: (a) the likelihood, timing, or frequency of prepayments (both voluntary and involuntary) and their impact on interest payments or the degree to which such prepayments might differ from those originally anticipated, (b) the possibility that a Certificateholder might suffer a lower than anticipated yield, (c) the likelihood of receipt of yield maintenance charges, prepayment charges, prepayment premiums, prepayment fees or penalties or default interest or post anticipated repayment date additional interest, (d) the likelihood of experiencing any Prepayment Interest Shortfalls, an assessment of whether or to what extent the interest payable on any class of Offered Certificates may be reduced in connection with any Prepayment Interest Shortfalls, or of receiving Compensating Interest Payments, (e) the tax treatment of the Offered Certificates or effect of taxes on the payments received, (f) the likelihood or willingness of the parties to the respective documents to meet their contractual obligations or the likelihood or willingness of any party or court to enforce, or hold enforceable, the documents in whole or in part, (g) an assessment of the yield to maturity that investors may experience, (h) the likelihood, timing or receipt of any payments of interest to the holders of the Offered Certificates resulting from an increase in the interest rate on any Mortgage Loan in connection with a Mortgage Loan modification, waiver or amendment, (i) Excess Interest or (j) other non-credit risks, including, without limitation, market risks or liquidity.
The ratings take into consideration the credit quality of the underlying Mortgaged Properties and the Mortgage Loans, structural and legal aspects associated with the Offered Certificates, and the extent to which the payment stream of the Mortgage Loans is adequate to make payments required under the Offered Certificates. However, as noted above, the ratings do not represent an assessment of the likelihood, timing or frequency of principal prepayments (both voluntary and involuntary) by the borrowers, or the degree to which such prepayments might differ from those originally anticipated. In general, the ratings address credit risk and not prepayment risk. Ratings are forward-looking opinions about credit risk and express an agency’s opinion about the ability and willingness of an issuer of securities to meet its financial obligations in full and on time. Ratings are not indications of investment merit. In addition, the ratings do not represent an assessment of the yield to maturity that investors may experience or the possibility that investors might not fully recover their initial investment in the event of delinquencies or defaults or rapid prepayments on the Mortgage Loans (including both voluntary and involuntary prepayments) or the application of any realized losses. In the event that holders of such certificates do not fully recover their investment as a result of rapid principal prepayments on the Mortgage Loans, all amounts “due” to such holders will nevertheless have been paid, and such result is consistent with the ratings assigned to such certificates. As indicated in this prospectus, holders of the certificates with Notional Amounts are entitled only to payments of interest on the related Mortgage Loans. If the Mortgage Loans were to prepay in the initial month, with the result that the holders of the certificates with Notional Amounts receive only a single month’s interest and therefore, suffer a nearly complete loss of
452
their investment, all amounts “due” to such holders will nevertheless have been paid, and such result is consistent with the rating received on those certificates. The Notional Amounts of the certificates with Notional Amounts on which interest is calculated may be reduced by the allocation of realized losses and prepayments, whether voluntary or involuntary. The ratings do not address the timing or magnitude of reductions of such Notional Amount, but only the obligation to pay interest timely on the Notional Amount, as so reduced from time to time. Therefore, the ratings of the certificates with Notional Amounts should be evaluated independently from similar ratings on other types of securities. See “Risk Factors—Other Risks Relating to the Certificates—Your Yield May Be Affected by Defaults, Prepayments and Other Factors” and “Yield and Maturity Considerations”.
Although the depositor will prepay fees for ongoing rating surveillance by certain of the Rating Agencies, the depositor has no obligation or ability to ensure that any Rating Agency performs ratings surveillance. In addition, a Rating Agency may cease ratings surveillance if the information furnished to that Rating Agency is insufficient to allow it to perform surveillance.
453
Index of Defined Terms
| 10 Hudson Yards Co-Lender Agreement | 175 |
| 10 Hudson Yards Companion Loans | 174 |
| 10 Hudson Yards Mortgage Loan | 174 |
| 10 Hudson Yards Mortgaged Property | 174 |
| 10 Hudson Yards Non-Standalone Loans | 174 |
| 10 Hudson Yards Non-Standalone Pari Passu Companion Loans | 174 |
| 10 Hudson Yards Noteholders | 175 |
| 10 Hudson Yards Pari Passu Companion Loans | 174 |
| 10 Hudson Yards Standalone Companion Loans | 174 |
| 10 Hudson Yards Standalone Pari Passu Companion Loans | 174 |
| 10 Hudson Yards Subordinate Companion Loan Holder | 175 |
| 10 Hudson Yards Subordinate Companion Loans | 174 |
| 10 Hudson Yards Triggering Event of Default | 176 |
| 10 Hudson Yards Whole Loan | 174 |
| 17g-5 Information Provider | 274 |
| 1986 Act | 434 |
| 1996 Act | 413 |
| 2015 Budget Act | 441 |
| 401 South State Street Co-Lender Agreement | 214 |
| 401 South State Street Companion Loan | 214 |
| 401 South State Street Mortgage Loan | 214 |
| 401 South State Street Mortgaged Property | 214 |
| 401 South State Street Non-Controlling Note Holder | 215 |
| 401 South State Street Noteholders | 214 |
| 401 South State Street Whole Loan | 214 |
| 401 Subordinate Loan | 170 |
| 401(c) Regulations | 450 |
| AB Modified Loan | 319 |
| Acceptable Insurance Default | 323 |
| Accrued AB Loan Interest | 259 |
| Acting General Counsel’s Letter | 119 |
| Actual/360 Basis | 158 |
| Actual/360 Loans | 298 |
| ADA | 415 |
| Additional IDA Bonds | 156 |
| Administrative Cost Rate | 255 |
| ADR | 122 |
| Advances | 294 |
| Affirmative Asset Review Vote | 354 |
| Agency | 156 |
| Allocated Loan Amount | 122 |
| Annual Debt Service | 123 |
| Anticipated Repayment Date | 158 |
| Appraisal Reduction Amount | 316 |
| Appraisal Reduction Event | 315 |
| Appraised Value | 123 |
| Appraised-Out Class | 320 |
| ARD Loans | 158 |
| Assessment of Compliance | 393 |
| Asset Representations Reviewer Asset Review Fee | 314 |
| Asset Representations Reviewer Fee Cap | 314 |
| Asset Representations Reviewer Termination Event | 359 |
| Asset Review | 356 |
| Asset Review Notice | 355 |
| Asset Review Quorum | 355 |
| Asset Review Report | 357 |
| Asset Review Report Summary | 357 |
| Asset Review Standard | 356 |
| Asset Review Trigger | 353 |
| Asset Review Vote Election | 354 |
| Asset Status Report | 332 |
| Assumed Final Distribution Date | 262 |
| Assumed Scheduled Payment | 256 |
| Attestation Report | 393 |
| Authority | 155 |
| Authority Bonds | 155 |
| Authority Lease | 155 |
| Available Funds | 250 |
| Balloon Balance | 123 |
| Balloon LTV | 124 |
| Base Interest Fraction | 261 |
| BCG | 146 |
| BEAs | 137 |
| Benefit Plan Investors | 448 |
| Birch Run Premium Outlets Companion Loans | 198 |
| Birch Run Premium Outlets Control Note Securitization Date | 198 |
| Birch Run Premium Outlets Directing Certificateholder | 199 |
| Birch Run Premium Outlets Intercreditor Agreement | 198 |
| Birch Run Premium Outlets Mortgage Loan | 198 |
| Birch Run Premium Outlets Mortgaged Property | 198 |
| Birch Run Premium Outlets Non-Controlling Note Holder | 199 |
454
| Birch Run Premium Outlets Noteholders | 198 |
| Birch Run Premium Outlets Pooling and Servicing Agreement | 198 |
| Birch Run Premium Outlets Special Servicer | 199 |
| Birch Run Premium Outlets Whole Loan | 198 |
| Borrower Party | 268 |
| Borrower Party Affiliate | 268 |
| Breach Notice | 285 |
| BSA | 152 |
| BSA Application | 152 |
| BSA Approval | 152 |
| C(WUMP)O | 16 |
| CAP | 139 |
| CERCLA | 412 |
| Certificate Administrator/Trustee Fee | 313 |
| Certificate Administrator/Trustee Fee Rate | 313 |
| Certificate Balance | 248 |
| Certificate Owners | 276 |
| Certificateholder | 269 |
| Certificateholder Quorum | 362 |
| Certificateholder Repurchase Request | 371 |
| Certifying Certificateholder | 278 |
| CGCMT 2016-P4 Certificate Administrator | 214 |
| CGCMT 2016-P4 Depositor | 214 |
| CGCMT 2016-P4 Directing Certificateholder | 215 |
| CGCMT 2016-P4 Master Servicer | 214 |
| CGCMT 2016-P4 Mortgage Trust | 214 |
| CGCMT 2016-P4 Operating Advisor | 214 |
| CGCMT 2016-P4 Pooling and Servicing Agreement | 214 |
| CGCMT 2016-P4 Special Servicer | 214 |
| CGCMT 2016-P4 Trustee | 214 |
| CGMRC | 225 |
| CGMRC Data File | 226 |
| CGMRC Mortgage Loans | 225 |
| CGMRC Securitization Database | 226 |
| City | 156 |
| Class A Certificates | 248 |
| Class A-SB Planned Principal Balance | 257 |
| Class X Certificates | 248 |
| Clearstream | 275 |
| Clearstream Participants | 277 |
| Closing Date | 122 |
| CMBS | 51, 217 |
| Code | 432 |
| Collateral Deficiency Amount | 319 |
| Collection Account | 297 |
| Collection Period | 251 |
| COMM 2015-CCRE26 Certificate Administrator | 194 |
| COMM 2015-CCRE26 Directing Certificateholder | 195 |
| COMM 2015-CCRE26 Master Servicer | 194 |
| COMM 2015-CCRE26 Operating Advisor | 194 |
| COMM 2015-CCRE26 Pooling and Servicing Agreement | 194 |
| COMM 2015-CCRE26 Special Servicer | 194 |
| COMM 2015-CCRE26 Trustee | 194 |
| COMM 2016-DC2 Certificate Administrator | 198 |
| COMM 2016-DC2 Master Servicer | 198 |
| COMM 2016-DC2 Operating Advisor | 198 |
| COMM 2016-DC2 Pooling and Servicing Agreement | 198 |
| COMM 2016-DC2 Special Servicer | 198 |
| COMM 2016-DC2 Trustee | 198 |
| COMM 2016-GCT Certificate Administrator | 201 |
| COMM 2016-GCT Controlling Class | 208 |
| COMM 2016-GCT Controlling Class Certificateholder | 209 |
| COMM 2016-GCT Directing Holder | 208, 209 |
| COMM 2016-GCT Master Servicer | 201 |
| COMM 2016-GCT Special Servicer | 201 |
| COMM 2016-GCT Subordinate Consultation Period | 208 |
| COMM 2016-GCT Subordinate Control Period | 208 |
| COMM 2016-GCT Trust and Servicing Agreement | 201 |
| COMM 2016-GCT Trustee | 201 |
| Commonwealth | 156 |
| Communication Request | 278 |
| Companion Loan | 121 |
| Companion Loan Holder | 171 |
| Company Lease | 155 |
| Compensating Interest Payment | 263 |
| Complaint | 236 |
| Constant Prepayment Rate | 423 |
| Consultation Termination Event | 344 |
| Control Eligible Certificates | 340 |
| Control Termination Event | 343 |
| Controlling Class | 339 |
| Controlling Class Certificateholder | 339 |
| Controlling Companion Loan | 171 |
| Core Club | 152 |
| Corrected Loan | 332 |
| CPR | 423 |
| CREFC® | 266 |
| CREFC® Intellectual Property Royalty License Fee | 315 |
| CREFC® Intellectual Property Royalty License Fee Rate | 315 |
| CREFC® Reports | 266 |
| Crossover Date | 253 |
455
| Cumulative Appraisal Reduction Amount | 319, 320 |
| Cure Event | 184, 193, 210 |
| Cure Payment | 183, 192, 209 |
| Cure/Contest Period | 357 |
| Current LTV | 124 |
| Custodian | 235 |
| Cut-off Date | 121 |
| Cut-off Date Balance | 123 |
| Cut-off Date LTV Ratio | 124 |
| Cut-off Date UW NCF | 126 |
| Daily Portions | 436 |
| DB Originators | 220 |
| DBJPM 2016-SFC Certificate Administrator | 186 |
| DBJPM 2016-SFC Controlling Class | 192 |
| DBJPM 2016-SFC Controlling Class Certificateholder | 192 |
| DBJPM 2016-SFC Master Servicer | 185 |
| DBJPM 2016-SFC Special Servicer | 185 |
| DBJPM 2016-SFC Subordinate Consultation Period | 191 |
| DBJPM 2016-SFC Subordinate Control Period | 191 |
| DBJPM 2016-SFC Trust and Servicing Agreement | 185 |
| DBJPM 2016-SFC Trustee | 186 |
| DBRS | 349 |
| Defaulted Loan | 337 |
| Defeasance Deposit | 163 |
| Defeasance Loans | 163 |
| Defeasance Lock-Out Period | 163 |
| Defeasance Option | 163 |
| Definitive Certificate | 275 |
| Delinquent Loan | 354 |
| Depositaries | 276 |
| Depositor | 233 |
| Determination Date | 249 |
| Diligence File | 282 |
| Directing Certificateholder | 339 |
| Disclosable Special Servicer Fees | 313 |
| Discount Rate | 159 |
| Dispute Resolution Consultation | 374 |
| Dispute Resolution Cut-off Date | 373 |
| Distribution Accounts | 297 |
| Distribution Date | 249 |
| District Court | 236 |
| DMARC | 218 |
| Dodd-Frank Act | 107 |
| DOL | 448 |
| Draft CRR Amendment Regulation | 106 |
| DTC | 275 |
| DTC Participants | 276 |
| DTC Rules | 277 |
| Due Date | 158, 251 |
| Due Diligence Questionnaire | 227 |
| EDGAR | 447 |
| Eligible Asset Representations Reviewer | 357 |
| Eligible Operating Advisor | 349 |
| Enforcing Party | 372 |
| Enforcing Servicer | 371 |
| EPA | 138 |
| ESA | 137, 222 |
| Escrow/Reserve Mitigating Circumstances | 224 |
| Euroclear | 275 |
| Euroclear Operator | 277 |
| Euroclear Participants | 277 |
| Excess Interest | 249 |
| Excess Interest Distribution Account | 298 |
| Excess Prepayment Interest Shortfall | 264 |
| Exchange Act | 216, 224 |
| Excluded Controlling Class Holder | 268 |
| Excluded Controlling Class Loan | 268 |
| Excluded Information | 269 |
| Excluded Loan | 269 |
| Excluded Plan | 449 |
| Excluded Special Servicer | 363 |
| Excluded Special Servicer Mortgage Loan | 363 |
| Exemption | 448 |
| Exemption Rating Agency | 448 |
| FATCA | 443 |
| FDIA | 118 |
| FDIC | 119, 243 |
| FETL | 17 |
| FIEL | 18 |
| Final Asset Status Report | 347 |
| Final Dispute Resolution Election Notice | 374 |
| Financial Promotion Order | 14 |
| FIRREA | 120, 221 |
| Fitch | 349 |
| FPO Persons | 15 |
| FSCMA | 17 |
| FSMA | 15 |
| Funds | 243 |
| GACC | 217 |
| GACC Data Tape | 219 |
| GACC Deal Team | 218 |
| GACC Mortgage Loans | 218 |
| Gain-on-Sale Reserve Account | 298 |
| Garn Act | 414 |
| Gas Company Tower & World Trade Center Parking Garage Co-Lender Agreement | 201 |
| Gas Company Tower & World Trade Center Parking Garage Companion Loans | 201 |
456
| Gas Company Tower & World Trade Center Parking Garage Mortgage Loan | 200 |
| Gas Company Tower & World Trade Center Parking Garage Mortgaged Property | 200 |
| Gas Company Tower & World Trade Center Parking Garage Non-Standalone Loans | 201 |
| Gas Company Tower & World Trade Center Parking Garage Non-Standalone Pari Passu Companion Loan | 201 |
| Gas Company Tower & World Trade Center Parking Garage Noteholders | 201 |
| Gas Company Tower & World Trade Center Parking Garage Pari Passu Companion Loans | 201 |
| Gas Company Tower & World Trade Center Parking Garage Standalone Companion Loans | 201 |
| Gas Company Tower & World Trade Center Parking Garage Standalone Pari Passu Companion Loans | 200 |
| Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loan Holder | 202 |
| Gas Company Tower & World Trade Center Parking Garage Subordinate Companion Loans | 201 |
| Gas Company Tower & World Trade Center Parking Garage Whole Loan | 201 |
| Gas Company Triggering Event of Default | 202 |
| Grace Period | 158 |
| Grantor Trust | 48, 249, 433 |
| Hard Lockbox | 123 |
| High Net Worth Companies, Unincorporated Associations, Etc. | 14 |
| Hope Note | 143 |
| Hudson Yards 2016-10HY Certificate Administrator | 175 |
| Hudson Yards 2016-10HY Controlling Class | 182 |
| Hudson Yards 2016-10HY Controlling Class Certificateholder | 182 |
| Hudson Yards 2016-10HY Directing Holder | 181, 183 |
| Hudson Yards 2016-10HY Master Servicer | 175 |
| Hudson Yards 2016-10HY Special Servicer | 175 |
| Hudson Yards 2016-10HY Subordinate Consultation Period | 182 |
| Hudson Yards 2016-10HY Subordinate Control Period | 182 |
| Hudson Yards 2016-10HY Trust and Servicing Agreement | 175 |
| Hudson Yards 2016-10HY Trustee | 175 |
| IDA | 155 |
| IDA Agreement | 156 |
| IDA Bonds | 156 |
| IDA Lease | 155 |
| IEPA | 139 |
| Indirect Participants | 276 |
| Initial IDA Bonds | 156 |
| Initial Pool Balance | 121 |
| Initial Rate | 158 |
| Initial Requesting Certificateholder | 371 |
| In-Place Cash Management | 123 |
| Insurance and Condemnation Proceeds | 297 |
| Intercreditor Agreement | 171 |
| Interest Accrual Amount | 255 |
| Interest Accrual Period | 255 |
| Interest Distribution Amount | 255 |
| Interest Payment Differential | 160 |
| Interest Reserve Account | 298 |
| Interest Shortfall | 255 |
| Interested Person | 338 |
| Investment Company Act | 1 |
| Investor Certification | 269 |
| Investor Q&A Forum | 273 |
| Investor Registry | 274 |
| IO Group YM Distribution Amount | 260 |
| Largest Tenant | 124 |
| Lease Expiration | 124 |
| Lennar | 243 |
| Liquidation Fee | 309 |
| Liquidation Proceeds | 297, 309 |
| Loan Per Net Rentable Area | 124 |
| Loan-to-Value Ratio | 124 |
| Loan-to-Value Ratio at Maturity or ARD | 124 |
| Loss of Value Payment | 286 |
| Lower-Tier Regular Interests | 432 |
| Lower-Tier REMIC | 47 |
| Lower-Tier REMIC Distribution Account | 297 |
| Lower-Tier REMICs | 432 |
| LTV Ratio | 124 |
| LTV Ratio at Maturity or ARD | 124 |
| LUST | 139 |
| MAI | 287 |
| Major Decision | 341 |
| Market Discount | 437 |
| MAS | 16 |
| Massachusetts Tax Commissioner | 157 |
| Master Servicer Proposed Course of Action Notice | 372 |
| Master Servicer Remittance Date | 293 |
| Master Servicing Fee | 307 |
| Master Servicing Fee Rate | 307 |
| Material Defect | 285 |
457
| Maturity Date LTV Ratio | 124 |
| Midland | 237 |
| MLPA | 279 |
| Modeling Assumptions | 424 |
| Modification Fees | 311 |
| Modified Mortgage Loan | 316 |
| Moody’s | 349 |
| Mortgage | 122 |
| Mortgage File | 279 |
| Mortgage Loan Seller | 217, 225 |
| Mortgage Loans | 121 |
| Mortgage Note | 122 |
| Mortgage Pool | 121 |
| Mortgage Rate | 255 |
| Mortgaged Property | 122 |
| Most Recent NOI | 124 |
| MSA | 125 |
| Net Default Interest | 307 |
| Net Mortgage Rate | 254 |
| Net Operating Income | 125 |
| Net Prepayment Interest Excess | 263 |
| New PCO | 152 |
| NFR | 139 |
| NI 33-105 | 18 |
| NOI | 125 |
| NOI Date | 125 |
| Nonrecoverable Advance | 295 |
| Non-Reduced Certificates | 362 |
| Non-Serviced Certificate Administrator | 171 |
| Non-Serviced Companion Loan | 171 |
| Non-Serviced Master Servicer | 172, 239 |
| Non-Serviced Mortgage Loan | 173 |
| Non-Serviced PSA | 172 |
| Non-Serviced Securitization Trust | 173 |
| Non-Serviced Special Servicer | 172 |
| Non-Serviced Trustee | 172 |
| Non-Serviced Whole Loan | 173 |
| Non-U.S. Person | 443 |
| Note A | 181, 191, 207 |
| Note A-1 | 181, 208 |
| Note A-1-C | 200 |
| Note A-1-C1 | 174 |
| Note A-2 | 181, 208 |
| Note B | 181, 191, 208 |
| Notice of Foreclosure/DIL | 184, 193, 210 |
| Notional Amount | 249 |
| NRA | 125 |
| NRSRO | 451 |
| NRSRO | 268, 366 |
| NRSRO Certification | 270 |
| N-Star Unsecured Loan | 141 |
| NYSDEC | 138 |
| Occupancy | 125 |
| Occupancy Date | 125 |
| Offered Certificates | 248 |
| Offsetting Modification Fees | 312 |
| OID Regulations | 435 |
| OLA | 119 |
| Operating Advisor Consulting Fee | 313 |
| Operating Advisor Fee | 313 |
| Operating Advisor Fee Rate | 313 |
| Operating Advisor Standard | 348 |
| Operating Advisor Termination Event | 350 |
| Original Balance | 125 |
| Other Loan | 142 |
| P&I Advance | 293 |
| Pads | 129 |
| PAR | 222 |
| Pari Passu Companion Loan | 121 |
| Park Bridge Financial | 246 |
| Park Bridge Lender Services | 246 |
| Participants | 275 |
| Parties in Interest | 447 |
| Pass-Through Rate | 253 |
| Patriot Act | 416 |
| PCIS Persons | 15 |
| PCR | 233 |
| Periodic Payments | 250 |
| Permitted Investments | 250, 299 |
| Permitted Special Servicer/Affiliate Fees | 312 |
| Pillar Mortgage Loans | 217 |
| PILOT | 155 |
| PILOT Mortgages | 155 |
| PIPs | 71, 139 |
| Plaintiffs | 141 |
| Plans | 447 |
| PRC | 15 |
| Preliminary Dispute Resolution Election Notice | 373 |
| Prepayment Assumption | 436 |
| Prepayment Interest Excess | 262 |
| Prepayment Interest Shortfall | 262 |
| Prepayment Provision | 125 |
| Prime Rate | 297 |
| Principal Balance Certificates | 248 |
| Principal Distribution Amount | 255 |
| Principal Shortfall | 257 |
| Prior Loan | 141 |
| Prior Securitization | 141 |
| Prior Sponsorship | 141 |
| Privileged Information | 350 |
| Privileged Information Exception | 350 |
| Privileged Person | 268 |
| Prohibited Prepayment | 263 |
| Promotion of Collective Investment Schemes Exemptions Order | 15 |
| Proposed Course of Action | 373 |
| Proposed Course of Action Notice | 372 |
| Prospectus Directive | 14 |
| Prudential Plaza Companion Loans | 194 |
| Prudential Plaza Guarantors | 141 |
458
| Prudential Plaza Intercreditor Agreement | 194 |
| Prudential Plaza Loan REMIC | 47, 432 |
| Prudential Plaza Loan REMIC Regular Interest | 432 |
| Prudential Plaza Loan REMIC Residual Interest | 432 |
| Prudential Plaza Loan REMIC Residual Interest Distribution Account | 298 |
| Prudential Plaza Mortgage Loan | 194 |
| Prudential Plaza Mortgaged Property | 194 |
| Prudential Plaza Non-Controlling Note Holder | 195 |
| Prudential Plaza Noteholders | 194 |
| Prudential Plaza Whole Loan | 194 |
| PSA | 247 |
| PSA Party Repurchase Request | 372 |
| PTCE | 450 |
| Purchase Price | 286 |
| Qualified Replacement Special Servicer | 362 |
| Qualified Substitute Mortgage Loan | 287 |
| RAC No-Response Scenario | 391 |
| Rated Final Distribution Date | 262 |
| Rating Agencies | 392 |
| Rating Agency Confirmation | 392 |
| RCM | 243 |
| REA | 58 |
| Realized Loss | 264 |
| Record Date | 249 |
| Registration Statement | 446 |
| Regular Certificates | 248 |
| Regular Interest Holder | 435 |
| Regular Interests | 432 |
| Regulation AB | 394 |
| Reimbursement Rate | 297 |
| Reinvestment Yield | 159 |
| Related Proceeds | 296 |
| Release Date | 163 |
| Relevant Member State | 13 |
| Relevant Persons | 15 |
| Relief Act | 415 |
| REMIC | 432 |
| REMIC Regulations | 432 |
| REO Account | 298 |
| REO Loan | 257 |
| REO Property | 331 |
| Repurchase Election Notice | 184, 193, 210 |
| Repurchase Option Notice | 184, 193, 210 |
| Repurchase Request | 372 |
| Requesting Certificateholder | 374 |
| Requesting Holders | 320 |
| Requesting Investor | 278 |
| Requesting Party | 391 |
| Requirements | 416 |
| Residual Certificates | 248 |
| Resolution Failure | 372 |
| Resolved | 372 |
| Restricted Group | 448 |
| Restricted Mezzanine Holder | 268 |
| Restricted Party | 350 |
| Review Materials | 355 |
| Revised Rate | 158 |
| RevPAR | 125 |
| Rialto | 243 |
| RMBS | 236 |
| Rooms | 129 |
| Rule 17g-5 | 270 |
| Scheduled Principal Distribution Amount | 256 |
| SEC | 216, 224 |
| Securities Act | 393 |
| Securitization Accounts | 299 |
| Securitization Framework | 106 |
| Securitization Regulation | 106 |
| Senior Certificates | 248 |
| Serviced Companion Loan | 173 |
| Serviced Pari Passu Companion Loan | 173 |
| Serviced Whole Loan | 173 |
| Serviced Whole Loan Custodial Account | 297 |
| Servicer Termination Event | 364 |
| Servicing Advances | 294 |
| Servicing Compensation | 307 |
| Servicing Fee | 307 |
| Servicing Fee Rate | 307 |
| Servicing Standard | 292 |
| Servicing Transfer Event | 331 |
| SF | 126 |
| SFA | 16 |
| SFO | 16 |
| Similar Law | 447 |
| Simon L.P. | 155 |
| Small Loan Appraisal Estimate | 317 |
| SMMEA | 451 |
| Soft Lockbox | 125 |
| Soft Springing Hard Lockbox | 125 |
| Sole Certificateholder | 312 |
| Sophisticated Investors | 19 |
| Special Servicer | 243 |
| Special Servicer Decision | 325 |
| Special Servicing Fee | 308 |
| Specially Serviced Loans | 330 |
| Sponsor | 217, 225 |
| Springing Cash Management | 126 |
| Springing Lockbox | 126 |
| Sq. Ft. | 126 |
| Square Feet | 126 |
| Startup Day | 433 |
| Stated Principal Balance | 257 |
| Subject Loans | 314 |
| Subordinate Certificates | 248 |
459
| Subordinate Companion Loan | 121, 173 |
| Sub-Servicing Agreement | 293 |
| Sub-Servicing Entity | 365 |
| SVOCs | 138 |
| T-12 | 126 |
| TACO | 139 |
| Tax Rebate Agreement | 156 |
| TCO | 152 |
| Term to Maturity | 126 |
| Terms and Conditions | 278 |
| Tests | 356 |
| The Addendum | 19 |
| The Joint Investment Trusts Law | 19 |
| The Securities Law | 18 |
| TIF | 157 |
| Title V | 415 |
| TMPs | 441 |
| Trailing 12 NOI | 124 |
| TRIPRA | 78 |
| Trust REMIC | 47 |
| Trust REMICs | 249, 432 |
| TTM | 126 |
| U.S. Obligations | 160 |
| U.S. Person | 442 |
| UCC | 403 |
| U-Haul | 142 |
| U-Haul AREC Portfolio Companion Loan | 196 |
| U-Haul AREC Portfolio Intercreditor Agreement | 196 |
| U-Haul AREC Portfolio Mortgage Loan | 196 |
| U-Haul AREC Portfolio Mortgaged Property | 196 |
| U-Haul AREC Portfolio Non-Controlling Note Holder | 197 |
| U-Haul AREC Portfolio Noteholders | 196 |
| U-Haul AREC Portfolio Whole Loan | 196 |
| Underwriter Entities | 96 |
| Underwriting Agreement | 444 |
| Underwritten EGI | 128 |
| Underwritten Expenses | 126 |
| Underwritten NCF | 126 |
| Underwritten NCF Debt Yield | 126 |
| Underwritten NCF DSCR | 127 |
| Underwritten Net Cash Flow | 126 |
| Underwritten Net Cash Flow DSCR | 127 |
| Underwritten Net Operating Income | 127 |
| Underwritten Net Operating Income DSCR | 128 |
| Underwritten NOI | 127 |
| Underwritten NOI Debt Yield | 126 |
| Underwritten NOI DSCR | 128 |
| Underwritten Revenues | 128 |
| Units | 129 |
| Unscheduled Principal Distribution Amount | 256 |
| Unsecured Loan | 170 |
| Unsolicited Information | 356 |
| Updated Appraisal | 318 |
| Upper-Tier REMIC | 47, 432 |
| Upper-Tier REMIC Distribution Account | 297 |
| UST | 138 |
| UW EGI | 128 |
| UW Expenses | 126 |
| UW NCF | 126 |
| UW NCF Debt Yield | 126 |
| UW NCF DSCR | 127 |
| UW NOI | 127 |
| UW NOI Debt Yield | 126 |
| UW NOI DSCR | 128 |
| Vertex Environmental Insurance Policy | 138 |
| Vertex Pharmaceuticals HQ Companion Loans | 211 |
| Vertex Pharmaceuticals HQ Controlling Companion Loan | 212 |
| Vertex Pharmaceuticals HQ Intercreditor Agreement | 211 |
| Vertex Pharmaceuticals HQ Mortgage Loan | 211 |
| Vertex Pharmaceuticals HQ Mortgaged Property | 211 |
| Vertex Pharmaceuticals HQ Non-Controlling Note Holder | 213 |
| Vertex Pharmaceuticals HQ Noteholders | 211 |
| Vertex Pharmaceuticals HQ Whole Loan | 211 |
| VOCs | 138 |
| Volcker Rule | 107 |
| Voting Rights | 274 |
| WAC Rate | 254 |
| Wachovia | 239 |
| Weighted Average Mortgage Rate | 129 |
| Wells Fargo Bank | 235 |
| Westfield San Francisco Centre Co-Lender Agreement | 185 |
| Westfield San Francisco Centre Companion Loans | 185 |
| Westfield San Francisco Centre Mortgage Loan | 185 |
| Westfield San Francisco Centre Mortgaged Property | 185 |
| Westfield San Francisco Centre Non-Standalone Pari Passu Companion Loan | 185 |
| Westfield San Francisco Centre Noteholders | 185 |
| Westfield San Francisco Centre Pari Passu Companion Loans | 185 |
| Westfield San Francisco Centre Standalone Companion Loans | 185 |
460
| Westfield San Francisco Centre Standalone Pari Passu Companion Loans | 185 |
| Westfield San Francisco Centre Subordinate Companion Loan Holder | 186 |
| Westfield San Francisco Centre Subordinate Companion Loans | 185 |
| Westfield San Francisco Centre Whole Loan | 185 |
| Westfield Triggering Event of Default | 186 |
| WFCM 2016-BNK1 Certificate Administrator | 212 |
| WFCM 2016-BNK1 Depositor | 211 |
| WFCM 2016-BNK1 Directing Certificateholder | 213 |
| WFCM 2016-BNK1 Master Servicer | 211 |
| WFCM 2016-BNK1 Mortgage Trust | 212 |
| WFCM 2016-BNK1 Operating Advisor | 212 |
| WFCM 2016-BNK1 Pooling and Servicing Agreement | 212 |
| WFCM 2016-BNK1 Special Servicer | 211 |
| WFCM 2016-BNK1 Trustee | 212 |
| Whole Loan | 121, 171 |
| Withheld Amounts | 298 |
| Workout Fee | 308 |
| Workout-Delayed Reimbursement Amount | 296 |
461
[THIS PAGE INTENTIONALLY LEFT BLANK]
ANNEX A-1
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
AND MORTGAGED PROPERTIES
[THIS PAGE INTENTIONALLY LEFT BLANK]
CD 2016-CD1
ANNEX A-1 - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
| % of | Mortgage | Cut-off | General | Detailed | Interest | Original | Remaining | Original | ||||||||||
| Initial Pool | # of | Loan | Original | Date | Maturity | Property | Property | Interest | Administrative | Accrual | Term to | Term to | Amortization | |||||
| Property Flag | ID | Property Name | Balance | Properties | Seller(1) | Balance($)(2)(3) | Balance($)(2)(3) | or ARD Balance($) | Type(5) | Type | Rate(6) | Fee Rate(7) | Basis | Maturity or ARD | Maturity or ARD | Term | ||
| Loan | 1 | 10 Hudson Yards(34)(35) | 9.2% | 1 | GACC | 65,000,000 | 65,000,000 | 65,000,000 | Office | CBD | 2.9833333% | 0.0128% | Actual/360 | 120 | 120 | 0 | ||
| Loan | 2 | Fiserv at 2900 Westside | 9.2% | 1 | GACC | 65,000,000 | 65,000,000 | 56,242,952 | Office | Suburban | 4.01000% | 0.0184% | Actual/360 | 120 | 120 | 360 | ||
| Loan | 3 | Westfield San Francisco Centre(34) | 8.5% | 1 | GACC | 60,000,000 | 60,000,000 | 60,000,000 | Mixed Use | Super Regional Mall / Office | 3.39400% | 0.0128% | Actual/360 | 120 | 120 | 0 | ||
| Loan | 4 | Prudential Plaza(34)(36) | 7.1% | 1 | GACC | 50,000,000 | 50,000,000 | 44,884,307 | Office | CBD | 4.61000% | 0.0140% | Actual/360 | 120 | 108 | 360 | ||
| Loan | 5 | U-Haul AREC Portfolio(34) | 6.9% | 23 | GACC | 48,500,000 | 48,500,000 | 34,525,465 | Self Storage | Self Storage | 3.72000% | 0.0225% | Actual/360 | 120 | 120 | 300 | ||
| Property | 5.01 | U-Haul N Miami Beach | 0.7% | 1 | GACC | 4,572,368 | 4,572,368 | Self Storage | Self Storage | |||||||||
| Property | 5.02 | U-Haul Moving & Storage At Oso Blanca | 0.5% | 1 | GACC | 3,429,275 | 3,429,275 | Self Storage | Self Storage | |||||||||
| Property | 5.03 | U-Haul Moving & Storage Of Spring Valley | 0.4% | 1 | GACC | 3,013,606 | 3,013,606 | Self Storage | Self Storage | |||||||||
| Property | 5.04 | U-Haul Moving & Storage Of North Brunswick | 0.4% | 1 | GACC | 2,909,688 | 2,909,688 | Self Storage | Self Storage | |||||||||
| Property | 5.05 | U-Haul Moving & Storage Of Marlboro | 0.4% | 1 | GACC | 2,840,410 | 2,840,410 | Self Storage | Self Storage | |||||||||
| Property | 5.06 | U-Haul Moving & Storage Of Forestville Rd | 0.4% | 1 | GACC | 2,805,771 | 2,805,771 | Self Storage | Self Storage | |||||||||
| Property | 5.07 | U-Haul Moving & Storage Of Casa Grande | 0.4% | 1 | GACC | 2,667,214 | 2,667,214 | Self Storage | Self Storage | |||||||||
| Property | 5.08 | U-Haul Moving & Storage Of East Brunswick | 0.3% | 1 | GACC | 2,424,740 | 2,424,740 | Self Storage | Self Storage | |||||||||
| Property | 5.09 | U-Haul Coeur D Alene | 0.3% | 1 | GACC | 2,251,544 | 2,251,544 | Self Storage | Self Storage | |||||||||
| Property | 5.10 | U-Haul Moving & Storage At W Lake Mead Blvd | 0.3% | 1 | GACC | 2,182,266 | 2,182,266 | Self Storage | Self Storage | |||||||||
| Property | 5.11 | U-Haul Moving & Storage Of Little River | 0.3% | 1 | GACC | 2,043,709 | 2,043,709 | Self Storage | Self Storage | |||||||||
| Property | 5.12 | U-Haul Moving & Storage At Hwy 13 & Portland Ave | 0.3% | 1 | GACC | 1,929,400 | 1,929,400 | Self Storage | Self Storage | |||||||||
| Property | 5.13 | U-Haul Storage Of Cumming | 0.3% | 1 | GACC | 1,870,514 | 1,870,514 | Self Storage | Self Storage | |||||||||
| Property | 5.14 | U-Haul Moving & Storage Of Haines City | 0.3% | 1 | GACC | 1,856,658 | 1,856,658 | Self Storage | Self Storage | |||||||||
| Property | 5.15 | U-Haul Storage Of Downtown | 0.3% | 1 | GACC | 1,790,844 | 1,790,844 | Self Storage | Self Storage | |||||||||
| Property | 5.16 | U-Haul Moving & Storage Of Salisbury | 0.3% | 1 | GACC | 1,770,060 | 1,770,060 | Self Storage | Self Storage | |||||||||
| Property | 5.17 | U-Haul Center Dade County | 0.2% | 1 | GACC | 1,628,040 | 1,628,040 | Self Storage | Self Storage | |||||||||
| Property | 5.18 | U-Haul Moving & Storage Of Historic Ybor City | 0.2% | 1 | GACC | 1,233,154 | 1,233,154 | Self Storage | Self Storage | |||||||||
| Property | 5.19 | U-Haul Of Stone Mountain | 0.2% | 1 | GACC | 1,203,710 | 1,203,710 | Self Storage | Self Storage | |||||||||
| Property | 5.20 | U-Haul Moving & Storage Of Cedar Rapids | 0.2% | 1 | GACC | 1,098,061 | 1,098,061 | Self Storage | Self Storage | |||||||||
| Property | 5.21 | U-Haul Center North Irby St | 0.1% | 1 | GACC | 1,004,535 | 1,004,535 | Self Storage | Self Storage | |||||||||
| Property | 5.22 | U-Haul Moving And Storage Of West Warner Robins | 0.1% | 1 | GACC | 1,004,535 | 1,004,535 | Self Storage | Self Storage | |||||||||
| Property | 5.23 | U-Haul 36th Street | 0.1% | 1 | GACC | 969,896 | 969,896 | Self Storage | Self Storage | |||||||||
| Loan | 6 | Birch Run Premium Outlets(34) | 6.1% | 1 | GACC | 43,000,000 | 43,000,000 | 43,000,000 | Retail | Anchored | 4.20900% | 0.0128% | Actual/360 | 120 | 114 | 0 | ||
| Loan | 7 | Hall Office Park 16 | 6.0% | 1 | GACC | 42,000,000 | 42,000,000 | 33,456,919 | Office | Suburban | 4.08000% | 0.0184% | Actual/360 | 120 | 120 | 360 | ||
| Loan | 8 | Gas Company Tower & World Trade Center Parking Garage(34)(35) | 5.7% | 1 | GACC | 40,000,000 | 40,000,000 | 40,000,000 | Mixed Use | Office/Parking | 3.47270% | 0.0128% | Actual/360 | 60 | 60 | 0 | ||
| Loan | 9 | Vertex Pharmaceuticals HQ(34)(35) | 4.3% | 1 | CGMRC | 30,000,000 | 30,000,000 | 30,000,000 | Office | CBD | 2.79817647% | 0.0140% | Actual/360 | 120 | 120 | 0 | ||
| Loan | 10 | 60 East 55th Street | 3.6% | 1 | CGMRC | 25,000,000 | 25,000,000 | 20,049,630 | Mixed Use | Office/Retail | 4.27000% | 0.0184% | Actual/360 | 120 | 120 | 360 | ||
| Loan | 11 | Embassy Suites Columbus | 3.3% | 1 | GACC | 23,000,000 | 23,000,000 | 19,924,646 | Hospitality | Full Service | 5.05000% | 0.0184% | Actual/360 | 120 | 113 | 360 | ||
| Loan | 12 | Columbia Gorge Premium Outlets | 3.0% | 1 | GACC | 21,350,000 | 21,350,000 | 18,696,498 | Retail | Anchored | 4.52000% | 0.0184% | Actual/360 | 120 | 114 | 360 | ||
| Loan | 13 | Hilton Garden Inn San Leandro | 2.9% | 1 | CGMRC | 20,275,000 | 20,275,000 | 17,432,348 | Hospitality | Full Service | 4.75000% | 0.0184% | Actual/360 | 120 | 119 | 360 | ||
| Loan | 14 | Deerbrook Commons | 2.4% | 1 | GACC | 17,000,000 | 17,000,000 | 14,808,678 | Retail | Anchored | 4.29000% | 0.0484% | Actual/360 | 120 | 110 | 360 | ||
| Loan | 15 | 401 South State Street(34)(35)(36) | 2.2% | 1 | CGMRC | 15,760,000 | 15,742,454 | 12,871,725 | Office | CBD | 4.80000% | 0.0140% | Actual/360 | 120 | 119 | 360 | ||
| Loan | 16 | Oxford Glen Apartments | 2.2% | 1 | GACC | 15,500,000 | 15,482,942 | 12,680,451 | Multifamily | Garden | 4.85000% | 0.0184% | Actual/360 | 120 | 119 | 360 | ||
| Loan | 17 | NY Rite Aid Portfolio | 1.7% | 4 | CGMRC | 11,950,830 | 11,950,830 | 10,248,370 | Retail | Single Tenant | 4.65000% | 0.0184% | Actual/360 | 120 | 119 | 360 | ||
| Property | 17.01 | Rite Aid - Batavia, NY | 0.5% | 1 | CGMRC | 3,387,489 | 3,387,489 | Retail | Single Tenant | |||||||||
| Property | 17.02 | Rite Aid - West Seneca, NY | 0.5% | 1 | CGMRC | 3,185,236 | 3,185,236 | Retail | Single Tenant | |||||||||
| Property | 17.03 | Rite Aid - Cheektowaga | 0.4% | 1 | CGMRC | 2,816,485 | 2,816,485 | Retail | Single Tenant | |||||||||
| Property | 17.04 | Rite Aid - Greece, NY | 0.4% | 1 | CGMRC | 2,561,620 | 2,561,620 | Retail | Single Tenant | |||||||||
| Loan | 18 | Kahana Retail(36) | 1.7% | 1 | GACC | 11,900,000 | 11,900,000 | 9,954,003 | Retail | Shadow Anchored | 4.69000% | 0.0184% | Actual/360 | 120 | 113 | 360 | ||
| Loan | 19 | 465 Columbus Ave | 1.6% | 1 | GACC | 11,500,000 | 11,500,000 | 9,296,868 | Office | Suburban | 4.50000% | 0.0184% | Actual/360 | 120 | 120 | 360 | ||
| Loan | 20 | Shoppes at Vickery Village | 1.5% | 1 | CGMRC | 10,687,500 | 10,675,464 | 8,714,261 | Mixed Use | Office/Retail | 4.75000% | 0.0184% | Actual/360 | 120 | 119 | 360 | ||
| Loan | 21 | San Marin Shopping Center(36) | 1.3% | 1 | GACC | 9,300,000 | 9,300,000 | 8,288,337 | Retail | Anchored | 4.25000% | 0.0184% | Actual/360 | 120 | 119 | 360 | ||
| Loan | 22 | Mapletree Gardens | 1.3% | 1 | GACC | 8,950,000 | 8,950,000 | 7,798,680 | Multifamily | Garden | 4.30000% | 0.0184% | Actual/360 | 120 | 119 | 360 | ||
| Loan | 23 | North Pacific Plaza | 1.2% | 1 | GACC | 8,500,000 | 8,500,000 | 6,847,907 | Office | CBD | 4.40000% | 0.0584% | Actual/360 | 120 | 120 | 360 | ||
| Loan | 24 | Altmonte Apartments | 1.0% | 1 | GACC | 7,100,000 | 7,100,000 | 5,778,987 | Multifamily | Garden | 4.70000% | 0.0184% | Actual/360 | 120 | 120 | 360 | ||
| Loan | 25 | Fourth & Milliken | 1.0% | 1 | GACC | 6,800,000 | 6,800,000 | 5,948,913 | Retail | Unanchored | 4.47000% | 0.0859% | Actual/360 | 120 | 119 | 360 | ||
| Loan | 26 | Holiday Inn Express Cocoa Beach | 0.9% | 1 | GACC | 6,100,000 | 6,100,000 | 4,986,681 | Hospitality | Limited Service | 4.83000% | 0.0184% | Actual/360 | 120 | 120 | 360 | ||
| Loan | 27 | Huntington Park | 0.8% | 1 | GACC | 5,900,000 | 5,900,000 | 4,810,328 | Multifamily | Garden | 4.75000% | 0.0184% | Actual/360 | 120 | 120 | 360 | ||
| Loan | 28 | Hampton Inn Eugene | 0.8% | 1 | GACC | 5,670,000 | 5,663,303 | 4,590,365 | Hospitality | Limited Service | 4.54000% | 0.0184% | Actual/360 | 120 | 119 | 360 | ||
| Loan | 29 | National Self Storage Portfolio | 0.7% | 2 | GACC | 5,000,000 | 4,994,265 | 4,065,883 | Self Storage | Self Storage | 4.67000% | 0.0959% | Actual/360 | 120 | 119 | 360 | ||
| Property | 29.01 | Joe Battle | 0.4% | 1 | GACC | 3,000,000 | 2,996,559 | Self Storage | Self Storage | |||||||||
| Property | 29.02 | North Kenazo | 0.3% | 1 | GACC | 2,000,000 | 1,997,706 | Self Storage | Self Storage | |||||||||
| Loan | 30 | Shady Haven MHC | 0.7% | 1 | GACC | 4,600,000 | 4,600,000 | 3,712,348 | Manufactured Housing Community | Manufactured Housing Community | 4.45000% | 0.0184% | Actual/360 | 120 | 120 | 360 | ||
| Loan | 31 | Emporia Marketplace | 0.6% | 1 | CGMRC | 4,165,000 | 4,160,729 | 3,440,930 | Retail | Anchored | 5.15000% | 0.1159% | Actual/360 | 120 | 119 | 360 | ||
| Loan | 32 | Fresenius Medical Center Summit | 0.5% | 1 | CGMRC | 3,775,000 | 3,775,000 | 2,907,484 | Office | Medical | 4.60000% | 0.0184% | Actual/360 | 120 | 120 | 324 |
A-1-1
CD 2016-CD1
ANNEX A-1 - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
| Pari Passu | Pari Passu | |||||||||||||||||
| Remaining | First | Monthly | Annual | Companion Loan | Companion Loan | Remaining | Crossed | |||||||||||
| Amortization | Origination | Payment | Maturity | ARD Loan | Final | Debt | Debt | Monthly Debt | Annual Debt | Interest Only | Cash | With | Related | Underwritten | ||||
| Property Flag | ID | Property Name | Term | Date | Date | or ARD Date | (Yes/No) | Maturity Date | Service($)(8) | Service($)(8) | Service($) | Service($) | Period | Lockbox(9) | Management(10) | Other Loans | Borrower | NOI DSCR(8)(11)(12) |
| Loan | 1 | 10 Hudson Yards(34)(35) | 0 | 08/01/2016 | 09/06/2016 | 08/06/2026 | No | 08/06/2026 | 163,842 | 1,966,100 | 1,621,024 | 19,452,286 | 120 | Hard | Springing | No | 4.27x | |
| Loan | 2 | Fiserv at 2900 Westside | 360 | 07/22/2016 | 09/06/2016 | 08/06/2026 | No | 08/06/2026 | 310,695 | 3,728,337 | 36 | Hard | In Place | No | 1.66x | |||
| Loan | 3 | Westfield San Francisco Centre(34) | 0 | 07/11/2016 | 09/01/2016 | 08/01/2026 | No | 08/01/2026 | 172,057 | 2,064,683 | 1,069,841 | 12,838,098 | 120 | Hard | Springing | No | 3.79x | |
| Loan | 4 | Prudential Plaza(34)(36) | 360 | 07/30/2015 | 09/06/2015 | 08/06/2025 | No | 08/06/2025 | 256,621 | 3,079,453 | 1,873,334 | 22,480,007 | 36 | Hard | In Place | No | 1.46x | |
| Loan | 5 | U-Haul AREC Portfolio(34) | 300 | 07/07/2016 | 09/06/2016 | 08/06/2026 | Yes | 08/06/2036 | 248,562 | 2,982,749 | 235,750 | 2,828,999 | Soft | Springing | No | 1.68x | ||
| Property | 5.01 | U-Haul N Miami Beach | ||||||||||||||||
| Property | 5.02 | U-Haul Moving & Storage At Oso Blanca | ||||||||||||||||
| Property | 5.03 | U-Haul Moving & Storage Of Spring Valley | ||||||||||||||||
| Property | 5.04 | U-Haul Moving & Storage Of North Brunswick | ||||||||||||||||
| Property | 5.05 | U-Haul Moving & Storage Of Marlboro | ||||||||||||||||
| Property | 5.06 | U-Haul Moving & Storage Of Forestville Rd | ||||||||||||||||
| Property | 5.07 | U-Haul Moving & Storage Of Casa Grande | ||||||||||||||||
| Property | 5.08 | U-Haul Moving & Storage Of East Brunswick | ||||||||||||||||
| Property | 5.09 | U-Haul Coeur D Alene | ||||||||||||||||
| Property | 5.10 | U-Haul Moving & Storage At W Lake Mead Blvd | ||||||||||||||||
| Property | 5.11 | U-Haul Moving & Storage Of Little River | ||||||||||||||||
| Property | 5.12 | U-Haul Moving & Storage At Hwy 13 & Portland Ave | ||||||||||||||||
| Property | 5.13 | U-Haul Storage Of Cumming | ||||||||||||||||
| Property | 5.14 | U-Haul Moving & Storage Of Haines City | ||||||||||||||||
| Property | 5.15 | U-Haul Storage Of Downtown | ||||||||||||||||
| Property | 5.16 | U-Haul Moving & Storage Of Salisbury | ||||||||||||||||
| Property | 5.17 | U-Haul Center Dade County | ||||||||||||||||
| Property | 5.18 | U-Haul Moving & Storage Of Historic Ybor City | ||||||||||||||||
| Property | 5.19 | U-Haul Of Stone Mountain | ||||||||||||||||
| Property | 5.20 | U-Haul Moving & Storage Of Cedar Rapids | ||||||||||||||||
| Property | 5.21 | U-Haul Center North Irby St | ||||||||||||||||
| Property | 5.22 | U-Haul Moving And Storage Of West Warner Robins | ||||||||||||||||
| Property | 5.23 | U-Haul 36th Street | ||||||||||||||||
| Loan | 6 | Birch Run Premium Outlets(34) | 0 | 01/07/2016 | 03/06/2016 | 02/06/2026 | No | 02/06/2026 | 152,917 | 1,835,007 | 284,497 | 3,413,967 | 114 | Hard | Springing | No | 3.10x | |
| Loan | 7 | Hall Office Park 16 | 360 | 07/22/2016 | 09/01/2016 | 08/01/2026 | No | 08/01/2026 | 202,456 | 2,429,476 | Hard | Springing | No | 1.53x | ||||
| Loan | 8 | Gas Company Tower & World Trade Center Parking Garage(34)(35) | 0 | 07/11/2016 | 09/06/2016 | 08/06/2021 | No | 08/06/2021 | 117,364 | 1,408,373 | 305,147 | 3,661,769 | 60 | Hard (Office); Soft (Parking Garage) | Springing (Office); Springing (Parking Garage) | No | 5.66x | |
| Loan | 9 | Vertex Pharmaceuticals HQ(34)(35) | 0 | 07/15/2016 | 09/06/2016 | 08/06/2026 | Yes | 11/06/2028 | 70,926 | 851,112 | 933,859 | 11,206,308 | 120 | Hard | Springing | No | 6.31x | |
| Loan | 10 | 60 East 55th Street | 360 | 07/19/2016 | 09/06/2016 | 08/06/2026 | No | 08/06/2026 | 123,278 | 1,479,334 | Hard | In Place | No | 1.50x | ||||
| Loan | 11 | Embassy Suites Columbus | 360 | 12/18/2015 | 02/06/2016 | 01/06/2026 | No | 01/06/2026 | 124,173 | 1,490,073 | 17 | Springing Hard | Springing | No | 2.22x | |||
| Loan | 12 | Columbia Gorge Premium Outlets | 360 | 01/07/2016 | 03/06/2016 | 02/06/2026 | No | 02/06/2026 | 108,431 | 1,301,174 | 30 | Springing Hard | Springing | No | 2.18x | |||
| Loan | 13 | Hilton Garden Inn San Leandro | 360 | 06/16/2016 | 08/06/2016 | 07/06/2026 | No | 07/06/2026 | 105,764 | 1,269,168 | 23 | Hard | Springing | No | 2.20x | |||
| Loan | 14 | Deerbrook Commons | 360 | 10/02/2015 | 11/06/2015 | 10/06/2025 | No | 10/06/2025 | 84,028 | 1,008,340 | 26 | Hard | Springing | No | 1.75x | |||
| Loan | 15 | 401 South State Street(34)(35)(36) | 359 | 06/10/2016 | 08/06/2016 | 07/06/2026 | No | 07/06/2026 | 82,687 | 992,247 | 167,893 | 2,014,715 | Hard | In Place | No | 1.82x | ||
| Loan | 16 | Oxford Glen Apartments | 359 | 07/06/2016 | 08/06/2016 | 07/06/2026 | No | 07/06/2026 | 81,792 | 981,507 | Springing Soft | Springing | No | 1.64x | ||||
| Loan | 17 | NY Rite Aid Portfolio | 360 | 06/23/2016 | 08/06/2016 | 07/06/2026 | No | 07/06/2026 | 61,623 | 739,475 | 23 | Hard | Springing | No | 1.42x | |||
| Property | 17.01 | Rite Aid - Batavia, NY | ||||||||||||||||
| Property | 17.02 | Rite Aid - West Seneca, NY | ||||||||||||||||
| Property | 17.03 | Rite Aid - Cheektowaga | ||||||||||||||||
| Property | 17.04 | Rite Aid - Greece, NY | ||||||||||||||||
| Loan | 18 | Kahana Retail(36) | 360 | 12/24/2015 | 02/06/2016 | 01/06/2026 | No | 01/06/2026 | 61,646 | 739,757 | 5 | Springing Hard | Springing | No | 1.40x | |||
| Loan | 19 | 465 Columbus Ave | 360 | 07/25/2016 | 09/06/2016 | 08/06/2026 | No | 08/06/2026 | 58,269 | 699,226 | Hard | Springing | No | 1.75x | ||||
| Loan | 20 | Shoppes at Vickery Village | 359 | 07/06/2016 | 08/06/2016 | 07/06/2026 | No | 07/06/2026 | 55,751 | 669,013 | Hard | Springing | No | 1.49x | ||||
| Loan | 21 | San Marin Shopping Center(36) | 360 | 07/06/2016 | 08/06/2016 | 07/06/2026 | No | 07/06/2026 | 45,750 | 549,005 | 47 | Hard | Springing | No | 1.52x | |||
| Loan | 22 | Mapletree Gardens | 360 | 07/06/2016 | 08/06/2016 | 07/06/2026 | No | 07/06/2026 | 44,291 | 531,492 | 35 | Springing Soft | Springing | No | 1.83x | |||
| Loan | 23 | North Pacific Plaza | 360 | 07/25/2016 | 09/06/2016 | 08/06/2026 | No | 08/06/2026 | 42,565 | 510,776 | Springing Hard | Springing | No | 1.45x | ||||
| Loan | 24 | Altmonte Apartments | 360 | 07/21/2016 | 09/06/2016 | 08/06/2026 | No | 08/06/2026 | 36,823 | 441,879 | NAP | NAP | No | 1.94x | ||||
| Loan | 25 | Fourth & Milliken | 360 | 07/01/2016 | 08/06/2016 | 07/06/2026 | No | 07/06/2026 | 34,334 | 412,002 | 35 | Springing Hard | Springing | No | 1.46x | |||
| Loan | 26 | Holiday Inn Express Cocoa Beach | 360 | 07/14/2016 | 09/06/2016 | 08/06/2026 | No | 08/06/2026 | 32,115 | 385,383 | Springing Hard | Springing | No | 2.54x | ||||
| Loan | 27 | Huntington Park | 360 | 07/27/2016 | 09/06/2016 | 08/06/2026 | No | 08/06/2026 | 30,777 | 369,326 | Soft | Springing | No | 1.56x | ||||
| Loan | 28 | Hampton Inn Eugene | 359 | 06/08/2016 | 08/06/2016 | 07/06/2026 | No | 07/06/2026 | 28,864 | 346,368 | Springing Hard | Springing | No | 2.85x | ||||
| Loan | 29 | National Self Storage Portfolio | 359 | 07/06/2016 | 08/06/2016 | 07/06/2026 | No | 07/06/2026 | 25,842 | 310,102 | Soft | Springing | No | 1.46x | ||||
| Property | 29.01 | Joe Battle | ||||||||||||||||
| Property | 29.02 | North Kenazo | ||||||||||||||||
| Loan | 30 | Shady Haven MHC | 360 | 07/19/2016 | 09/06/2016 | 08/06/2026 | No | 08/06/2026 | 23,171 | 278,053 | NAP | NAP | No | 1.38x | ||||
| Loan | 31 | Emporia Marketplace | 359 | 07/01/2016 | 08/06/2016 | 07/06/2026 | No | 07/06/2026 | 22,742 | 272,904 | Hard | Springing | No | 1.49x | ||||
| Loan | 32 | Fresenius Medical Center Summit | 324 | 07/13/2016 | 09/01/2016 | 08/01/2026 | No | 08/01/2026 | 20,367 | 244,403 | Springing Hard | Springing | No | 1.40x |
A-1-2
CD 2016-CD1
ANNEX A-1 - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
| FIRREA | Cut-Off | ||||||||||||||||
| Underwritten | Grace | Payment | Appraised | Appraisal | Compliant | Date LTV | LTV Ratio at | Year | Year | ||||||||
| Property Flag | ID | Property Name | NCF DSCR(8)(11)(12) | Period(13) | Date | Value ($)(14) | As-of Date | (Yes/No) | Ratio(11)(12)(14) | Maturity or ARD(11)(12)(14) | Address | City | County | State | Zip Code | Built | Renovated |
| Loan | 1 | 10 Hudson Yards(34)(35) | 4.18x | 0 | 6 | 2,150,000,000 | 07/01/2016 | Yes | 32.9% | 32.9% | 10 Hudson Yards | New York | New York | NY | 10001 | 2016 | NAP |
| Loan | 2 | Fiserv at 2900 Westside | 1.52x | 0 | 6 | 96,800,000 | 06/27/2016 | Yes | 67.1% | 58.1% | 2900 & 2950 Westside Parkway | Alpharetta | Fulton | GA | 30004 | 2001 | 2015 |
| Loan | 3 | Westfield San Francisco Centre(34) | 3.68x | 5 | 1 | 1,220,000,000 | 04/27/2016 | Yes | 35.5% | 35.5% | 865 Market Street | San Francisco | San Francisco | CA | 94103 | 1908, 1988 | 2006 |
| Loan | 4 | Prudential Plaza(34)(36) | 1.34x | 0 | 6 | 700,000,000 | 07/20/2016 | Yes | 59.3% | 53.2% | 130 East Randolph Street & 180 North Stetson Avenue | Chicago | Cook | IL | 60601 | 1955 | 1990, 2014-2015 |
| Loan | 5 | U-Haul AREC Portfolio(34) | 1.64x | 0 | 6 | 140,165,000 | Various | Yes | 67.4% | 48.0% | Various | Various | Various | Various | Various | Various | Various |
| Property | 5.01 | U-Haul N Miami Beach | 13,200,000 | 04/21/2016 | Yes | 2269 Northeast 163rd Street and 2100 Northeast 162nd Street | North Miami Beach | Miami-Dade | FL | 33160 and 33162 | 1963, 1972, 1985, 2001 | NAP | |||||
| Property | 5.02 | U-Haul Moving & Storage At Oso Blanca | 9,900,000 | 04/25/2016 | Yes | 8701 Oso Blanca Road | Las Vegas | Clark | NV | 89166 | 2009 | 2013 | |||||
| Property | 5.03 | U-Haul Moving & Storage Of Spring Valley | 8,700,000 | 04/25/2016 | Yes | 5220 South Jones Boulevard | Las Vegas | Clark | NV | 89118 | 1998 | 2013 | |||||
| Property | 5.04 | U-Haul Moving & Storage Of North Brunswick | 8,400,000 | 05/02/2016 | Yes | 1256 How Lane | North Brunswick | Middlesex | NJ | 08902 | 1988 | NAP | |||||
| Property | 5.05 | U-Haul Moving & Storage Of Marlboro | 8,200,000 | 05/02/2016 | Yes | 409 Highway 9 South | Englishtown | Monmouth | NJ | 07726 | 1988 | NAP | |||||
| Property | 5.06 | U-Haul Moving & Storage Of Forestville Rd | 8,100,000 | 04/26/2016 | Yes | 4014 Forestville Road | District Heights | Prince George’s | MD | 20747 | 2002 | NAP | |||||
| Property | 5.07 | U-Haul Moving & Storage Of Casa Grande | 7,700,000 | 04/26/2016 | Yes | 242 North Camino Mercado | Casa Grande | Pinal | AZ | 85122 | 2008 | NAP | |||||
| Property | 5.08 | U-Haul Moving & Storage Of East Brunswick | 7,000,000 | 05/02/2016 | Yes | 397 State Route 18 | East Brunswick | Middlesex | NJ | 08816 | 1993 | NAP | |||||
| Property | 5.09 | U-Haul Coeur D Alene | 6,600,000 | 04/26/2016 | Yes | 750 West Appleway Avenue | Coeur d’Alene | Kootenai | ID | 83814 | 1945, 1970, 2011 | NAP | |||||
| Property | 5.10 | U-Haul Moving & Storage At W Lake Mead Blvd | 6,300,000 | 04/25/2016 | Yes | 3083 West Lake Mead Boulevard | North Las Vegas | Clark | NV | 89032 | 2005 | 2014 | |||||
| Property | 5.11 | U-Haul Moving & Storage Of Little River | 5,900,000 | 04/21/2016 | Yes | 3195 Highway 9 East | Little River | Horry | SC | 29566 | 1996 | 2005 | |||||
| Property | 5.12 | U-Haul Moving & Storage At Hwy 13 & Portland Ave | 5,570,000 | 04/21/2016 | Yes | 12200 Portland Avenue | Burnsville | Dakota | MN | 55337 | 2008 | NAP | |||||
| Property | 5.13 | U-Haul Storage Of Cumming | 5,400,000 | 04/21/2016 | Yes | 3060 Keith Bridge Road | Cumming | Forsyth | GA | 30041 | 2007 | 2008 | |||||
| Property | 5.14 | U-Haul Moving & Storage Of Haines City | 5,360,000 | 04/28/2016 | Yes | 3307 US Highway 17-92 West | Haines City | Polk | FL | 33844 | 2007 | NAP | |||||
| Property | 5.15 | U-Haul Storage Of Downtown | 5,170,000 | 04/25/2016 | Yes | 400 West Ashley Street | Jacksonville | Duval | FL | 32202 | 1925 | 1996 | |||||
| Property | 5.16 | U-Haul Moving & Storage Of Salisbury | 5,110,000 | 04/20/2016 | Yes | 1326 & 1402 North Salisbury Boulevard | Salisbury | Wicomico | MD | 21801 | 1990, 2002, 2005 | NAP | |||||
| Property | 5.17 | U-Haul Center Dade County | 4,700,000 | 04/21/2016 | Yes | 5341 Northwest 7th Avenue | Miami | Miami-Dade | FL | 33127 | 1958 | NAP | |||||
| Property | 5.18 | U-Haul Moving & Storage Of Historic Ybor City | 3,560,000 | 04/27/2016 | Yes | 2309 Angel Oliva Senior Street | Tampa | Hillsborough | FL | 33605 | 1908 | 1976 | |||||
| Property | 5.19 | U-Haul Of Stone Mountain | 3,475,000 | 04/21/2016 | Yes | 4940 Memorial Drive | Stone Mountain | Dekalb | GA | 30083 | 1988 | 1990 | |||||
| Property | 5.20 | U-Haul Moving & Storage Of Cedar Rapids | 3,170,000 | 04/21/2016 | Yes | 1550 16th Avenue Southwest | Cedar Rapids | Linn | IA | 52404 | 1979 | 2015 | |||||
| Property | 5.21 | U-Haul Center North Irby St | 2,950,000 | 04/21/2016 | Yes | 369 North Irby Street | Florence | Florence | SC | 29501 | 1964 | 2012 | |||||
| Property | 5.22 | U-Haul Moving And Storage Of West Warner Robins | 2,900,000 | 04/21/2016 | Yes | 301 Robins West Parkway | Warner Robins | Houston | GA | 31088 | 1994 | 1996-2004 | |||||
| Property | 5.23 | U-Haul 36th Street | 2,800,000 | 04/21/2016 | Yes | 2460 Northwest 36th Street | Miami | Miami-Dade | FL | 33142 | 1965, 1995 | NAP | |||||
| Loan | 6 | Birch Run Premium Outlets(34) | 2.90x | 0 | 6 | 207,200,000 | 12/03/2015 | Yes | 59.4% | 59.4% | 12240 South Beyer Road | Birch Run | Saginaw | MI | 48415 | 1985 | 1986-1996, 2005, 2013 |
| Loan | 7 | Hall Office Park 16 | 1.41x | 5 | 1 | 56,130,017 | 06/30/2016 | Yes | 74.8% | 59.6% | 3001 Dallas Parkway | Frisco | Collin | TX | 75034 | 2014 | NAP |
| Loan | 8 | Gas Company Tower & World Trade Center Parking Garage(34)(35) | 5.23x | 0 | 6 | 611,000,000 | 06/21/2016 | Yes | 23.6% | 23.6% | 555 West Fifth Street; 350 South Figueroa Street | Los Angeles | Los Angeles | CA | 90013; 90071 | 1991 | 2010-2015 |
| Loan | 9 | Vertex Pharmaceuticals HQ(34)(35) | 6.28x | 0 | 6 | 1,198,000,000 | 06/03/2016 | Yes | 35.5% | 35.5% | 50 Northern Avenue & 11 Fan Pier Boulevard | Boston | Suffolk | MA | 02110 | 2013 | NAP |
| Loan | 10 | 60 East 55th Street | 1.40x | 0 | 6 | 55,000,000 | 06/01/2016 | Yes | 45.5% | 36.5% | 60 East 55th Street | New York | New York | NY | 10022 | 2005 | NAP |
| Loan | 11 | Embassy Suites Columbus | 1.95x | 0 | 6 | 33,900,000 | 10/27/2015 | Yes | 67.8% | 58.8% | 2886 Airport Drive | Columbus | Franklin | OH | 43219 | 2009 | 2013 |
| Loan | 12 | Columbia Gorge Premium Outlets | 2.08x | 0 | 6 | 29,500,000 | 12/04/2015 | Yes | 72.4% | 63.4% | 450 Northwest 257th Way | Troutdale | Multnomah | OR | 97060 | 1991, 1994 | NAP |
| Loan | 13 | Hilton Garden Inn San Leandro | 1.99x | 0 | 6 | 34,300,000 | 04/27/2017 | Yes | 59.1% | 50.8% | 510 Lewelling Boulevard | San Leandro | Alameda | CA | 94579 | 2002 | NAP |
| Loan | 14 | Deerbrook Commons | 1.54x | 0 | 6 | 24,490,000 | 07/19/2016 | Yes | 69.4% | 60.5% | 9638 FM 1960 Bypass West | Humble | Harris | TX | 77338 | 1984 | NAP |
| Loan | 15 | 401 South State Street(34)(35)(36) | 1.59x | 0 | 6 | 76,500,000 | 05/18/2016 | Yes | 62.4% | 51.0% | 401 South State Street & 418 South Wabash Street | Chicago | Cook | IL | 60605 | 1892, 1983 | 2012, 2014 |
| Loan | 16 | Oxford Glen Apartments | 1.50x | 0 | 6 | 22,400,000 | 05/19/2016 | Yes | 69.1% | 56.6% | 1424 Sycamore Drive | Augusta | Richmond | GA | 30909 | 1949, 1969 | 2005-2006 |
| Loan | 17 | NY Rite Aid Portfolio | 1.35x | 0 | 6 | 16,600,000 | Various | Yes | 72.0% | 61.7% | Various | Various | Various | NY | Various | Various | Various |
| Property | 17.01 | Rite Aid - Batavia, NY | 4,700,000 | 06/16/2016 | Yes | 4155 West Main Road | Batavia | Genesee | NY | 14020 | 2001 | NAP | |||||
| Property | 17.02 | Rite Aid - West Seneca, NY | 4,400,000 | 06/16/2016 | Yes | 1454 Union Road | West Seneca | Erie | NY | 14224 | 2000 | NAP | |||||
| Property | 17.03 | Rite Aid - Cheektowaga | 3,900,000 | 06/15/2016 | Yes | 2561 Union Road | Cheektowaga | Erie | NY | 14227 | 1999 | NAP | |||||
| Property | 17.04 | Rite Aid - Greece, NY | 3,600,000 | 06/16/2016 | Yes | 4433 Dewey Avenue | Greece | Monroe | NY | 14616 | 1999 | NAP | |||||
| Loan | 18 | Kahana Retail(36) | 1.34x | 0 | 6 | 17,200,000 | 11/01/2015 | Yes | 69.2% | 57.9% | 4405 Honoapiilani Highway | Lahaina | Maui | HI | 96761 | 1990 | NAP |
| Loan | 19 | 465 Columbus Ave | 1.39x | 0 | 6 | 17,500,000 | 05/20/2016 | Yes | 65.7% | 53.1% | 465 Columbus Ave | Valhalla | Westchester | NY | 10595 | 1986 | 2015 |
| Loan | 20 | Shoppes at Vickery Village | 1.35x | 0 | 6 | 15,450,000 | 04/25/2016 | Yes | 69.1% | 56.4% | 5820, 5830, 5860 Clarion Street; 5802-5854 Vickery Street | Cumming | Forsyth | GA | 30040 | 2006 | NAP |
| Loan | 21 | San Marin Shopping Center(36) | 1.37x | 0 | 6 | 14,500,000 | 06/06/2016 | Yes | 64.1% | 57.2% | 199 San Marin Drive | Novato | Marin | CA | 94945 | 1981 | 2000 |
| Loan | 22 | Mapletree Gardens | 1.72x | 0 | 6 | 12,800,000 | 06/06/2016 | Yes | 69.9% | 60.9% | 6050 Glenmont Drive | Houston | Harris | TX | 77081 | 1971 | 2015-2016 |
| Loan | 23 | North Pacific Plaza | 1.33x | 0 | 6 | 11,400,000 | 06/27/2016 | Yes | 74.6% | 60.1% | 1675 Southwest Marlow Avenue | Portland | Washington | OR | 97225 | 1972 | 2005 |
| Loan | 24 | Altmonte Apartments | 1.78x | 0 | 6 | 11,210,000 | 05/05/2016 | Yes | 63.3% | 51.6% | 10925 Beamer Road | Houston | Harris | TX | 77089 | 1981-1982 | 2011, 2015 |
| Loan | 25 | Fourth & Milliken | 1.40x | 0 | 6 | 10,300,000 | 06/07/2016 | Yes | 66.0% | 57.8% | 9638, 9640, 9668 Milliken Avenue & 11226 Fourth Street | Rancho Cucamonga | San Bernardino | CA | 91730 | 2007 | NAP |
| Loan | 26 | Holiday Inn Express Cocoa Beach | 2.31x | 0 | 6 | 10,200,000 | 06/15/2016 | Yes | 59.8% | 48.9% | 5575 North Atlantic Avenue | Cocoa Beach | Brevard | FL | 32931 | 2000 | 2010 |
| Loan | 27 | Huntington Park | 1.45x | 0 | 6 | 8,700,000 | 05/01/2017 | Yes | 67.8% | 55.3% | 7019 Crowder Boulevard | New Orleans | Orleans | LA | 70127 | 1973 | 2014-2016 |
| Loan | 28 | Hampton Inn Eugene | 2.57x | 0 | 6 | 8,600,000 | 05/23/2017 | Yes | 65.9% | 53.4% | 3780 West 11th Avenue | Eugene | Lane | OR | 97402 | 2000 | 2016 |
| Loan | 29 | National Self Storage Portfolio | 1.42x | 0 | 6 | 7,700,000 | 06/06/2016 | Yes | 64.9% | 52.8% | Various | Various | El Paso | TX | 79938 | 2004 | NAP |
| Property | 29.01 | Joe Battle | 4,575,000 | 06/06/2016 | Yes | 3070 Joe Battle Boulevard | El Paso | El Paso | TX | 79938 | 2004 | NAP | |||||
| Property | 29.02 | North Kenazo | 3,125,000 | 06/06/2016 | Yes | 490 North Kenazo Avenue | Horizon City | El Paso | TX | 79928 | 2004 | NAP | |||||
| Loan | 30 | Shady Haven MHC | 1.36x | 0 | 6 | 6,600,000 | 06/06/2016 | Yes | 69.7% | 56.2% | 150 Old Englewood Road | Englewood | Sarasota | FL | 34223 | 1953 | 1980, 2015 |
| Loan | 31 | Emporia Marketplace | 1.25x | 0 | 6 | 5,750,000 | 04/25/2016 | Yes | 72.4% | 59.8% | 200-280 Market Drive | Emporia | Greensville | VA | 23847 | 1995 | NAP |
| Loan | 32 | Fresenius Medical Center Summit | 1.37x | 5 | 1 | 5,590,000 | 05/06/2016 | Yes | 67.5% | 52.0% | 7320 Archer Avenue | Summit Argo | Cook | IL | 60501 | 2016 | NAP |
A-1-3
CD 2016-CD1
ANNEX A-1 - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
| Net | Loan per Net | ||||||||||||||||
| Rentable Area | Units | Rentable Area | Second Most | Second | Second | Second | Third Most | Third | |||||||||
| (SF/Units | of | (SF/Units/ | Prepayment Provisions | Most Recent Operating | Most Recent | Most Recent | Most Recent | Recent Operating | Most Recent | Most Recent | Most Recent | Recent Operating | Most Recent | ||||
| Property Flag | ID | Property Name | Rooms/Pads)(4) | Measure | Rooms/Pads) ($)(11)(12) | (# of payments)(15)(16)(17) | Statements Date | EGI ($) | Expenses($) | NOI($) | Statements Date | EGI($) | Expenses($) | NOI($) | Statements Date | EGI($) | |
| Loan | 1 | 10 Hudson Yards(34)(35) | 1,813,465 | Sq. Ft. | 390 | L(24), D(91), O(5) | |||||||||||
| Loan | 2 | Fiserv at 2900 Westside | 376,351 | Sq. Ft. | 173 | L(24), D(91), O(5) | |||||||||||
| Loan | 3 | Westfield San Francisco Centre(34) | 794,521 | Sq. Ft. | 545 | L(24), DorYM1(92), O(4) | T-12 3/31/2016 | 90,654,772 | 38,690,784 | 51,963,988 | 12/31/2015 | 88,603,550 | 37,649,371 | 50,954,179 | 12/31/2014 | 84,621,362 | |
| Loan | 4 | Prudential Plaza(34)(36) | 2,269,388 | Sq. Ft. | 183 | L(35), D(79), O(6) | T-12 5/31/2016 | 55,679,248 | 32,297,197 | 23,382,051 | 12/31/2015 | 53,321,676 | 32,167,828 | 21,153,848 | 12/31/2014 | 50,276,294 | |
| Loan | 5 | U-Haul AREC Portfolio(34) | 1,223,463 | Sq. Ft. | 77 | L(24), D(92), O(4) | T-12 5/31/2016 | 13,451,784 | 3,610,425 | 9,841,358 | 12/31/2015 | 11,127,291 | 3,411,829 | 7,715,462 | 12/31/2014 | 6,997,361 | |
| Property | 5.01 | U-Haul N Miami Beach | 60,678 | Sq. Ft. | 147 | T-12 5/31/2016 | 1,180,965 | 293,877 | 887,088 | ||||||||
| Property | 5.02 | U-Haul Moving & Storage At Oso Blanca | 77,735 | Sq. Ft. | 86 | T-12 5/31/2016 | 815,732 | 154,516 | 661,216 | ||||||||
| Property | 5.03 | U-Haul Moving & Storage Of Spring Valley | 60,090 | Sq. Ft. | 98 | T-12 5/31/2016 | 764,647 | 145,476 | 619,171 | ||||||||
| Property | 5.04 | U-Haul Moving & Storage Of North Brunswick | 65,995 | Sq. Ft. | 86 | T-12 5/31/2016 | 828,184 | 221,993 | 606,191 | ||||||||
| Property | 5.05 | U-Haul Moving & Storage Of Marlboro | 61,420 | Sq. Ft. | 90 | T-12 5/31/2016 | 852,878 | 275,666 | 577,212 | ||||||||
| Property | 5.06 | U-Haul Moving & Storage Of Forestville Rd | 37,414 | Sq. Ft. | 146 | T-12 5/31/2016 | 635,266 | 135,842 | 499,424 | ||||||||
| Property | 5.07 | U-Haul Moving & Storage Of Casa Grande | 85,998 | Sq. Ft. | 60 | T-12 5/31/2016 | 598,139 | 185,501 | 412,637 | ||||||||
| Property | 5.08 | U-Haul Moving & Storage Of East Brunswick | 39,884 | Sq. Ft. | 118 | T-12 5/31/2016 | 736,818 | 250,565 | 486,254 | ||||||||
| Property | 5.09 | U-Haul Coeur D Alene | 67,895 | Sq. Ft. | 65 | T-12 5/31/2016 | 692,957 | 180,378 | 512,579 | ||||||||
| Property | 5.10 | U-Haul Moving & Storage At W Lake Mead Blvd | 76,475 | Sq. Ft. | 56 | T-12 5/31/2016 | 570,501 | 138,545 | 431,956 | ||||||||
| Property | 5.11 | U-Haul Moving & Storage Of Little River | 82,049 | Sq. Ft. | 49 | T-12 5/31/2016 | 603,691 | 146,756 | 456,935 | ||||||||
| Property | 5.12 | U-Haul Moving & Storage At Hwy 13 & Portland Ave | 47,507 | Sq. Ft. | 79 | T-12 5/31/2016 | 506,657 | 167,675 | 338,982 | ||||||||
| Property | 5.13 | U-Haul Storage Of Cumming | 60,475 | Sq. Ft. | 60 | T-12 5/31/2016 | 502,960 | 122,406 | 380,554 | ||||||||
| Property | 5.14 | U-Haul Moving & Storage Of Haines City | 57,390 | Sq. Ft. | 63 | T-12 5/31/2016 | 476,601 | 119,124 | 357,477 | ||||||||
| Property | 5.15 | U-Haul Storage Of Downtown | 46,773 | Sq. Ft. | 75 | T-12 5/31/2016 | 526,003 | 144,703 | 381,299 | ||||||||
| Property | 5.16 | U-Haul Moving & Storage Of Salisbury | 66,545 | Sq. Ft. | 52 | T-12 5/31/2016 | 597,232 | 142,990 | 454,242 | ||||||||
| Property | 5.17 | U-Haul Center Dade County | 10,600 | Sq. Ft. | 299 | T-12 5/31/2016 | 391,993 | 105,906 | 286,088 | ||||||||
| Property | 5.18 | U-Haul Moving & Storage Of Historic Ybor City | 19,719 | Sq. Ft. | 122 | T-12 5/31/2016 | 377,305 | 122,589 | 254,716 | ||||||||
| Property | 5.19 | U-Haul Of Stone Mountain | 39,640 | Sq. Ft. | 59 | T-12 5/31/2016 | 396,283 | 121,966 | 274,317 | ||||||||
| Property | 5.20 | U-Haul Moving & Storage Of Cedar Rapids | 60,000 | Sq. Ft. | 36 | T-12 5/31/2016 | 387,858 | 118,220 | 269,637 | ||||||||
| Property | 5.21 | U-Haul Center North Irby St | 27,068 | Sq. Ft. | 72 | T-12 5/31/2016 | 347,411 | 118,865 | 228,545 | ||||||||
| Property | 5.22 | U-Haul Moving And Storage Of West Warner Robins | 59,025 | Sq. Ft. | 33 | T-12 5/31/2016 | 305,193 | 90,119 | 215,074 | ||||||||
| Property | 5.23 | U-Haul 36th Street | 13,088 | Sq. Ft. | 144 | T-12 5/31/2016 | 356,510 | 106,747 | 249,762 | ||||||||
| Loan | 6 | Birch Run Premium Outlets(34) | 680,003 | Sq. Ft. | 181 | L(30), D(83), O(7) | T-12 5/31/2016 | 21,289,560 | 4,748,954 | 16,540,606 | 12/31/2015 | 21,147,973 | 4,671,555 | 16,476,418 | 12/31/2014 | 20,299,152 | |
| Loan | 7 | Hall Office Park 16 | 194,133 | Sq. Ft. | 216 | L(24), D(90), O(6) | |||||||||||
| Loan | 8 | Gas Company Tower & World Trade Center Parking Garage(34)(35) | 1,372,329 | Sq. Ft. | 105 | L(12), YM1(43), O(5) | T-12 5/31/2016 | 44,148,529 | 22,301,374 | 21,847,155 | 12/31/2015 | 42,670,504 | 21,835,684 | 20,834,820 | 12/31/2014 | 37,477,863 | |
| Loan | 9 | Vertex Pharmaceuticals HQ(34)(35) | 1,133,723 | Sq. Ft. | 375 | L(24), DorYM0.5(89), O(7) | 12/31/2015 | 88,180,123 | 17,255,195 | 70,924,928 | 12/31/2014 | 54,061,350 | 10,133,318 | 43,928,033 | |||
| Loan | 10 | 60 East 55th Street | 36,928 | Sq. Ft. | 677 | L(24), D(92), O(4) | T-12 6/30/2016 | 2,809,833 | 840,834 | 1,968,999 | 12/31/2015 | 2,585,393 | 888,310 | 1,697,084 | 12/31/2014 | 2,423,796 | |
| Loan | 11 | Embassy Suites Columbus | 198 | Rooms | 116,162 | L(31), D(85), O(4) | T-12 5/31/2016 | 10,217,593 | 6,882,227 | 3,335,366 | 12/31/2015 | 10,148,074 | 6,748,560 | 3,399,514 | 12/31/2014 | 8,738,876 | |
| Loan | 12 | Columbia Gorge Premium Outlets | 164,227 | Sq. Ft. | 130 | L(30), D(86), O(4) | 12/31/2015 | 4,595,111 | 1,440,458 | 3,154,653 | 12/31/2014 | 4,226,662 | 1,436,562 | 2,790,100 | 12/31/2013 | 4,225,390 | |
| Loan | 13 | Hilton Garden Inn San Leandro | 119 | Rooms | 170,378 | L(25), D(91), O(4) | T-12 4/30/2016 | 6,748,519 | 3,605,557 | 3,142,962 | 12/31/2015 | 6,531,291 | 3,775,236 | 2,756,055 | 12/31/2014 | 5,623,624 | |
| Loan | 14 | Deerbrook Commons | 180,631 | Sq. Ft. | 94 | L(34), D(82), O(4) | T-12 6/30/2016 | 2,713,430 | 575,309 | 2,138,121 | 12/31/2015 | 2,463,215 | 725,409 | 1,737,806 | 12/31/2014 | 2,315,065 | |
| Loan | 15 | 401 South State Street(34)(35)(36) | 487,022 | Sq. Ft. | 98 | L(25), YM1(91), O(4) | T-12 4/30/2016 | 10,766,431 | 5,700,668 | 5,065,763 | 12/31/2015 | 10,728,163 | 5,700,453 | 5,027,710 | 12/31/2014 | 11,014,375 | |
| Loan | 16 | Oxford Glen Apartments | 496 | Units | 31,216 | L(25), D(91), O(4) | T-12 4/30/2016 | 2,854,039 | 842,792 | 2,011,247 | 12/31/2015 | 2,885,297 | 883,112 | 2,002,185 | 12/31/2014 | 2,601,619 | |
| Loan | 17 | NY Rite Aid Portfolio | 45,462 | Sq. Ft. | 263 | L(25), D(92), O(3) | |||||||||||
| Property | 17.01 | Rite Aid - Batavia, NY | 12,738 | Sq. Ft. | 266 | ||||||||||||
| Property | 17.02 | Rite Aid - West Seneca, NY | 10,908 | Sq. Ft. | 292 | ||||||||||||
| Property | 17.03 | Rite Aid - Cheektowaga | 10,908 | Sq. Ft. | 258 | ||||||||||||
| Property | 17.04 | Rite Aid - Greece, NY | 10,908 | Sq. Ft. | 235 | ||||||||||||
| Loan | 18 | Kahana Retail(36) | 32,408 | Sq. Ft. | 367 | L(31), D(85), O(4) | T-12 5/31/2016 | 1,323,238 | 342,086 | 981,152 | 12/31/2015 | 1,312,348 | 330,933 | 981,415 | 12/31/2014 | 573,815 | |
| Loan | 19 | 465 Columbus Ave | 98,344 | Sq. Ft. | 117 | L(24), D(91), O(5) | T-12 4/30/2016 | 1,983,111 | 1,195,037 | 788,074 | 12/31/2015 | 1,952,706 | 1,190,908 | 761,798 | 12/31/2014 | 1,850,251 | |
| Loan | 20 | Shoppes at Vickery Village | 77,733 | Sq. Ft. | 137 | L(25), YM1(91), O(4) | T-12 3/31/2016 | 1,460,506 | 449,051 | 1,011,455 | T-10 12/31/2015 | 1,237,592 | 311,454 | 926,138 | |||
| Loan | 21 | San Marin Shopping Center(36) | 70,486 | Sq. Ft. | 132 | L(25), D(91), O(4) | T-12 3/31/2016 | 1,208,785 | 407,775 | 801,010 | 12/31/2015 | 1,201,945 | 408,109 | 793,836 | 12/31/2014 | 1,239,058 | |
| Loan | 22 | Mapletree Gardens | 242 | Units | 36,983 | L(25), D(91), O(4) | T-12 4/30/2016 | 1,795,470 | 944,182 | 851,288 | 12/31/2015 | 1,674,789 | 840,656 | 834,133 | T-11 11/30/2014 Ann. | 1,515,541 | |
| Loan | 23 | North Pacific Plaza | 65,423 | Sq. Ft. | 130 | L(24), D(91), O(5) | T-12 5/31/2016 | 972,343 | 426,423 | 545,920 | 12/31/2015 | 908,502 | 399,791 | 508,711 | 12/31/2014 | 808,474 | |
| Loan | 24 | Altmonte Apartments | 217 | Units | 32,719 | L(24), D(92), O(4) | T-12 3/31/2016 | 1,883,402 | 1,018,062 | 865,340 | 12/31/2015 | 1,867,734 | 1,034,453 | 833,280 | 12/31/2014 | 1,784,338 | |
| Loan | 25 | Fourth & Milliken | 19,496 | Sq. Ft. | 349 | L(25), D(91), O(4) | T-12 5/31/2016 | 853,805 | 245,914 | 607,891 | 12/31/2015 | 853,635 | 253,197 | 600,438 | 12/31/2014 | 823,318 | |
| Loan | 26 | Holiday Inn Express Cocoa Beach | 60 | Rooms | 101,667 | L(24), D(92), O(4) | T-12 3/31/2016 | 2,246,077 | 1,258,482 | 987,595 | 12/31/2015 | 2,178,840 | 1,245,384 | 933,456 | 12/31/2014 | 1,943,279 | |
| Loan | 27 | Huntington Park | 161 | Units | 36,646 | L(24), D(92), O(4) | T-12 4/30/2016 | 1,198,638 | 698,914 | 499,724 | 12/31/2015 | 1,114,300 | 686,746 | 427,554 | 12/31/2014 | 1,168,009 | |
| Loan | 28 | Hampton Inn Eugene | 61 | Rooms | 92,841 | L(25), D(90), O(5) | T-12 3/31/2016 | 2,524,636 | 1,575,243 | 949,393 | 12/31/2015 | 2,494,510 | 1,522,980 | 971,530 | 12/31/2014 | 2,268,160 | |
| Loan | 29 | National Self Storage Portfolio | 127,885 | Sq. Ft. | 39 | L(25), D(91), O(4) | T-12 5/31/2016 | 859,490 | 420,568 | 438,922 | 12/31/2015 | 846,906 | 426,602 | 420,304 | 12/31/2014 | 817,090 | |
| Property | 29.01 | Joe Battle | 76,055 | Sq. Ft. | 39 | T-12 5/31/2016 | 511,500 | 254,192 | 257,308 | 12/31/2015 | 501,129 | 255,675 | 245,454 | 12/31/2014 | 475,001 | ||
| Property | 29.02 | North Kenazo | 51,830 | Sq. Ft. | 39 | T-12 5/31/2016 | 347,990 | 166,376 | 181,614 | 12/31/2015 | 345,777 | 170,927 | 174,850 | 12/31/2014 | 342,089 | ||
| Loan | 30 | Shady Haven MHC | 103 | Pads | 44,660 | L(24), D(92), O(4) | T-12 5/31/2016 | 631,252 | 242,305 | 388,947 | 12/31/2015 | 619,519 | 239,377 | 380,142 | T-6 12/31/2014 Ann. | 414,790 | |
| Loan | 31 | Emporia Marketplace | 79,070 | Sq. Ft. | 53 | L(25), D(91), O(4) | T-12 4/30/2016 | 618,856 | 150,774 | 468,082 | 12/31/2015 | 614,835 | 143,260 | 471,575 | 12/31/2014 | 601,211 | |
| Loan | 32 | Fresenius Medical Center Summit | 8,762 | Sq. Ft. | 431 | L(24), D(92), O(4) |
A-1-4
CD 2016-CD1
ANNEX A-1 - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
| Third | Third | |||||||||||||||
| Most Recent | Most Recent | Underwritten NOI | Underwritten NCF | Underwritten | Underwritten | Underwritten | Underwritten | Underwritten | Underwritten | Underwritten | Ownership | Ground Lease | Ground Lease | |||
| Property Flag | ID | Property Name | Expenses($) | NOI($) | Debt Yield(11)(12) | Debt Yield(11)(12) | Revenue($) | EGI($) | Expenses($) | NOI ($) | Reserves($) | TI/LC($) | NCF ($) | Interest(18) | Expiration(19) | Extension Terms(19) |
| Loan | 1 | 10 Hudson Yards(34)(35) | 12.9% | 12.7% | 134,652,875 | 136,011,383 | 44,496,991 | 91,514,392 | 362,693 | 1,531,628 | 89,620,071 | Fee Simple | ||||
| Loan | 2 | Fiserv at 2900 Westside | 9.5% | 8.7% | 6,540,040 | 6,395,304 | 191,859 | 6,203,445 | 75,270 | 443,349 | 5,684,826 | Fee Simple | ||||
| Loan | 3 | Westfield San Francisco Centre(34) | 36,493,338 | 48,128,023 | 13.1% | 12.7% | 58,964,187 | 95,016,729 | 38,462,539 | 56,554,190 | 157,864 | 1,578,636 | 54,817,690 | Fee Simple/Leasehold | 06/30/2043 | One, 15-year option |
| Loan | 4 | Prudential Plaza(34)(36) | 28,845,540 | 21,430,754 | 9.0% | 8.3% | 59,395,270 | 68,810,777 | 31,397,007 | 37,413,770 | 572,052 | 2,470,470 | 34,371,248 | Fee Simple | ||
| Loan | 5 | U-Haul AREC Portfolio(34) | 2,778,371 | 4,218,991 | 10.3% | 10.1% | 12,172,465 | 13,451,784 | 3,676,925 | 9,774,858 | 252,815 | 9,522,044 | Fee Simple | |||
| Property | 5.01 | U-Haul N Miami Beach | 978,312 | 1,180,965 | 298,715 | 882,251 | 12,538 | 869,712 | Fee Simple | |||||||
| Property | 5.02 | U-Haul Moving & Storage At Oso Blanca | 747,043 | 815,732 | 157,356 | 658,376 | 16,063 | 642,313 | Fee Simple | |||||||
| Property | 5.03 | U-Haul Moving & Storage Of Spring Valley | 726,860 | 764,647 | 148,143 | 616,503 | 12,417 | 604,086 | Fee Simple | |||||||
| Property | 5.04 | U-Haul Moving & Storage Of North Brunswick | 802,755 | 828,184 | 225,361 | 602,823 | 13,637 | 589,186 | Fee Simple | |||||||
| Property | 5.05 | U-Haul Moving & Storage Of Marlboro | 694,988 | 852,878 | 279,959 | 572,920 | 12,692 | 560,228 | Fee Simple | |||||||
| Property | 5.06 | U-Haul Moving & Storage Of Forestville Rd | 620,490 | 635,266 | 138,240 | 497,026 | 7,731 | 489,295 | Fee Simple | |||||||
| Property | 5.07 | U-Haul Moving & Storage Of Casa Grande | 588,170 | 598,139 | 189,105 | 409,034 | 17,770 | 391,264 | Fee Simple | |||||||
| Property | 5.08 | U-Haul Moving & Storage Of East Brunswick | 667,490 | 736,818 | 254,635 | 482,183 | 8,242 | 473,941 | Fee Simple | |||||||
| Property | 5.09 | U-Haul Coeur D Alene | 603,587 | 692,957 | 183,848 | 509,109 | 14,030 | 495,079 | Fee Simple | |||||||
| Property | 5.10 | U-Haul Moving & Storage At W Lake Mead Blvd | 548,896 | 570,501 | 141,306 | 429,194 | 15,803 | 413,392 | Fee Simple | |||||||
| Property | 5.11 | U-Haul Moving & Storage Of Little River | 581,625 | 603,691 | 149,561 | 454,130 | 16,954 | 437,176 | Fee Simple | |||||||
| Property | 5.12 | U-Haul Moving & Storage At Hwy 13 & Portland Ave | 500,664 | 506,657 | 170,352 | 336,305 | 9,817 | 326,488 | Fee Simple | |||||||
| Property | 5.13 | U-Haul Storage Of Cumming | 448,374 | 502,960 | 124,847 | 378,113 | 12,496 | 365,616 | Fee Simple | |||||||
| Property | 5.14 | U-Haul Moving & Storage Of Haines City | 458,288 | 476,601 | 121,614 | 354,988 | 11,859 | 343,129 | Fee Simple | |||||||
| Property | 5.15 | U-Haul Storage Of Downtown | 510,187 | 526,003 | 147,492 | 378,511 | 9,665 | 368,846 | Fee Simple | |||||||
| Property | 5.16 | U-Haul Moving & Storage Of Salisbury | 577,109 | 597,232 | 145,672 | 451,560 | 13,751 | 437,810 | Fee Simple | |||||||
| Property | 5.17 | U-Haul Center Dade County | 238,139 | 391,993 | 108,087 | 283,906 | 2,190 | 281,715 | Fee Simple | |||||||
| Property | 5.18 | U-Haul Moving & Storage Of Historic Ybor City | 306,646 | 377,305 | 124,902 | 252,403 | 4,075 | 248,328 | Fee Simple | |||||||
| Property | 5.19 | U-Haul Of Stone Mountain | 348,043 | 396,283 | 124,430 | 271,852 | 8,191 | 263,661 | Fee Simple | |||||||
| Property | 5.20 | U-Haul Moving & Storage Of Cedar Rapids | 363,521 | 387,858 | 120,574 | 267,284 | 12,398 | 254,886 | Fee Simple | |||||||
| Property | 5.21 | U-Haul Center North Irby St | 291,364 | 347,411 | 121,567 | 225,844 | 5,593 | 220,251 | Fee Simple | |||||||
| Property | 5.22 | U-Haul Moving And Storage Of West Warner Robins | 291,253 | 305,193 | 92,105 | 213,089 | 12,197 | 200,892 | Fee Simple | |||||||
| Property | 5.23 | U-Haul 36th Street | 278,660 | 356,510 | 109,055 | 247,455 | 2,704 | 244,751 | Fee Simple | |||||||
| Loan | 6 | Birch Run Premium Outlets(34) | 4,748,944 | 15,550,208 | 13.2% | 12.4% | 16,959,668 | 21,540,481 | 5,266,315 | 16,274,165 | 204,001 | 860,362 | 15,209,802 | Fee Simple | ||
| Loan | 7 | Hall Office Park 16 | 8.9% | 8.2% | 5,967,502 | 5,934,019 | 2,214,379 | 3,719,640 | 48,533 | 234,600 | 3,436,507 | Fee Simple | ||||
| Loan | 8 | Gas Company Tower & World Trade Center Parking Garage(34)(35) | 19,964,921 | 17,512,942 | 19.9% | 18.4% | 36,696,196 | 51,405,707 | 22,733,822 | 28,671,885 | 430,466 | 1,720,268 | 26,521,151 | Fee Simple | ||
| Loan | 9 | Vertex Pharmaceuticals HQ(34)(35) | 17.9% | 17.8% | 95,760,191 | 93,423,532 | 17,361,124 | 76,062,408 | 283,431 | 75,778,977 | Fee Simple | |||||
| Loan | 10 | 60 East 55th Street | 749,109 | 1,674,687 | 8.9% | 8.3% | 3,454,897 | 3,282,152 | 1,069,269 | 2,212,883 | 7,386 | 130,094 | 2,075,403 | Fee Simple | ||
| Loan | 11 | Embassy Suites Columbus | 6,683,948 | 2,054,928 | 14.4% | 12.6% | 7,683,806 | 10,217,593 | 6,909,157 | 3,308,437 | 408,704 | 2,899,733 | Fee Simple | |||
| Loan | 12 | Columbia Gorge Premium Outlets | 1,406,191 | 2,819,199 | 13.3% | 12.7% | 3,029,832 | 4,251,935 | 1,411,444 | 2,840,491 | 41,059 | 95,655 | 2,703,777 | Fee Simple | ||
| Loan | 13 | Hilton Garden Inn San Leandro | 3,602,697 | 2,020,927 | 13.8% | 12.4% | 6,360,441 | 6,748,519 | 3,959,184 | 2,789,334 | 269,941 | 2,519,393 | Fee Simple | |||
| Loan | 14 | Deerbrook Commons | 705,593 | 1,609,472 | 10.4% | 9.2% | 2,668,588 | 2,497,814 | 728,510 | 1,769,305 | 36,126 | 177,551 | 1,555,627 | Fee Simple | ||
| Loan | 15 | 401 South State Street(34)(35)(36) | 5,902,206 | 5,112,169 | 11.5% | 10.0% | 15,402,288 | 12,429,423 | 6,948,035 | 5,481,388 | 121,756 | 581,678 | 4,777,955 | Fee Simple | ||
| Loan | 16 | Oxford Glen Apartments | 710,012 | 1,891,607 | 10.4% | 9.5% | 2,867,497 | 2,902,124 | 1,296,420 | 1,605,703 | 132,432 | 1,473,271 | Fee Simple | |||
| Loan | 17 | NY Rite Aid Portfolio | 8.8% | 8.4% | 1,152,942 | 1,095,295 | 43,437 | 1,051,858 | 10,456 | 40,392 | 1,001,009 | Fee Simple | ||||
| Property | 17.01 | Rite Aid - Batavia, NY | 326,804 | 310,464 | 12,278 | 298,186 | 2,930 | 11,411 | 283,845 | Fee Simple | ||||||
| Property | 17.02 | Rite Aid - West Seneca, NY | 307,292 | 291,927 | 11,296 | 280,631 | 2,509 | 10,456 | 267,667 | Fee Simple | ||||||
| Property | 17.03 | Rite Aid - Cheektowaga | 271,717 | 258,131 | 10,282 | 247,849 | 2,509 | 9,569 | 235,771 | Fee Simple | ||||||
| Property | 17.04 | Rite Aid - Greece, NY | 247,129 | 234,773 | 9,581 | 225,192 | 2,509 | 8,956 | 213,726 | Fee Simple | ||||||
| Loan | 18 | Kahana Retail(36) | 306,383 | 267,432 | 8.7% | 8.3% | 1,236,685 | 1,420,264 | 383,013 | 1,037,251 | 6,482 | 40,886 | 989,884 | Fee Simple | ||
| Loan | 19 | 465 Columbus Ave | 1,297,737 | 552,514 | 10.7% | 8.5% | 2,348,922 | 2,350,664 | 1,123,744 | 1,226,921 | 24,586 | 230,007 | 972,328 | Fee Simple | ||
| Loan | 20 | Shoppes at Vickery Village | 9.3% | 8.5% | 1,721,047 | 1,501,169 | 504,332 | 996,836 | 18,009 | 75,337 | 903,490 | Fee Simple | ||||
| Loan | 21 | San Marin Shopping Center(36) | 377,680 | 861,378 | 8.9% | 8.1% | 1,276,981 | 1,232,784 | 400,642 | 832,142 | 14,098 | 63,554 | 754,490 | Fee Simple | ||
| Loan | 22 | Mapletree Gardens | 916,246 | 599,295 | 10.9% | 10.2% | 1,942,980 | 1,874,782 | 900,874 | 973,908 | 60,742 | 913,166 | Fee Simple | |||
| Loan | 23 | North Pacific Plaza | 561,593 | 246,881 | 8.7% | 8.0% | 1,263,568 | 1,199,556 | 457,429 | 742,127 | 13,295 | 47,236 | 681,597 | Fee Simple | ||
| Loan | 24 | Altmonte Apartments | 1,046,434 | 737,904 | 12.1% | 11.1% | 1,908,900 | 1,901,221 | 1,043,059 | 858,163 | 70,525 | 787,638 | Fee Simple | |||
| Loan | 25 | Fourth & Milliken | 251,322 | 571,996 | 8.8% | 8.5% | 685,928 | 850,124 | 249,488 | 600,636 | 3,509 | 19,496 | 577,630 | Fee Simple | ||
| Loan | 26 | Holiday Inn Express Cocoa Beach | 1,339,020 | 604,259 | 16.0% | 14.6% | 2,246,077 | 2,246,077 | 1,267,056 | 979,021 | 89,843 | 889,177 | Fee Simple | |||
| Loan | 27 | Huntington Park | 716,026 | 451,983 | 9.8% | 9.1% | 1,290,144 | 1,248,029 | 671,916 | 576,113 | 40,250 | 535,863 | Fee Simple | |||
| Loan | 28 | Hampton Inn Eugene | 1,365,948 | 902,212 | 17.5% | 15.7% | 2,425,485 | 2,425,485 | 1,436,686 | 988,799 | 97,019 | 891,779 | Fee Simple | |||
| Loan | 29 | National Self Storage Portfolio | 449,460 | 367,630 | 9.0% | 8.8% | 1,160,427 | 859,490 | 407,864 | 451,627 | 12,789 | 438,838 | Fee Simple | |||
| Property | 29.01 | Joe Battle | 246,517 | 228,484 | 733,716 | 511,500 | 243,078 | 268,422 | 7,606 | 260,816 | Fee Simple | |||||
| Property | 29.02 | North Kenazo | 202,943 | 139,146 | 426,711 | 347,990 | 164,785 | 183,205 | 5,183 | 178,022 | Fee Simple | |||||
| Loan | 30 | Shady Haven MHC | 214,786 | 200,004 | 8.3% | 8.2% | 620,824 | 628,124 | 245,675 | 382,449 | 5,150 | 377,299 | Fee Simple | |||
| Loan | 31 | Emporia Marketplace | 141,078 | 460,132 | 9.8% | 8.2% | 652,878 | 548,826 | 142,866 | 405,960 | 34,791 | 29,651 | 341,518 | Fee Simple | ||
| Loan | 32 | Fresenius Medical Center Summit | 9.1% | 8.8% | 428,658 | 416,602 | 73,784 | 342,818 | 1,314 | 7,608 | 333,896 | Fee Simple |
A-1-5
CD 2016-CD1
ANNEX A-1 - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
| Lease | Lease | Lease | Lease | Lease | |||||||||||||
| Property Flag | ID | Property Name | Largest Tenant(20)(21)(22)(23)(24)(25) | SF | Expiration | 2nd Largest Tenant(20)(21)(22)(23)(24) | SF | Expiration | 3rd Largest Tenant(21)(23)(24) | SF | Expiration | 4th Largest Tenant(21)(23)(24) | SF | Expiration | 5th Largest Tenant(23)(24) | SF | Expiration |
| Loan | 1 | 10 Hudson Yards(34)(35) | Coach | 693,938 | 07/31/2036 | L’Oreal | 411,358 | 08/31/2031 | BCG | 193,295 | 04/30/2032 | SAP | 144,065 | 06/30/2032 | Intersection | 67,058 | 01/31/2027 |
| Loan | 2 | Fiserv at 2900 Westside | Fiserv | 376,351 | 12/31/2027 | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Loan | 3 | Westfield San Francisco Centre(34) | San Francisco State University | 125,483 | 12/31/2021 | Crunchyroll, Inc. | 71,614 | 01/31/2020 | Century Theatres | 52,636 | 09/30/2021 | Bespoke | 36,977 | 12/31/2021 | True Ultimate Standards Every | 28,217 | 02/29/2020 |
| Loan | 4 | Prudential Plaza(34)(36) | Optiver US LLC | 73,779 | 04/30/2023 | Clark Hill | 71,813 | 12/31/2032 | Leydig, Voit & Mayer, Ltd. | 66,783 | 09/30/2025 | CBS Radio Holdings Corp. | 63,453 | 04/30/2028 | The Prudential Insurance Company | 51,646 | 07/31/2025 |
| Loan | 5 | U-Haul AREC Portfolio(34) | |||||||||||||||
| Property | 5.01 | U-Haul N Miami Beach | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.02 | U-Haul Moving & Storage At Oso Blanca | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.03 | U-Haul Moving & Storage Of Spring Valley | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.04 | U-Haul Moving & Storage Of North Brunswick | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.05 | U-Haul Moving & Storage Of Marlboro | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.06 | U-Haul Moving & Storage Of Forestville Rd | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.07 | U-Haul Moving & Storage Of Casa Grande | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.08 | U-Haul Moving & Storage Of East Brunswick | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.09 | U-Haul Coeur D Alene | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.10 | U-Haul Moving & Storage At W Lake Mead Blvd | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.11 | U-Haul Moving & Storage Of Little River | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.12 | U-Haul Moving & Storage At Hwy 13 & Portland Ave | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.13 | U-Haul Storage Of Cumming | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.14 | U-Haul Moving & Storage Of Haines City | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.15 | U-Haul Storage Of Downtown | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.16 | U-Haul Moving & Storage Of Salisbury | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.17 | U-Haul Center Dade County | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.18 | U-Haul Moving & Storage Of Historic Ybor City | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.19 | U-Haul Of Stone Mountain | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.20 | U-Haul Moving & Storage Of Cedar Rapids | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.21 | U-Haul Center North Irby St | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.22 | U-Haul Moving And Storage Of West Warner Robins | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 5.23 | U-Haul 36th Street | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Loan | 6 | Birch Run Premium Outlets(34) | Pottery Barn | 30,000 | 01/31/2023 | V.F. Factory Outlet | 23,975 | 12/31/2018 | Old Navy | 19,589 | 07/31/2017 | Nike Factory Store | 12,500 | 01/31/2020 | Levi’s Outlet | 12,398 | 01/31/2020 |
| Loan | 7 | Hall Office Park 16 | Paycor | 37,199 | 09/30/2023 | Jamba Juice | 25,381 | 03/31/2027 | Imagine Communications | 24,896 | 02/14/2022 | Amica Insurance | 24,896 | 03/31/2023 | Workday | 17,167 | 05/31/2021 |
| Loan | 8 | Gas Company Tower & World Trade Center Parking Garage(34)(35) | Southern California Gas Co. | 469,078 | 10/31/2026 | Sidley Austin | 164,674 | 12/31/2023 | Deloitte | 112,028 | 01/31/2031 | Latham & Watkins | 97,218 | 12/31/2020 | WeWork | 92,493 | 07/31/2033 |
| Loan | 9 | Vertex Pharmaceuticals HQ(34)(35) | Vertex | 1,082,417 | 12/31/2028 | Bright Horizons Children’s Center | 12,665 | 05/01/2035 | Babbo Enoteca Fp, Llc | 9,117 | 09/01/2025 | Master Lease | 7,300 | 05/01/2029 | Pier 50 LLC | 6,704 | 10/01/2024 |
| Loan | 10 | 60 East 55th Street | The Core Club | 32,339 | 06/30/2026 | Sweetgreen | 4,589 | 01/31/2029 | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Loan | 11 | Embassy Suites Columbus | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Loan | 12 | Columbia Gorge Premium Outlets | Gap Outlet | 9,204 | 07/31/2019 | Coach | 9,007 | 01/31/2023 | Loft Outlet | 8,514 | 01/31/2022 | Adidas | 6,503 | 01/31/2020 | Rue 21 | 6,412 | 01/31/2026 |
| Loan | 13 | Hilton Garden Inn San Leandro | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Loan | 14 | Deerbrook Commons | Movie Tavern | 25,342 | 02/28/2021 | Workforce Solutions | 12,526 | 11/30/2020 | Olive Garden | 10,800 | 12/31/2021 | It’s a Stitch | 8,350 | 09/30/2017 | Deerbrook Beauty Supply | 6,416 | 07/14/2026 |
| Loan | 15 | 401 South State Street(34)(35)(36) | Robert Morris University | 365,033 | 06/30/2024 | Willow Creek Community Church | 7,500 | 07/31/2017 | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Loan | 16 | Oxford Glen Apartments | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Loan | 17 | NY Rite Aid Portfolio | |||||||||||||||
| Property | 17.01 | Rite Aid - Batavia, NY | Rite Aid | 12,738 | 01/14/2026 | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 17.02 | Rite Aid - West Seneca, NY | Rite Aid | 10,908 | 05/31/2026 | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 17.03 | Rite Aid - Cheektowaga | Rite Aid | 10,908 | 10/11/2026 | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 17.04 | Rite Aid - Greece, NY | Rite Aid | 10,908 | 02/28/2026 | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Loan | 18 | Kahana Retail(36) | FMC Kahana | 9,216 | 03/31/2027 | Bob’s Maui Dive Shop, Inc. | 8,325 | 07/31/2018 | Amakua Holdings, Inc. | 4,630 | 08/31/2018 | First Hawaiian Bank | 1,992 | 10/31/2021 | Leslie’s Family Funwear | 1,528 | 12/31/2016 |
| Loan | 19 | 465 Columbus Ave | NYC Department of Environmental Protection | 50,835 | 04/30/2024 | Westchester Health Associates | 9,744 | 01/31/2027 | Effective Telemarketing, Inc. | 5,206 | 02/28/2017 | Phillips Electronics Realty, LLC | 4,993 | 07/15/2021 | Atmosphere Design Group, LLC | 4,949 | 06/15/2024 |
| Loan | 20 | Shoppes at Vickery Village | The ReThink Group | 11,925 | 12/31/2020 | Cinco Mexican Cantina | 6,000 | 01/31/2019 | Tanner’s Vickery | 5,403 | 08/31/2019 | Wade Alexander, Jr. | 4,584 | 01/31/2019 | T.L. Culinary Concepts, Inc. | 4,568 | 02/29/2020 |
| Loan | 21 | San Marin Shopping Center(36) | Apple Market | 27,549 | 08/31/2020 | Tuesday Morning, Inc. | 7,525 | 07/15/2018 | Mary’s Pizza Shack | 4,144 | 04/30/2017 | Animal Hospital of San Marin | 2,196 | 03/31/2018 | Starbucks | 1,945 | 02/28/2021 |
| Loan | 22 | Mapletree Gardens | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Loan | 23 | North Pacific Plaza | Albertina Kerr Centers | 18,276 | 06/30/2017 | TFG Card Solutions, Inc. | 7,010 | 04/30/2019 | SolvOne, LLC | 6,965 | 12/31/2020 | Oregon Law Group | 3,126 | 07/31/2018 | Journeys Peak Travel | 2,640 | 11/30/2018 |
| Loan | 24 | Altmonte Apartments | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Loan | 25 | Fourth & Milliken | Green Mango Thai Restaurant | 2,750 | 05/31/2023 | 7-Eleven Inc - Store #34287 | 2,680 | 10/31/2019 | Mort Jafari dba Fatburger | 2,559 | 10/31/2020 | Lanny Ho (Bamboo Noodle & Grill) | 2,211 | 07/31/2021 | Kim To Nguyen dba Jade Nails & Spa | 1,700 | 01/31/2021 |
| Loan | 26 | Holiday Inn Express Cocoa Beach | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Loan | 27 | Huntington Park | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Loan | 28 | Hampton Inn Eugene | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Loan | 29 | National Self Storage Portfolio | |||||||||||||||
| Property | 29.01 | Joe Battle | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Property | 29.02 | North Kenazo | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Loan | 30 | Shady Haven MHC | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
| Loan | 31 | Emporia Marketplace | Food Lion | 33,000 | 08/15/2020 | Peebles | 20,000 | 01/31/2020 | Family Dollar | 8,800 | 06/30/2020 | Rite Aid | 8,450 | MTM | White’s Family Shoes | 2,520 | 05/31/2019 |
| Loan | 32 | Fresenius Medical Center Summit | Fresenius Medical Center | 8,762 | 04/30/2031 | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP | NAP |
A-1-6
CD 2016-CD1
ANNEX A-1 - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
| Upfront | Monthly | |||||
| Occupancy | Replacement | Replacement | ||||
| Property Flag | ID | Property Name | Occupancy(4) | As-of Date | Reserves($)(27) | Reserves ($)(28)(29) |
| Loan | 1 | 10 Hudson Yards(34)(35) | 93.2% | 07/01/2016 | Springing | |
| Loan | 2 | Fiserv at 2900 Westside | 100.0% | 08/06/2016 | Springing | |
| Loan | 3 | Westfield San Francisco Centre(34) | 95.6% | 04/30/2016 | Springing | |
| Loan | 4 | Prudential Plaza(34)(36) | 76.4% | 05/31/2016 | 2,525,657 | 47,671 |
| Loan | 5 | U-Haul AREC Portfolio(34) | 90.7% | 05/31/2016 | 126,407 | Springing |
| Property | 5.01 | U-Haul N Miami Beach | 96.0% | 05/31/2016 | ||
| Property | 5.02 | U-Haul Moving & Storage At Oso Blanca | 89.1% | 05/31/2016 | ||
| Property | 5.03 | U-Haul Moving & Storage Of Spring Valley | 95.2% | 05/31/2016 | ||
| Property | 5.04 | U-Haul Moving & Storage Of North Brunswick | 88.8% | 05/31/2016 | ||
| Property | 5.05 | U-Haul Moving & Storage Of Marlboro | 90.2% | 05/31/2016 | ||
| Property | 5.06 | U-Haul Moving & Storage Of Forestville Rd | 92.2% | 05/31/2016 | ||
| Property | 5.07 | U-Haul Moving & Storage Of Casa Grande | 81.8% | 05/31/2016 | ||
| Property | 5.08 | U-Haul Moving & Storage Of East Brunswick | 93.8% | 05/31/2016 | ||
| Property | 5.09 | U-Haul Coeur D Alene | 97.6% | 05/31/2016 | ||
| Property | 5.10 | U-Haul Moving & Storage At W Lake Mead Blvd | 85.3% | 05/31/2016 | ||
| Property | 5.11 | U-Haul Moving & Storage Of Little River | 88.5% | 05/31/2016 | ||
| Property | 5.12 | U-Haul Moving & Storage At Hwy 13 & Portland Ave | 98.3% | 05/31/2016 | ||
| Property | 5.13 | U-Haul Storage Of Cumming | 90.6% | 05/31/2016 | ||
| Property | 5.14 | U-Haul Moving & Storage Of Haines City | 86.3% | 05/31/2016 | ||
| Property | 5.15 | U-Haul Storage Of Downtown | 96.4% | 05/31/2016 | ||
| Property | 5.16 | U-Haul Moving & Storage Of Salisbury | 86.4% | 05/31/2016 | ||
| Property | 5.17 | U-Haul Center Dade County | 98.6% | 05/31/2016 | ||
| Property | 5.18 | U-Haul Moving & Storage Of Historic Ybor City | 94.0% | 05/31/2016 | ||
| Property | 5.19 | U-Haul Of Stone Mountain | 98.7% | 05/31/2016 | ||
| Property | 5.20 | U-Haul Moving & Storage Of Cedar Rapids | 97.2% | 05/31/2016 | ||
| Property | 5.21 | U-Haul Center North Irby St | 92.1% | 05/31/2016 | ||
| Property | 5.22 | U-Haul Moving And Storage Of West Warner Robins | 80.4% | 05/31/2016 | ||
| Property | 5.23 | U-Haul 36th Street | 94.1% | 05/31/2016 | ||
| Loan | 6 | Birch Run Premium Outlets(34) | 87.0% | 05/31/2016 | Springing | |
| Loan | 7 | Hall Office Park 16 | 95.1% | 07/22/2016 | 4,044 | |
| Loan | 8 | Gas Company Tower & World Trade Center Parking Garage(34)(35) | 83.0% | 06/01/2016 | 71,744 | 35,872 |
| Loan | 9 | Vertex Pharmaceuticals HQ(34)(35) | 99.9% | 04/30/2016 | ||
| Loan | 10 | 60 East 55th Street | 100.0% | 06/23/2016 | 615 | |
| Loan | 11 | Embassy Suites Columbus | 79.4% | 05/31/2016 | 32,344 | |
| Loan | 12 | Columbia Gorge Premium Outlets | 87.5% | 03/01/2016 | 3,422 | |
| Loan | 13 | Hilton Garden Inn San Leandro | 87.6% | 04/30/2016 | Borrower shall pay the greater of (i) the amount required under the Franchise Agreement and (ii) From the 1st payment through the 11th payment: 1/12th of 2% of gross income, From the 12th payment through the 23rd payment: 1/12th of 3% of gross income and 1/12th of 4% of gross income thereafter | |
| Loan | 14 | Deerbrook Commons | 66.1% | 07/28/2016 | 3,011 | |
| Loan | 15 | 401 South State Street(34)(35)(36) | 76.5% | 06/10/2016 | 2,850,000 | 10,210 |
| Loan | 16 | Oxford Glen Apartments | 93.3% | 04/30/2016 | 953,637 | 12,400 |
| Loan | 17 | NY Rite Aid Portfolio | 100.0% | 08/06/2016 | 873 | |
| Property | 17.01 | Rite Aid - Batavia, NY | 100.0% | 08/06/2016 | ||
| Property | 17.02 | Rite Aid - West Seneca, NY | 100.0% | 08/06/2016 | ||
| Property | 17.03 | Rite Aid - Cheektowaga | 100.0% | 08/06/2016 | ||
| Property | 17.04 | Rite Aid - Greece, NY | 100.0% | 08/06/2016 | ||
| Loan | 18 | Kahana Retail(36) | 82.0% | 04/30/2016 | 540 | |
| Loan | 19 | 465 Columbus Ave | 98.2% | 06/30/2016 | 2,049 | |
| Loan | 20 | Shoppes at Vickery Village | 93.2% | 04/30/2016 | 1,501 | |
| Loan | 21 | San Marin Shopping Center(36) | 80.1% | 05/31/2016 | 1,175 | |
| Loan | 22 | Mapletree Gardens | 94.6% | 06/06/2016 | 5,062 | |
| Loan | 23 | North Pacific Plaza | 96.0% | 07/01/2016 | 1,108 | |
| Loan | 24 | Altmonte Apartments | 98.2% | 04/28/2016 | 6,781 | |
| Loan | 25 | Fourth & Milliken | 100.0% | 06/28/2016 | 292 | |
| Loan | 26 | Holiday Inn Express Cocoa Beach | 77.7% | 03/31/2016 | The greater of (i) 5.0% of prior month’s gross revenues and (ii) any amount required under Management Agreement or Franchise Agreement for FF&E Work | |
| Loan | 27 | Huntington Park | 93.8% | 07/26/2016 | 110,000 | 3,354 |
| Loan | 28 | Hampton Inn Eugene | 74.8% | 03/31/2016 | The greater of (i) 4.0% of prior month’s gross revenues and (ii) any amount required under Management Agreement or Franchise Agreement for FF&E Work | |
| Loan | 29 | National Self Storage Portfolio | 85.4% | 06/28/2016 | 1,066 | |
| Property | 29.01 | Joe Battle | 85.2% | 06/28/2016 | ||
| Property | 29.02 | North Kenazo | 85.8% | 06/28/2016 | ||
| Loan | 30 | Shady Haven MHC | 98.1% | 06/01/2016 | 429 | |
| Loan | 31 | Emporia Marketplace | 100.0% | 06/01/2016 | 125,000 | 4,283 |
| Loan | 32 | Fresenius Medical Center Summit | 100.0% | 06/08/2016 | 110 |
A-1-7
CD 2016-CD1
ANNEX A-1 - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
| Upfront | Monthly | Upfront | Monthly | Upfront | Monthly | Upfront | Upfront | Monthly | |||
| TI/LC | TI/LC | Tax | Tax | Insurance | Insurance | Engineering | Other | Other | |||
| Property Flag | ID | Property Name | Reserves ($)(27) | Reserves ($)(28) | Reserves ($)(27) | Reserves ($)(28)(29) | Reserves($)(27) | Reserves ($)(28) | Reserve($)(27) | Reserve(27)(30) | Reserves ($)(28)(29)(30) |
| Loan | 1 | 10 Hudson Yards(34)(35) | Springing | Springing | Springing | 159,543,940 | Springing | ||||
| Loan | 2 | Fiserv at 2900 Westside | Springing | Springing | Springing | Springing | |||||
| Loan | 3 | Westfield San Francisco Centre(34) | Springing | Springing | Springing | Springing | |||||
| Loan | 4 | Prudential Plaza(34)(36) | 21,489,422 | 1,134,682 | 1,134,682 | 248,278 | 82,759 | 47,911,435 | Springing | ||
| Loan | 5 | U-Haul AREC Portfolio(34) | 645,544 | Springing | Springing | 388,906 | |||||
| Property | 5.01 | U-Haul N Miami Beach | |||||||||
| Property | 5.02 | U-Haul Moving & Storage At Oso Blanca | |||||||||
| Property | 5.03 | U-Haul Moving & Storage Of Spring Valley | |||||||||
| Property | 5.04 | U-Haul Moving & Storage Of North Brunswick | |||||||||
| Property | 5.05 | U-Haul Moving & Storage Of Marlboro | |||||||||
| Property | 5.06 | U-Haul Moving & Storage Of Forestville Rd | |||||||||
| Property | 5.07 | U-Haul Moving & Storage Of Casa Grande | |||||||||
| Property | 5.08 | U-Haul Moving & Storage Of East Brunswick | |||||||||
| Property | 5.09 | U-Haul Coeur D Alene | |||||||||
| Property | 5.10 | U-Haul Moving & Storage At W Lake Mead Blvd | |||||||||
| Property | 5.11 | U-Haul Moving & Storage Of Little River | |||||||||
| Property | 5.12 | U-Haul Moving & Storage At Hwy 13 & Portland Ave | |||||||||
| Property | 5.13 | U-Haul Storage Of Cumming | |||||||||
| Property | 5.14 | U-Haul Moving & Storage Of Haines City | |||||||||
| Property | 5.15 | U-Haul Storage Of Downtown | |||||||||
| Property | 5.16 | U-Haul Moving & Storage Of Salisbury | |||||||||
| Property | 5.17 | U-Haul Center Dade County | |||||||||
| Property | 5.18 | U-Haul Moving & Storage Of Historic Ybor City | |||||||||
| Property | 5.19 | U-Haul Of Stone Mountain | |||||||||
| Property | 5.20 | U-Haul Moving & Storage Of Cedar Rapids | |||||||||
| Property | 5.21 | U-Haul Center North Irby St | |||||||||
| Property | 5.22 | U-Haul Moving And Storage Of West Warner Robins | |||||||||
| Property | 5.23 | U-Haul 36th Street | |||||||||
| Loan | 6 | Birch Run Premium Outlets(34) | Springing | Springing | Springing | ||||||
| Loan | 7 | Hall Office Park 16 | 32,589 | 520,882 | 74,442 | Springing | 4,382,337 | Springing | |||
| Loan | 8 | Gas Company Tower & World Trade Center Parking Garage(34)(35) | 21,033,588 | 171,541 | 2,822,545 | 564,509 | Springing | 5,699,085 | 14,150 | ||
| Loan | 9 | Vertex Pharmaceuticals HQ(34)(35) | Springing | Springing | Springing | ||||||
| Loan | 10 | 60 East 55th Street | 128,086 | 64,043 | Springing | 2,064,955 | |||||
| Loan | 11 | Embassy Suites Columbus | 69,725 | 34,862 | 71,930 | 5,994 | |||||
| Loan | 12 | Columbia Gorge Premium Outlets | 85,000 | 15,000 | 130,941 | 32,735 | Springing | 209,375 | 275,000 | ||
| Loan | 13 | Hilton Garden Inn San Leandro | 101,451 | 14,493 | 53,914 | 5,990 | 4,183,856 | Springing | |||
| Loan | 14 | Deerbrook Commons | 150,000 | 15,414 | 281,855 | 31,317 | Springing | ||||
| Loan | 15 | 401 South State Street(34)(35)(36) | 987,754 | 164,626 | 28,255 | 14,128 | |||||
| Loan | 16 | Oxford Glen Apartments | 78,881 | 9,860 | 25,302 | Springing | 46,363 | ||||
| Loan | 17 | NY Rite Aid Portfolio | 126,317 | 18,045 | 1,837 | Springing | |||||
| Property | 17.01 | Rite Aid - Batavia, NY | |||||||||
| Property | 17.02 | Rite Aid - West Seneca, NY | |||||||||
| Property | 17.03 | Rite Aid - Cheektowaga | |||||||||
| Property | 17.04 | Rite Aid - Greece, NY | |||||||||
| Loan | 18 | Kahana Retail(36) | 377,320 | 3,401 | 69,108 | 10,125 | Springing | 5,225 | 1/12 of Annual Condo Assessments | ||
| Loan | 19 | 465 Columbus Ave | 10,244 | 125,400 | 31,350 | 12,564 | 2,513 | 80,000 | Springing | ||
| Loan | 20 | Shoppes at Vickery Village | 8,356 | 86,157 | 7,180 | 5,923 | 2,961 | 22,813 | 10,500 | ||
| Loan | 21 | San Marin Shopping Center(36) | 5,287 | 65,229 | Springing | Springing | Springing | ||||
| Loan | 22 | Mapletree Gardens | 69,671 | 9,953 | Springing | 1,740 | |||||
| Loan | 23 | North Pacific Plaza | 465,000 | Springing | 70,867 | 7,087 | 7,910 | 791 | 236,975 | Springing | |
| Loan | 24 | Altmonte Apartments | 124,185 | 12,418 | 111,376 | 12,375 | 1/12 of Annual Condo Assessments | ||||
| Loan | 25 | Fourth & Milliken | 1,625 | 31,732 | 5,263 | Springing | |||||
| Loan | 26 | Holiday Inn Express Cocoa Beach | 19,936 | 2,215 | 14,871 | 3,718 | 100,000 | Springing | |||
| Loan | 27 | Huntington Park | 60,424 | 7,553 | 32,749 | 8,187 | 12,688 | ||||
| Loan | 28 | Hampton Inn Eugene | 16,667 | 2,262 | 1,102,000 | Springing | |||||
| Loan | 29 | National Self Storage Portfolio | 71,052 | 10,150 | Springing | ||||||
| Property | 29.01 | Joe Battle | |||||||||
| Property | 29.02 | North Kenazo | |||||||||
| Loan | 30 | Shady Haven MHC | 62,693 | 6,269 | 2,958 | 2,958 | 9,625 | ||||
| Loan | 31 | Emporia Marketplace | 65,000 | 4,942 | 44,727 | 4,970 | 7,649 | 850 | 127,289 | ||
| Loan | 32 | Fresenius Medical Center Summit | Springing | Springing | Springing |
A-1-8
CD 2016-CD1
ANNEX A-1 - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
| Other | Environmental | ||||
| Property | Reserves | Report | Engineering | ||
| Flag | ID | Property Name | Description | Date (31)(32) | Report Date |
| Loan | 1 | 10 Hudson Yards(34)(35) | Remaining Construction Work Reserve (Upfront: 90,969,679); Existing TI/LC Reserve (Upfront: 34,414,188); Free Rent Reserve (Upfront: 34,160,073); Lease Sweep Reserve (Springing Monthly: Excess Cash Flow); Owners’ Association Reserve (Monthly: Springing) | 06/30/2016 | 06/27/2016 |
| Loan | 2 | Fiserv at 2900 Westside | Lease Sweep Reserve (Springing Monthly: Excess Cash Flow) | 06/27/2016 | 06/27/2016 |
| Loan | 3 | Westfield San Francisco Centre(34) | Ground Rent Reserve (Springing Monthly: Ground Rent Funds) | 05/05/2016 | 05/05/2016 |
| Loan | 4 | Prudential Plaza(34)(36) | Future Leasing Funds (Upfront: 35,000,000; Monthly: Springing); Rent Abatement Funds (Upfront: 12,911,435) | 06/30/2015 | 06/26/2015 |
| Loan | 5 | U-Haul AREC Portfolio(34) | |||
| Property | 5.01 | U-Haul N Miami Beach | 05/18/2016 | 05/18/2016 | |
| Property | 5.02 | U-Haul Moving & Storage At Oso Blanca | 05/18/2016 | 05/18/2016 | |
| Property | 5.03 | U-Haul Moving & Storage Of Spring Valley | 05/18/2016 | 05/18/2016 | |
| Property | 5.04 | U-Haul Moving & Storage Of North Brunswick | 05/20/2016 | 05/18/2016 | |
| Property | 5.05 | U-Haul Moving & Storage Of Marlboro | 05/25/2016 | 05/09/2016 | |
| Property | 5.06 | U-Haul Moving & Storage Of Forestville Rd | 05/19/2016 | 05/18/2016 | |
| Property | 5.07 | U-Haul Moving & Storage Of Casa Grande | 05/11/2016 | 05/06/2016 | |
| Property | 5.08 | U-Haul Moving & Storage Of East Brunswick | 05/20/2016 | 05/18/2016 | |
| Property | 5.09 | U-Haul Coeur D Alene | 05/19/2016 | 05/18/2016 | |
| Property | 5.10 | U-Haul Moving & Storage At W Lake Mead Blvd | 05/18/2016 | 05/06/2016 | |
| Property | 5.11 | U-Haul Moving & Storage Of Little River | 05/18/2016 | 05/09/2016 | |
| Property | 5.12 | U-Haul Moving & Storage At Hwy 13 & Portland Ave | 05/09/2016 | 05/18/2016 | |
| Property | 5.13 | U-Haul Storage Of Cumming | 05/18/2016 | 05/18/2016 | |
| Property | 5.14 | U-Haul Moving & Storage Of Haines City | 05/23/2016 | 05/18/2016 | |
| Property | 5.15 | U-Haul Storage Of Downtown | 05/11/2016 | 05/18/2016 | |
| Property | 5.16 | U-Haul Moving & Storage Of Salisbury | 05/19/2016 | 05/18/2016 | |
| Property | 5.17 | U-Haul Center Dade County | 05/18/2016 | 05/10/2016 | |
| Property | 5.18 | U-Haul Moving & Storage Of Historic Ybor City | 05/11/2016 | 05/18/2016 | |
| Property | 5.19 | U-Haul Of Stone Mountain | 05/25/2016 | 05/18/2016 | |
| Property | 5.20 | U-Haul Moving & Storage Of Cedar Rapids | 05/19/2016 | 05/18/2016 | |
| Property | 5.21 | U-Haul Center North Irby St | 05/18/2016 | 05/09/2016 | |
| Property | 5.22 | U-Haul Moving And Storage Of West Warner Robins | 05/25/2016 | 05/18/2016 | |
| Property | 5.23 | U-Haul 36th Street | 05/12/2016 | 05/18/2016 | |
| Loan | 6 | Birch Run Premium Outlets(34) | 12/11/2015 | 12/11/2015 | |
| Loan | 7 | Hall Office Park 16 | Free Rent Reserve (Upfront: 1,200,786); Prepaid Rent Reserve (Upfront: 120,479); Tax Abatement Reserve (Upfront: 731,841); Lease Sweep Reserve (Springing Monthly: Excess Cash Flow); Outstanding TI Reserve (Upfront: 2,329,231) | 06/29/2016 | 06/29/2016 |
| Loan | 8 | Gas Company Tower & World Trade Center Parking Garage(34)(35) | Outstanding Free Rent (Upfront: 4,478,325); WeWork Lease (Upfront: 1,000,000); SCGC Lease (Upfront: 220,760); Jams and Latham Lease (Monthly: 14,150); Lease Sweep Reserve (Springing Monthly: Excess Cash Flow) | 06/28/2016 | 06/27/2016 |
| Loan | 9 | Vertex Pharmaceuticals HQ(34)(35) | Lease Termination Funds (Monthly: Springing) | 06/10/2016 | 06/14/2016 |
| Loan | 10 | 60 East 55th Street | Sweetgreen Lease Commencement Reserve (Upfront: 1,545,000); Free Rent Reserve (Upfront: 257,500); Unfunded Tenant Obligations Reserve (Upfront: 250,000); Condominium Common Charge Fund (Upfront: 12,455) | 06/06/2016 | 07/20/2016 |
| Loan | 11 | Embassy Suites Columbus | 11/03/2015 | 11/03/2015 | |
| Loan | 12 | Columbia Gorge Premium Outlets | Vans Outlet Reserve (Upfront: 275,000) | 11/03/2015 | 11/03/2015 |
| Loan | 13 | Hilton Garden Inn San Leandro | PIP Reserve (Upfront: 4,183,856; Monthly: Springing) | 04/28/2016 | 04/28/2016 |
| Loan | 14 | Deerbrook Commons | 07/23/2015 | 07/23/2015 | |
| Loan | 15 | 401 South State Street(34)(35)(36) | 05/27/2016 | 05/27/2016 | |
| Loan | 16 | Oxford Glen Apartments | 05/27/2016 | 05/27/2016 | |
| Loan | 17 | NY Rite Aid Portfolio | |||
| Property | 17.01 | Rite Aid - Batavia, NY | 05/27/2016 | 05/27/2016 | |
| Property | 17.02 | Rite Aid - West Seneca, NY | 05/27/2016 | 05/27/2016 | |
| Property | 17.03 | Rite Aid - Cheektowaga | 05/27/2016 | 05/27/2016 | |
| Property | 17.04 | Rite Aid - Greece, NY | 05/27/2016 | 05/27/2016 | |
| Loan | 18 | Kahana Retail(36) | Lease Sweep Reserve (Springing Monthly: Excess Cash Flow); Condo Assessment Reserve (Monthly: 1/12 of Annual Condo Assessments); Rent Concession Reserve (Springing Monthly: Rent Concessions) | 05/20/2015 | 11/19/2015 |
| Loan | 19 | 465 Columbus Ave | Remaining Parking/LED Conversion Reserve (Upfront: 80,000); Lease Sweep Reserve (Springing Monthly: Excess Cash Flow) | 06/08/2016 | 06/08/2016 |
| Loan | 20 | Shoppes at Vickery Village | Unfunded Obligations Reserve (Upfront: 10,500) | 04/28/2016 | 04/28/2016 |
| Loan | 21 | San Marin Shopping Center(36) | Lease Termination Rollover Reserve (Monthly: Springing) | 06/13/2016 | 06/13/2016 |
| Loan | 22 | Mapletree Gardens | 06/14/2016 | 06/14/2016 | |
| Loan | 23 | North Pacific Plaza | Lease Sweep Reserve (Springing Monthly: Excess Cash Flow) | 06/27/2016 | 06/27/2016 |
| Loan | 24 | Altmonte Apartments | Condominium Funds (Monthly: 1/12 of Annual Condo Assessments) | 05/10/2016 | 05/10/2016 |
| Loan | 25 | Fourth & Milliken | 07/13/2016 | 07/12/2016 | |
| Loan | 26 | Holiday Inn Express Cocoa Beach | Seasonal Working Capital (Upfront: 100,000; Monthly: Springing); PIP Reserve (Springing Monthly: Excess Cash Flow) | 01/05/2016 | 01/05/2016 |
| Loan | 27 | Huntington Park | 05/04/2016 | 05/04/2016 | |
| Loan | 28 | Hampton Inn Eugene | PIP Reserve (Upfront: 1,102,000); Seasonal Working Capital (Monthly: Springing) | 12/18/2015 | 12/18/2015 |
| Loan | 29 | National Self Storage Portfolio | |||
| Property | 29.01 | Joe Battle | 06/16/2016 | 06/16/2016 | |
| Property | 29.02 | North Kenazo | 06/16/2016 | 06/16/2016 | |
| Loan | 30 | Shady Haven MHC | 06/14/2016 | 06/13/2016 | |
| Loan | 31 | Emporia Marketplace | 05/05/2016 | 05/05/2016 | |
| Loan | 32 | Fresenius Medical Center Summit | 06/08/2016 | 06/10/2016 |
A-1-9
CD 2016-CD1
ANNEX A-1 - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
| Loan | |||||
| Property Flag | ID | Property Name | Purpose | Sponsor(26) | Guarantor(33) |
| Loan | 1 | 10 Hudson Yards(34)(35) | Recapitalization | Podium Fund HY REIT Owner LP | NAP |
| Loan | 2 | Fiserv at 2900 Westside | Acquisition | LCN North American Fund II REIT | LCN North American Fund II REIT |
| Loan | 3 | Westfield San Francisco Centre(34) | Refinance | Westfield America, Inc. | Westfield America, Inc. |
| Loan | 4 | Prudential Plaza(34)(36) | Refinance | Michael Silberberg; Mark Karasick | Michael Silberberg; Mark Karasick |
| Loan | 5 | U-Haul AREC Portfolio(34) | Recapitalization | AMERCO | AMERCO |
| Property | 5.01 | U-Haul N Miami Beach | |||
| Property | 5.02 | U-Haul Moving & Storage At Oso Blanca | |||
| Property | 5.03 | U-Haul Moving & Storage Of Spring Valley | |||
| Property | 5.04 | U-Haul Moving & Storage Of North Brunswick | |||
| Property | 5.05 | U-Haul Moving & Storage Of Marlboro | |||
| Property | 5.06 | U-Haul Moving & Storage Of Forestville Rd | |||
| Property | 5.07 | U-Haul Moving & Storage Of Casa Grande | |||
| Property | 5.08 | U-Haul Moving & Storage Of East Brunswick | |||
| Property | 5.09 | U-Haul Coeur D Alene | |||
| Property | 5.10 | U-Haul Moving & Storage At W Lake Mead Blvd | |||
| Property | 5.11 | U-Haul Moving & Storage Of Little River | |||
| Property | 5.12 | U-Haul Moving & Storage At Hwy 13 & Portland Ave | |||
| Property | 5.13 | U-Haul Storage Of Cumming | |||
| Property | 5.14 | U-Haul Moving & Storage Of Haines City | |||
| Property | 5.15 | U-Haul Storage Of Downtown | |||
| Property | 5.16 | U-Haul Moving & Storage Of Salisbury | |||
| Property | 5.17 | U-Haul Center Dade County | |||
| Property | 5.18 | U-Haul Moving & Storage Of Historic Ybor City | |||
| Property | 5.19 | U-Haul Of Stone Mountain | |||
| Property | 5.20 | U-Haul Moving & Storage Of Cedar Rapids | |||
| Property | 5.21 | U-Haul Center North Irby St | |||
| Property | 5.22 | U-Haul Moving And Storage Of West Warner Robins | |||
| Property | 5.23 | U-Haul 36th Street | |||
| Loan | 6 | Birch Run Premium Outlets(34) | Refinance | Simon Property Group, L.P. | Simon Property Group, L.P. |
| Loan | 7 | Hall Office Park 16 | Refinance | Hall Phoenix/Inwood Ltd. | Hall Phoenix/Inwood Ltd. |
| Loan | 8 | Gas Company Tower & World Trade Center Parking Garage(34)(35) | Refinance | Brookfield DTLA Holdings LLC | Brookfield DTLA Holdings LLC |
| Loan | 9 | Vertex Pharmaceuticals HQ(34)(35) | Refinance | Senior Housing Properties Trust | Senior Housing Properties Trust |
| Loan | 10 | 60 East 55th Street | Refinance | Michael Fuchs; Aby Rosen | Michael Fuchs; Aby Rosen |
| Loan | 11 | Embassy Suites Columbus | Refinance | Jeffrey A. Coopersmith; Michael Levin; Benjamin J. Horn; Jeffrey A. Coopersmith, Trustee of the Jeffrey A. Coopersmith 7/27/2015 Amended and Restated Revocable Trust | Jeffrey A. Coopersmith; Michael Levin; Benjamin J. Horn; Jeffrey A. Coopersmith, Trustee of the Jeffrey A. Coopersmith 7/27/2015 Amended and Restated Revocable Trust |
| Loan | 12 | Columbia Gorge Premium Outlets | Acquisition | Francis Greenburger | Francis Greenburger |
| Loan | 13 | Hilton Garden Inn San Leandro | Acquisition | Sheenal Patel; Vamsikrishna Bonthala | Sheenal Patel; Vamsikrishna Bonthala |
| Loan | 14 | Deerbrook Commons | Refinance | Steven Yari | Steven Yari |
| Loan | 15 | 401 South State Street(34)(35)(36) | Acquisition | Steven A. Cuculich, Sr. | Steven A. Cuculich, Sr. |
| Loan | 16 | Oxford Glen Apartments | Refinance | Craig Stansberry | Craig Stansberry |
| Loan | 17 | NY Rite Aid Portfolio | Acquisition | Yerachmeal Jacobson; Marc Jacobowitz | Yerachmeal Jacobson; Marc Jacobowitz |
| Property | 17.01 | Rite Aid - Batavia, NY | |||
| Property | 17.02 | Rite Aid - West Seneca, NY | |||
| Property | 17.03 | Rite Aid - Cheektowaga | |||
| Property | 17.04 | Rite Aid - Greece, NY | |||
| Loan | 18 | Kahana Retail(36) | Refinance | National Credit Tenant Investments, LLC | National Credit Tenant Investments, LLC |
| Loan | 19 | 465 Columbus Ave | Refinance | Capstone Realty Group Holdings, LLC; Kabr Real Estate Investment Partners II, LLC | Capstone Realty Group Holdings, LLC; Kabr Real Estate Investment Partners II, LLC |
| Loan | 20 | Shoppes at Vickery Village | Acquisition | Russell G. Scaramella | Russell G. Scaramella |
| Loan | 21 | San Marin Shopping Center(36) | Refinance | Doerken Properties, Inc | Doerken Properties, Inc |
| Loan | 22 | Mapletree Gardens | Refinance | Mark R. Daronch | Mark R. Daronch |
| Loan | 23 | North Pacific Plaza | Refinance | John M. Klimp | John M. Klimp |
| Loan | 24 | Altmonte Apartments | Refinance | Benjamin J. Cheng | Benjamin J. Cheng |
| Loan | 25 | Fourth & Milliken | Refinance | Kosti Shirvanian | Kosti Shirvanian |
| Loan | 26 | Holiday Inn Express Cocoa Beach | Refinance | Dipak K. Patidar; Bharat Patel | Dipak K. Patidar; Bharat Patel |
| Loan | 27 | Huntington Park | Refinance | Edward P. Lorin; Charles F. Hill | Edward P. Lorin; Charles F. Hill |
| Loan | 28 | Hampton Inn Eugene | Acquisition | Charles Miano; Douglas Brown | Charles Miano; Douglas Brown |
| Loan | 29 | National Self Storage Portfolio | Refinance | John Schatzman; Robert Schoff; Richard Holdridge; Joseph Balsiger | John Schatzman; Robert Schoff; Richard Holdridge; Joseph Balsiger |
| Property | 29.01 | Joe Battle | |||
| Property | 29.02 | North Kenazo | |||
| Loan | 30 | Shady Haven MHC | Refinance | Charles A. Ellis, III; Jennifer A. Ellis; Charles A. Ellis, III as Trustee of The Ellis Family Revocable Trust u/t/d August 1, 2006 | Charles A. Ellis, III; Jennifer A. Ellis; Charles A. Ellis, III as Trustee of The Ellis Family Revocable Trust u/t/d August 1, 2006 |
| Loan | 31 | Emporia Marketplace | Refinance | Joshua S. Peck | Joshua S. Peck |
| Loan | 32 | Fresenius Medical Center Summit | Refinance | The David E. Cunningham Trust Dated June 2, 1998; David E. Cunningham | The David E. Cunningham Trust Dated June 2, 1998; David E. Cunningham |
A-1-10
CD 2016-CD1
ANNEX A-1 - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
| Existing | Future Debt | |||||
| Additional Debt | Permitted | |||||
| Property Flag | ID | Property Name | Previous Securitization | Amount | Existing Additional Debt Description | Type |
| Loan | 1 | 10 Hudson Yards(34)(35) | 1,135,000,000 | 643,100,000 Pari Passu Debt; 191,900,000 Subordinate Secured Debt; 300,000,000 Mezzanine Debt | NAP | |
| Loan | 2 | Fiserv at 2900 Westside | None | NAP | ||
| Loan | 3 | Westfield San Francisco Centre(34) | LBUBS 2007-C1 | 498,000,000 | $373,077,000 Pari Passu Debt; $124,923,000 Subordinate Secured Debt | NAP |
| Loan | 4 | Prudential Plaza(34)(36) | JPMCC 2006-LDP7; JPMCC 2006-CB16 | 365,000,000 | Pari Passu Debt | Mezzanine |
| Loan | 5 | U-Haul AREC Portfolio(34) | 46,000,000 | Pari Passu Debt | NAP | |
| Property | 5.01 | U-Haul N Miami Beach | ||||
| Property | 5.02 | U-Haul Moving & Storage At Oso Blanca | ||||
| Property | 5.03 | U-Haul Moving & Storage Of Spring Valley | ||||
| Property | 5.04 | U-Haul Moving & Storage Of North Brunswick | ||||
| Property | 5.05 | U-Haul Moving & Storage Of Marlboro | ||||
| Property | 5.06 | U-Haul Moving & Storage Of Forestville Rd | ||||
| Property | 5.07 | U-Haul Moving & Storage Of Casa Grande | ||||
| Property | 5.08 | U-Haul Moving & Storage Of East Brunswick | ||||
| Property | 5.09 | U-Haul Coeur D Alene | ||||
| Property | 5.10 | U-Haul Moving & Storage At W Lake Mead Blvd | ||||
| Property | 5.11 | U-Haul Moving & Storage Of Little River | ||||
| Property | 5.12 | U-Haul Moving & Storage At Hwy 13 & Portland Ave | ||||
| Property | 5.13 | U-Haul Storage Of Cumming | ||||
| Property | 5.14 | U-Haul Moving & Storage Of Haines City | ||||
| Property | 5.15 | U-Haul Storage Of Downtown | ||||
| Property | 5.16 | U-Haul Moving & Storage Of Salisbury | ||||
| Property | 5.17 | U-Haul Center Dade County | ||||
| Property | 5.18 | U-Haul Moving & Storage Of Historic Ybor City | ||||
| Property | 5.19 | U-Haul Of Stone Mountain | ||||
| Property | 5.20 | U-Haul Moving & Storage Of Cedar Rapids | ||||
| Property | 5.21 | U-Haul Center North Irby St | ||||
| Property | 5.22 | U-Haul Moving And Storage Of West Warner Robins | ||||
| Property | 5.23 | U-Haul 36th Street | ||||
| Loan | 6 | Birch Run Premium Outlets(34) | WBCMT 2006-C26; WBCMT 2006-C27; RREF 2007-1A | 80,000,000 | Pari Passu Debt | NAP |
| Loan | 7 | Hall Office Park 16 | None | NAP | ||
| Loan | 8 | Gas Company Tower & World Trade Center Parking Garage(34)(35) | JPMCC 2006-LDP8; WBCMT 2006-C28 | 410,000,000 | $104,000,000 Pari Passu Debt; $175,000,000 Subordinate Secured Debt; $131,000,000 Mezzanine Debt | NAP |
| Loan | 9 | Vertex Pharmaceuticals HQ(34)(35) | 590,000,000 | $395,000,000 of pari passu first mortgage debt; $195,000,000 of Mezzanine Debt | NAP | |
| Loan | 10 | 60 East 55th Street | None | NAP | ||
| Loan | 11 | Embassy Suites Columbus | None | NAP | ||
| Loan | 12 | Columbia Gorge Premium Outlets | None | NAP | ||
| Loan | 13 | Hilton Garden Inn San Leandro | None | NAP | ||
| Loan | 14 | Deerbrook Commons | None | NAP | ||
| Loan | 15 | 401 South State Street(34)(35)(36) | 39,794,374 | $31,964,374 Pari Passu Debt; $7,830,000 Mezzanine Debt | Mezzanine | |
| Loan | 16 | Oxford Glen Apartments | CGCMT 2006-C5 | None | NAP | |
| Loan | 17 | NY Rite Aid Portfolio | JPMCC 2005-LDP5 | None | NAP | |
| Property | 17.01 | Rite Aid - Batavia, NY | JPMCC 2005-LDP5 | |||
| Property | 17.02 | Rite Aid - West Seneca, NY | JPMCC 2005-LDP5 | |||
| Property | 17.03 | Rite Aid - Cheektowaga | ||||
| Property | 17.04 | Rite Aid - Greece, NY | JPMCC 2005-LDP5 | |||
| Loan | 18 | Kahana Retail(36) | MLCFC 2006-C1 | None | Mezzanine | |
| Loan | 19 | 465 Columbus Ave | None | NAP | ||
| Loan | 20 | Shoppes at Vickery Village | RAIT 2015-FL4 | None | NAP | |
| Loan | 21 | San Marin Shopping Center(36) | None | Mezzanine | ||
| Loan | 22 | Mapletree Gardens | None | NAP | ||
| Loan | 23 | North Pacific Plaza | None | NAP | ||
| Loan | 24 | Altmonte Apartments | BSCMS 2006-T24 | None | NAP | |
| Loan | 25 | Fourth & Milliken | BSCMS 2006-PW13 | None | NAP | |
| Loan | 26 | Holiday Inn Express Cocoa Beach | BSCMS 2006-PW13 | None | NAP | |
| Loan | 27 | Huntington Park | None | NAP | ||
| Loan | 28 | Hampton Inn Eugene | None | NAP | ||
| Loan | 29 | National Self Storage Portfolio | None | NAP | ||
| Property | 29.01 | Joe Battle | ||||
| Property | 29.02 | North Kenazo | ||||
| Loan | 30 | Shady Haven MHC | None | NAP | ||
| Loan | 31 | Emporia Marketplace | JPMCC 2006-CB16 | None | NAP | |
| Loan | 32 | Fresenius Medical Center Summit | None | NAP |
A-1-11
CD 2016-CD1
FOOTNOTES TO ANNEX A-1
| (1) | GACC—German American Capital Corporation or one of its affiliates; CGMRC—Citigroup Global Markets Realty Corp. or one of its affiliates. |
| (2) | Loan No. 1 – 10 Hudson Yards – The Original Balance ($) and Cut-off Date Balance ($) of $65.0 million represent the senior non-controlling Note A-1-C1 of a $900.0 million whole loan evidenced by 13 promissory notes: 11 pari passu senior notes with an aggregate original principal balance of $708.1 million and two subordinate notes with an aggregate original principal balance of $191.9 million. Two of the senior notes with an aggregate original principal balance of $408.1 million and both of the junior notes were contributed to the Hudson Yards 2016-10HY mortgage trust. The remaining senior notes are expected to be held by Deutsche Bank AG, NY Branch (“DBNY”) or an affiliate and Goldman Sachs Mortgage Company or an affiliate and contributed to one or more future securitizations. |
| Loan No. 3 – Westfield San Francisco Centre – The Original Balance ($) and Cut-off Date Balance ($) of $60.0 million represent the senior non-controlling Notes A-1-EMP-C2, A-1-SFC-C2, A-1-EMP-C3 and A-1-SFC-C3 of a $558.0 million whole loan evidenced by 28 promissory notes: 24 pari passu senior notes with an aggregate original principal balance of $433.077 million and four subordinate notes with an aggregate original principal balance of $124.923 million. Eight of the senior notes with an aggregate original principal balance of $182.019 million and all of the junior notes were contributed to the DBJPM 2016-SFC mortgage trust. Four senior notes were contributed to the DBJPM 2016-C3 mortgage trust. The remaining senior notes are expected to be held by DBNY or an affiliate and JPMorgan Chase Bank, National Association (“JPMCB”) or an affiliate and contributed to one or more future securitizations. | |
| Loan No. 4 – Prudential Plaza – The Original Balance ($) and Cut-off Date Balance ($) of $50.0 million represent non-controlling Note A-2-1 of a $415.0 million whole loan evidenced by six pari passu notes. The controlling Note A-1 with an original principal balance of $115.0 million was contributed to the COMM 2015-CCRE26 mortgage trust. The remaining four pari passu notes in the original principal amount of $250.0 are currently held by GACC or an affiliate and expected to be contributed to one or more future securitizations. | |
| Loan No. 5 – U-Haul AREC Portfolio – The Original Balance ($) and Cut-off Date Balance ($) of $48.5 million represent the controlling Note A-1 of a $94.5 million whole evidenced by two pari passu notes. The pari passu companion loan is the non-controlling Note A-2 in the original principal amount of $46.0 million and was contributed to the DBJPM 2016-C3 mortgage trust. | |
| Loan No. 6 – Birch Run Premium Outlets – The Original Balance ($) and Cut-off Date Balance ($) of $43.0 million represent the aggregate original principal balance of the non-controlling Note A-2-A in the original principal amount of $25.0 million and the non-controlling Note A-4 in the original principal amount of $18.0 million of a $123.0 million whole loan evidenced by six pari passu notes. The pari passu companion loans are the non-controlling Note A-1-A in the original principal amount of $20.0 million which was included in the COMM 2016-DC2 mortgage trust and the non-controlling Note A-1-B in the original principal balance amount of $20.0 million, the non-controlling Note A-2-B in the original principal amount of $10.0 million and the controlling Note A-3 in the original principal balance amount of $30.0 million which are currently held by GACC or an affiliate and expected to be contributed to one or more future securitizations. | |
| Loan No. 8 – Gas Company Tower & World Trade Center Parking Garage – The Original Balance ($) and Cut-off Date Balance ($) of $40.0 million represent the senior non-controlling Note A-1-C of a $319.0 million whole loan evidenced by eight promissory notes: six pari passu senior notes with an aggregate original principal balance of $144.0 million and two subordinate notes with an aggregate original principal balance of $175.0 million. Four of the senior notes with an aggregate original principal balance of $89.0 million and both of the junior notes are expected to be contributed to the COMM 2016-GCT mortgage trust. The remaining senior note is expected to be held by Barclays Bank PLC or an affiliate. | |
| Loan No. 9 – Vertex Pharmaceuticals HQ – The Original Balance ($) and Cut-off Date Balance ($) of $30.0 million represent the non-controlling Note A-5 of a $425.0 million whole loan evidenced by ten pari passu notes. The pari passu companion loans are the controlling Note A-1 in the original principal amount of $80.0 million, which is expected to be included in the WFCM 2016-BNK1 securitization as of the closing date, the non-controlling Note A-2-1, Note A-2-2, Note A-2-3, Note A-3 and Note A-4, in the aggregate original principal |
A-1-12
| amount of $217.5 million, which are all currently held by Morgan Stanley Bank, N.A., and the non-controlling Note A-6-1, Note A-6-2 and Note A-7, in the aggregate original principal amount of $97.5 million, which are currently held by CGMRC. | |
| Loan No. 15 – 401 South State Street – The Original Balance ($) and Cut-off Date Balance ($) of $15.76 million and approximately $15.74 million, respectively, represent the non-controlling Note A-2 of a $47.76 million whole loan evidenced by two pari passu notes. The pari passu companion loan is the controlling Note A-1 in the original principal amount of $32.0 million, which was included in the CGCMT 2016-P4 securitization. | |
| (3) | With respect to any Mortgaged Property securing a multi property Mortgage Loan, the amounts listed under the headings “Original Balance ($)” and “Cut off Date Balance ($)” reflect the Allocated Loan Amount related to such Mortgaged Property. |
| (4) | Loan No. 3 – Westfield San Francisco Centre – The Mortgaged Property consists of approximately 553,366 sq. ft. of retail space and approximately 241,155 sq. ft. of office space. |
| Loan No. 5 – U-Haul AREC Portfolio – The U-Haul AREC Portfolio Mortgaged Properties consists of 23 properties with two additional remote properties rolled up within the parent properties in U-Haul N Miami Beach and U-Haul Moving & Storage Of Salisbury. | |
| Loan No. 8 – Gas Company Tower & World Trade Center Parking Garage – The Mortgaged Property consists of approximately 1.3 million sq. ft. of office space and 10,436 sq. ft. of retail space. In addition, the Gas Company Tower includes 2,165 parking stalls comprised of a 979 stall on-site subterranean parking garage and the 1,186 stall World Trade Center Parking Garage. | |
| Loan No. 20 – Shoppes at Vickery Village – The Mortgaged Property consists of approximately 62,244 sq. ft. of office space and approximately 15,489 sq. ft. of retail space. | |
| (5) | Loan No. 15 – 401 South State Street – The Mortgaged Property has been landmarked by the City of Chicago and is on the National Register of Historic Places, protecting certain features of the Mortgaged Property including portions of interior staircases and the façade. We cannot assure you such designation will not interfere with any redevelopment or future use of the Mortgaged Property. |
| (6) | Loan No. 9 – Vertex Pharmaceuticals HQ – The Vertex Pharmaceuticals HQ Mortgage Loan has an ARD feature with an anticipated repayment date of August 6, 2026, with a revised interest rate equal to the sum of (1) 2.79817647%, plus (2) the product of (A) the quotient of (x) 2.79817647% divided by (y) 3.53000%, multiplied by (B) the difference between (x) the greater of (i) 6.53000% and (ii) the sum of (1) the then effective U.S. swap rate for a swap terminating on the then effective maturity date plus (2) 5.0000%, minus (y) 3.5300%, for the period from the anticipated repayment date through the final maturity date of November 6, 2028. |
| (7) | The Administrative Fee Rate includes the respective per annum rates applicable to the calculation of the servicing fee, any sub-servicing fee, trustee/certificate administrator fee, operating advisor fee and CREFC® license fee with respect to each Mortgage Loan. For purposes of this Annex A-1, the definition of Administrative Fee Rate as it relates to any Non-Serviced Mortgage Loan includes the related Pari Passu Loan Primary Servicing Fee Rate which includes the “primary servicing fee rate” (as defined or set forth in the applicable pooling and servicing agreement) and any other related servicing or any sub-servicing fee rate (other than those payable to the applicable special servicer) applicable to such Non-Serviced Mortgage Loan that constitutes a portion of the “servicing fee rate” applicable to the other master servicer under the applicable other pooling and servicing agreement. The Pari Passu Loan Primary Servicing Fee Rate for the 10 Hudson Yards Loan will be 0.00125%. The Pari Passu Loan Primary Servicing Fee Rate for the Westfield San Francisco Centre Loan will be 0.00125%. The Pari Passu Loan Primary Servicing Fee Rate for the Prudential Plaza Loan will be 0.00250%. The Pari Passu Loan Primary Servicing Fee Rate for the U-Haul AREC Portfolio Loan will be 0.00250%. The Pari Passu Loan Primary Servicing Fee Rate for the Birch Run Premium Outlets Loan will be 0.00250%. The Pari Passu Loan Primary Servicing Fee Rate for the Gas Company Tower & World Trade Center Parking Garage Loan will be 0.00125%. The Pari Passu Loan Primary Servicing Fee Rate for each of the Vertex Pharmaceuticals HQ Loan and 401 South State Street Loan will be 0.00250%. |
| (8) | Annual Debt Service ($), Monthly Debt Service ($), Underwritten NOI DSCR and Underwritten NCF DSCR for Mortgage Loans (i) with partial interest only periods are shown based on the monthly debt service payment |
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| immediately following the expiration of the interest only period and (ii) that are interest only until the related maturity date (or in the case of an ARD loan, the related anticipated repayment date) are shown based on the interest only payments during the 12 month period following the Cut off Date (or, in the case of Monthly Debt Service ($), the average of such interest only payments) without regard to leap year adjustments. | |
| (9) | “Hard” generally means each tenant is required to transfer its rent directly to the lender controlled lockbox account. However, with respect to hospitality properties, “Hard” means all credit card receipts are deposited directly into the lockbox by the card processing company and all over the-counter cash and equivalents are required to be deposited by the property manager or borrower into the lockbox. “Soft” means the borrower has established a lockbox account that will be under lender control and the borrower or property manager is required to collect rents from the tenants and then deposit those rents into such lockbox account. “Springing Soft” means that upon the occurrence of a trigger event (as specified in the related Mortgage Loan Documents), the borrower is required to establish a lockbox account that will be under lender control and the borrower or property manager is required to collect rents from the tenants and then deposit those rents into such lockbox account. “Springing Hard” means that upon a trigger event (as specified in the related Mortgage Loan Documents), each tenant will be required to transfer its rent directly to a lender controlled lockbox. “Soft Springing Hard” means that the borrower has established a lockbox account that will be under lender control and the borrower or property manager is required to collect rents from the tenants and then deposit those rents into such lockbox account. Upon a trigger event (as specified in the related Mortgage Loan documents), each tenant will be required to transfer its rent directly into a lender-controlled lockbox. |
| (10) | “In Place” means that related property cash flows go through a waterfall of required reserve or other payment amounts due before the lender either (i) disburses excess cash to the related borrower or (ii) retains excess cash as additional collateral for the Mortgage Loan. “Springing” means that upon the occurrence of a trigger event, as defined in the related Mortgage Loan Documents, In Place cash management (as described above) will take effect, and will generally continue until all trigger events are cured (to the extent a cure is permitted under the related Mortgage Loan Documents). |
| (11) | Loan No. 1 – 10 Hudson Yards – The Underwritten NOI DSCR, Underwritten NCF DSCR, Cut-off Date LTV Ratio, LTV Ratio at Maturity or ARD, Underwritten NOI Debt Yield, Underwritten NCF Debt Yield and Loan per Net Rentable Area (SF/Units/Rooms) ($) are calculated based on the Mortgage Loan included in the issuing entity and the related pari passu companion loans in the aggregate and exclude the 10 Hudson Yards subordinate companion loans and mezzanine debt. |
| Loan No. 3 – Westfield San Francisco Centre – The Underwritten NOI DSCR, Underwritten NCF DSCR, Cut-off Date LTV Ratio, LTV Ratio at Maturity or ARD, Underwritten NOI Debt Yield, Underwritten NCF Debt Yield and Loan per Net Rentable Area (SF/Units/Rooms) ($) are calculated based on the Mortgage Loan included in the issuing entity and the related pari passu companion loans in the aggregate and exclude the Westfield San Francisco Centre subordinate companion loan. | |
| Loan No. 4 – Prudential Plaza – The Underwritten NOI DSCR, Underwritten NCF DSCR, Cut-off Date LTV Ratio, LTV Ratio at Maturity or ARD, Underwritten NOI Debt Yield, Underwritten NCF Debt Yield and Loan per Net Rentable Area (SF/Units/Rooms) ($) are calculated based on the Mortgage Loan included in the issuing entity and the related pari passu companion loans in the aggregate. | |
| Loan No. 5 – U-Haul AREC Portfolio – The Underwritten NOI DSCR, Underwritten NCF DSCR, Cut-off Date LTV Ratio, LTV Ratio at Maturity or ARD, Underwritten NOI Debt Yield, Underwritten NCF Debt Yield and Loan per Net Rentable Area (SF/Units/Rooms) ($) are calculated based on the Mortgage Loan included in the issuing entity and the related pari passu companion loan in the aggregate. | |
| Loan No. 6 – Birch Run Premium Outlets – The Underwritten NOI DSCR, Underwritten NCF DSCR, Cut-off Date LTV Ratio, LTV Ratio at Maturity or ARD, Underwritten NOI Debt Yield, Underwritten NCF Debt Yield and Loan per Net Rentable Area (SF/Units/Rooms) ($) are calculated based on the Mortgage Loan included in the issuing entity and the related pari passu companion loans in the aggregate. | |
| Loan No. 8 – Gas Company Tower & World Trade Center Parking Garage – The Underwritten NOI DSCR, Underwritten NCF DSCR, Cut-off Date LTV Ratio, LTV Ratio at Maturity or ARD, Underwritten NOI Debt Yield, Underwritten NCF Debt Yield and Loan per Net Rentable Area (SF/Units/Rooms) ($) are calculated based on the Mortgage Loan included in the issuing entity and the related pari passu companion loans in the aggregate |
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| and exclude the Gas Company Tower & World Trade Center Parking Garage subordinate companion loan and mezzanine debt. | |
| Loan No. 15 – 401 South State Street – The Underwritten NOI DSCR, Underwritten NCF DSCR, Cut-off Date LTV Ratio, LTV Ratio at Maturity or ARD, Underwritten NOI Debt Yield, Underwritten NCF Debt Yield and Loan per Net Rentable Area (SF/Units/Rooms) ($) are calculated based on the Mortgage Loan included in the issuing entity and the related pari passu companion loans in the aggregate and exclude mezzanine debt. | |
| (12) | Loan No. 1 – 10 Hudson Yards – The Underwritten NOI DSCR, Underwritten NCF DSCR, Cut-off Date LTV Ratio, LTV Ratio at Maturity or ARD, Underwritten NOI Debt Yield, Underwritten NCF Debt Yield and Loan per Net Rentable Area (SF/Units/Rooms) ($) calculations exclude 10 Hudson Yards subordinate secured debt. |
| Loan No. 3 – Westfield San Francisco Centre – The Underwritten NOI DSCR, Underwritten NCF DSCR, Cut-off Date LTV Ratio, LTV Ratio at Maturity or ARD, Underwritten NOI Debt Yield, Underwritten NCF Debt Yield and Loan per Net Rentable Area (SF/Units/Rooms) ($) calculations exclude Westfield San Francisco Centre subordinate secured debt. | |
| Loan No. 8 – Gas Company Tower & World Trade Center Parking Garage – The Underwritten NOI DSCR, Underwritten NCF DSCR, Cut-off Date LTV Ratio, LTV Ratio at Maturity, Underwritten NOI Debt Yield, Underwritten NCF Debt Yield and Loan per Net Rentable Area (SF/Units/Rooms) ($) calculations exclude the Gas Company Tower & World Trade Center Parking Garage subordinate companion loan. | |
| (13) | The grace periods noted under “Grace Period” reflect the number of days of grace before a payment default is an event of default. Certain jurisdictions impose a statutorily longer grace period. Certain of the Mortgage Loans may additionally be subject to grace periods with respect to the occurrence of an event of default (other than a payment default) and/or commencement of late charges which are not addressed in Annex A 1 to this preliminary prospectus. |
| Loan No. 3 – Westfield San Francisco Centre – The late payment fee will be waived if any principal, interest or any other sum due under the loan documents (other than the outstanding principal balance due and payable on the maturity date) is paid within five business days following the date on which it is due. | |
| Loan No. 6 – Birch Run Premium Outlets – The late payment fee will be waived if any principal, interest or any other sum due under the loan documents (other than the outstanding principal balance due and payable on the maturity date) is paid within five business days following the date on which it is due. | |
| Loan No. 7 – Hall Office Park 16 - The late payment fee will be waived if any principal, interest or any other sum due under the loan documents (other than the outstanding principal balance due and payable on the maturity date) is paid within five business days following the date on which it is due. | |
| (14) | Loan No. 1 – 10 Hudson Yards – The Cut-off Date LTV Ratio, LTV Ratio at Maturity and Appraised Value ($) are based on the “Hypothetical As-Is” appraised value of $2.15 billion as of July 1, 2016. The “Hypothetical As-Is” appraised value assumes the remaining obligations and costs of approximately $108.6 million, consisting of approximately $50.1 million in hard/direct costs, $5.7 million in project contingency, $29.1 million in tenant improvements and $14.7 million in soft/indirect costs are expended as of July 1, 2016. As of August 1, 2016, approximately $91.0 million of contractual obligations and costs remain unexpended. Such amount was reserved upon origination of the Whole Loan. Based on the “As-Is” Appraised Value of $2.05 billion as of July 1, 2016, the Cut-off Date LTV Ratio and LTV Ratio at Maturity are 34.5% and 34.5%, respectively. |
| Loan No. 7 – Hall Office Park 16 – The Cut-off Date LTV Ratio, LTV Ratio at Maturity and Appraised Value ($) are based on the “As-Is with Reserves” appraised value of $56.13 million as of June 30, 2016. The “As-Is with Reserves” value reflects the scheduled outstanding tenant improvement, leasing commission, rent reserves and rent abatement costs that were reserved at loan origination. Based on the “As-is” appraised value of $52.6 million as of June 30, 2016, the Cut-off Date LTV and LTV Ratio at Maturity are 79.8% and 63.6%, respectively. | |
| Loan No. 13 – Hilton Garden Inn San Leandro – The Cut-off Date LTV Ratio, LTV Ratio at Maturity or ARD and Appraised Value ($) are based on the “As Stabilized” value of $34.3 million, which assumes the completion of PIP renovations, the costs of which were reserved at loan origination. Based on the “As-is” appraised value of $28.5 million, the Cut-off Date LTV is 71.1%. |
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| Loan No. 26 – Huntington Park – The Cut-off Date LTV Ratio, LTV Ratio at Maturity and Appraised Value ($) are based on the “As Complete” appraised value of $8.7 million as of May 1, 2017. The “As Complete” value reflects the completion of planned renovations at the Mortgaged Property which were reserved at loan origination. Based on the “As-is” appraised value of $8.5 million as of April 28, 2016, the Cut-off Date LTV and LTV Ratio at Maturity are 69.4% and 56.6%, respectively. | |
| Loan No. 28 – Hampton Inn Eugene – The Cut-off Date LTV Ratio, LTV Ratio at Maturity and Appraised Value ($) are based on the “As Complete/Stabilized” appraised value of $8.6 million as of May 23, 2017. The “As Complete” value assumes the completion of a PIP renovation at the Mortgaged Property. Based on the “As-is” appraised value of $7.3 million as of May 23, 2016, the Cut-off Date LTV and LTV Ratio at Maturity are 77.6% and 62.9%, respectively. | |
| (15) | Prepayment Provisions are shown from the respective Mortgage Loan First Payment Date. |
| L(x)” means lock-out for x payments. | |
| “D(x)” means may be defeased for x payments. | |
| “YM1(x)” means may be prepaid for x payments with payment of the greater of a yield maintenance charge and 1% of the amount prepaid. | |
| “DorYM1(x)” means may be prepaid for x payments with either defeasance or a yield maintenance charge or 1% of the amount prepaid. | |
| “DorYM0.5(x)” means may be prepaid for x payments with either defeasance or a yield maintenance charge or 0.5% of the amount prepaid. | |
| “DorYM0(x)” means may be prepaid for x payments with either defeasance or a yield maintenance charge. | |
| “O(x)” means freely prepayable for x payments, including the maturity date or anticipated repayment date. | |
| Certain of the Mortgage Loans permit the release of a portion of a Mortgaged Property (or an individual Mortgaged Property, in connection with a portfolio mortgage loan) under various circumstances, as described in this preliminary prospectus. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans—Partial Releases” in this preliminary prospectus. In addition, certain of the Mortgage Loans permit the borrower to prepay a portion of the Mortgage Loan to avoid or cure a cash sweep period due to a low debt yield or debt service coverage ratio trigger. See “Description of the Mortgage Pool—Certain Terms of the Mortgage Loans— Prepayment Protections and Certain Involuntary Prepayments” in this preliminary prospectus. | |
| (16) | Loan No. 1 – 10 Hudson Yards – The lockout period will be at least 24 payment dates beginning with and including the first payment date of September 6, 2016. Defeasance of the full $900.0 million 10 Hudson Yards Whole Loan is permitted after the date that is the earlier to occur of (i) two years after the closing date of the securitization that includes the last pari passu note to be securitized and (ii) August 1, 2019. The assumed lockout period of 24 payments is based on the expected CD 2016-CD1 securitization closing date in August 2016. The actual lockout period may be longer. |
| Loan No. 3 – Westfield San Francisco Centre – The lockout period will be at least 24 payment dates beginning with and including the first payment date of September 1, 2016. Defeasance of the full $558.0 million Westfield San Francisco Centre Whole Loan is permitted after the date that is the earlier to occur of (i) two years after the closing date of the securitization that includes the last pari passu note to be securitized and (ii) August 1, 2019. The assumed lockout period of 24 payments is based on the expected CD 2016-CD1 securitization closing date in August 2016. The actual lockout period may be longer. | |
| Loan No. 4 – Prudential Plaza - On July 26, 2016, the holder of the non-controlling Note A-2-1, together with the other non-controlling pari passu companion notes (the “REMIC Election Notes”) made a REMIC election with respect to the REMIC Election Notes. As such, the defeasance lockout period for the Prudential Plaza Whole Loan will be through the first payment date after July 26, 2018. For additional information regarding the REMIC Election Notes, see “Material Federal Income Tax Considerations” in the Prospectus. | |
| Loan No. 5 – U-Haul AREC Portfolio – The lockout period will be at least 24 payment dates beginning with and including the first payment date of September 6, 2016. Defeasance of the full $94.5 million U-Haul AREC |
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| Portfolio Whole Loan is permitted two years after the closing date of the securitization that includes the last pari passu note to be securitized. The assumed lockout period of 24 payments is based on the expected CD 2016-CD1 securitization closing date in August 2016. The actual lockout period may be longer. | |
| Loan No. 6 – Birch Run Premium Outlets – The lockout period will be at least 30 payment dates beginning with and including the first payment date of March 6, 2016. Defeasance of the full $123.0 million Birch Run Premium Outlets Whole Loan is permitted after the date that is the earlier to occur of (i) two years after the closing date of the securitization that includes the last pari passu note to be securitized and (ii) March 6, 2019. The assumed lockout period of 30 payments is based on the expected CD 2016-CD1 securitization closing date in August 2016. The actual lockout period may be longer. | |
| Loan No. 9 – Vertex Pharmaceuticals HQ – The lockout period will be at least 24 payment dates beginning with and including the first payment date of September 6, 2016. Defeasance of the full $425.0 million Vertex Pharmaceuticals HQ Whole Loan is permitted after the date that is earlier to occur of (i) two years after the closing date of the securitization that includes the last pari passu note to be securitized and (ii) the date that is 42 months after the origination date. The assumed lockout period of 24 payments is based on the expected CD 2016-CD1 securitization closing date in August 2016. The actual lockout period may be longer. | |
| (17) | Loan No. 6 – Birch Run Premium Outlets - The borrower may, without lender consent, transfer any non-income producing portion of the Mortgaged Property to third parties or affiliates of the borrower. st. |
| Loan No. 19 – 465 Columbus Ave – On any date after the expiration of the lockout period, the borrower may obtain the release of an unimproved release parcel, as described in Schedule VII in the loan agreement, provided that, among other things: (i) the release parcel is a legally subdivided parcel from the Mortgaged Property and is a separate tax lot from the Mortgaged Property; (ii) the conveyance of the release parcel does not adversely affect the use or operation of, or access to or from, the portion of the Mortgaged Property and (iii) the LTV of the remaining Mortgaged Property, after release of the release parcel, is greater than 125% of the unpaid principal balance of the Mortgage Loan. | |
| Loan No. 20 – Shoppes at Vickery Village – The borrower may transfer an outparcel at the Mortgaged Property to a third party and obtain the release of such outparcel, provided that, among other things: (i) the borrower delivers to the lender evidence satisfactory to the lender that (x) after giving effect to the outparcel release, the remaining Mortgaged Property would, among other things, constitute one or more separate tax lots from the released outparcel, comply with zoning and parking requirements and have available to it all necessary utility and other services for its development, use, occupancy and operation and (y) the owner of the released outparcel will comply with the anti-poaching restrictions that restrict solicitation of tenants at the Mortgaged Property to relocate to the released outparcel; and (ii) if required or requested, as applicable, by the lender, the borrower delivers to the lender (x) a rating agency confirmation and (y) a REMIC opinion with respect to the release. In addition, if at the time of such release the loan-to-value ratio of the remaining Mortgaged Property would exceed 125% immediately after such release, then the related borrower is required to pay down the outstanding principal balance of the Mortgage Loan by a “qualified amount,” as that term is defined in the IRS Revenue Procedure 2010-30 (as the same may be amended or modified from time to time), unless the lender receives an opinion of counsel that, if the foregoing prepayment is not made, any applicable securitization trust will not fail to maintain its status as a REMIC as a result of such release. | |
| Loan No. 31 – Emporia Marketplace – The borrower may transfer an outparcel at the Mortgaged Property to a third party and obtain the release of such outparcel, provided that, among other things: (i) the borrower delivers to the lender evidence satisfactory to the lender that (x) after giving effect to the outparcel release, the remaining Mortgaged Property would, among other things, constitute one or more separate tax lots from the released outparcel, comply with zoning and parking requirements and have available to it all necessary utility and other services for its development, use, occupancy and operation and (y) the owner of the released outparcel will comply with the anti-poaching restrictions that restrict solicitation of tenants at the Mortgaged Property to relocate to the released outparcel; and (ii) if required or requested, as applicable, by the lender, the borrower delivers to the lender (x) a rating agency confirmation and (y) a REMIC opinion with respect to the release. In addition, if at the time of such release the loan-to-value ratio of the remaining Mortgaged Property would exceed 125% immediately after such release, then the related borrower is required to pay down the outstanding principal balance of the Mortgage Loan by a “qualified amount,” as that term is defined in the IRS Revenue Procedure 2010-30 (as the same may be amended or modified from time to time), unless the lender |
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| receives an opinion of counsel that, if the foregoing prepayment is not made, any applicable securitization trust will not fail to maintain its status as a REMIC as a result of such release. | |
| (18) | Loan No. 1 – 10 Hudson Yards – The borrower, who owns the fee simple interest in the Mortgaged Property, has entered into (i) a company lease agreement, dated as of August 1, 2016 (the “Company Lease”), between the borrower, as landlord, and the New York City Industrial Development Agency (the “IDA”), as tenant, pursuant to which borrower leased the Mortgaged Property to the IDA, and (ii) an agency lease agreement, dated as of August 1, 2016 (the “IDA Lease”), between the IDA, as sublandlord, and the borrower, as subtenant, pursuant to which the IDA subleased the Mortgaged Property to the borrower. The Company Lease and the IDA Lease each have terms expiring on June 30, 2043, approximately 17 years beyond the maturity of the Mortgage Loan, with no extension options. During the term of the IDA Lease, the borrower is required to make payments in lieu of New York City real property taxes (“PILOT”) with respect to the Mortgaged Property in the amounts set forth in a schedule to the IDA Lease. Real estate taxes were underwritten on the basis of the PILOT payments. The borrower’s obligation to pay PILOT under the IDA Lease is secured by three fee and leasehold PILOT mortgages (collectively, the “PILOT Mortgages”), from the borrower and the IDA in favor of the Hudson Yards Infrastructure Corporation (“HYIC”) in the aggregate principal amount of $475,000,000 encumbering the borrower’s fee interest in the Mortgaged Property and subtenant’s interest under the IDA Lease and the IDA’s interest under the Company Lease. The liens of the PILOT Mortgages are senior in priority to the Mortgage securing the 10 Hudson Yards Whole Loan. |
| Loan No. 2 – Fiserv at 2900 Westside - In order to obtain and maintain certain real property tax abatements, the predecessor to the borrower entered into a municipal bond structure with the local development authority, the Development Authority of Alpharetta (the “DAA”) pursuant to which, the DAA acquired the fee interest in the Mortgaged Property in 2014 and issued certain municipal bonds (the “DAA Bonds”). In exchange, the predecessor to the borrower obtained the leasehold interest in the Mortgaged Property from the DAA and received 100% of the DAA Bonds. In connection with the acquisition of the Mortgaged Property, the borrower acquired ownership of the leasehold interest in the property, subject to the DAA’s temporary fee interest. The rent payable by the borrower to the DAA under the ground lease is equal to the principal and interest payments due to the borrower under the DAA Bonds and, therefore the rental payments and bond payments offset each other. At any time prior to December 31, 2025, the borrower is entitled to purchase the Mortgaged Property back from the DAA, terminate the ground lease and Fiserv at 2900 Westside Property will automatically be released from the lien of the subordinate mortgage. In order to effectuate the purchase, (i) the DAA has executed a deed conveying the property to the borrower, which deed is currently held in escrow with a third party escrow agent and (ii) such deed of conveyance will be recorded upon the surrender of the DAA Bonds by the borrower to the bond trustee and payment of certain nominal fees and expenses in connection with such surrender. The loan documents require borrower to exercise this purchase option at the expiration of the ground lease term on December 31, 2025 and the fee interest will revert to the borrower. The DAA Bonds are additional collateral for the Mortgage Loan and the DAA has encumbered its fee interest in the Mortgaged Property in favor of the lender. | |
| Loan No. 5 – U-Haul AREC Portfolio – Certain of the Mortgaged Properties are secured by the borrowers’ leasehold interest in the Mortgaged Property along with the corresponding fee simple interest of the ground lessor in such Mortgaged Property. As such, the borrowers’ interest in each Mortgaged Property is deemed to be a fee interest. | |
| (19) | The following Mortgaged Properties consist, in whole or in part, of the respective borrower’s interest in one or more ground leases, space leases, air rights leases or other similar leasehold interests: |
| Loan No. 3 – Westfield San Francisco Centre – The San Francisco Centre portion of the Mortgaged Property is subject to a ground lease with an initial expiration of June 30, 2043 and includes one renewal option for a 15-year term. | |
| (20) | Loan No. 8 – Gas Company Tower & World Trade Center Parking Garage – The Largest Tenant, Southern California Gas Co., occupies various spaces at the Mortgaged Property that represent in the aggregate 34.2% of the Mortgaged Property’s net rentable area with various lease expirations. The expiration date with respect to 385,057 sq. ft. (28.1% of the Mortgaged Property’s net rentable area) is October 31, 2026. The expiration date with respect to 56,014 sq. ft. (4.1% of the Mortgaged Property’s net rentable area) is March 31, 2019. The expiration date with respect to 28,007 sq. ft. (2.0% of the Mortgaged Property’s net rentable area) is December 31, 2017. |
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| Loan No. 19 – 465 Columbus Ave – The Second Largest Tenant, Westchester Health Associates, occupies three spaces representing 14.3% of the NRA with various lease expirations. The expiration date with respect to one space totaling 9,744 sq. ft. (9.9% of the Mortgaged Property’s net rentable area) is January 31, 2027. The expiration date with respect to the remaining two spaces totaling 4,289 sq. ft. (4.4% of the Mortgaged Property’s net rentable area) is February 28, 2027. | |
| Loan No. 20 – Shoppes at Vickery Village – The Largest Tenant, The ReThink Group, occupies three spaces, representing in the aggregate 15.3% of the NRA, with various lease expirations. Two spaces with a combined 9,250 sq. ft. expire in December 2020 and one space of 2,675 sq. ft. expires in March 2018. | |
| (21) | The lease expiration dates shown are based on full lease terms. However, in certain cases, a tenant may have the option to terminate its lease or abate rent prior to the stated lease expiration date for no reason after a specified period of time and/or upon notice to the landlord or upon the occurrence of certain contingencies including, without limitation, if landlord violates the lease or fails to provide utilities or certain essential services for a specified period or allows certain restricted uses, upon interference with tenant’s use of access or parking, upon casualty or condemnation, for zoning violations, if certain anchor or key tenants (including at an adjacent property) or a certain number of tenants go dark or cease operations, if a certain percentage of the net rentable area at the property is not occupied, if the tenant fails to meet sales targets or business objectives, or, in the case of a government tenant, for lack of appropriations or other reasons. In addition, in some instances, a tenant may have the right to assign its lease and be released from its obligations under the subject lease. Furthermore, some tenants may have the option to downsize their rented space without terminating the lease completely. In addition to the foregoing, the following are non contingent early termination options for those tenants listed in Annex A 1: |
| Loan No. 1 – 10 Hudson Yards – The Third Largest Tenant, BCG, has a one-time right to reduce its leased space by up to two full contiguous floors (either in the top half or bottom half of their space), which right may be exercised either (i) between January 31, 2026 and January 31, 2027 or (ii) between January 31, 2028 and January 31, 2029, with 18 months’ prior written notice and payment of a contraction fee. | |
| Loan No. 2 – Fiserv at 2900 Westside – The Sole Tenant, Fiserv, has two contraction options which can be executed with at least 12 months written notice. The first contraction option allows Fiserv to contract up to one full floor in the East Building, effective as of December 31, 2020. The second contraction option allows Fiserv to contract up to two full floors in the East Building, inclusive of any space contracted by exercise of the first contraction option, effective as of December 31, 2022. If the second contraction option is exercised, the space contracted must be contiguous space to any space contracted through exercise of the first contraction space and include the balance of the floor on which the first contraction space was located if the first contraction options is less than one full floor. Any space contracted through exercise of either the first or second contraction option must consist of at least one-half of the rentable sq. ft. on a floor. | |
| Loan No. 3 – Westfield San Francisco Centre – The Largest Tenant, San Francisco State University, has a termination option for the entirety of its space effective December 31, 2018 and requires notice by September 30, 2017, and payment of a termination fee equal to the then unamortized sum of (A) the total tenant improvement allowance granted to the tenant and (B) the total amount of brokerage commissions paid by the landlord. | |
| Loan No. 4 – Prudential Plaza – The Second Largest Tenant, Clark Hill, has the right to terminate its lease beginning on the last day of the 10th year of the lease term, upon at least 15 months prior written notice, subject to a termination fee equal to then unamortized leasing costs associated with the Clark Hill lease amortized at a rate of 8% per year. The Fifth Largest Tenant, The Prudential Insurance Company, has the right to terminate its lease beginning on July 31, 2022 upon 12 months written notice, subject to a termination fee equal to (i) two times the monthly gross rent and (ii) the then unamortized leasing costs associated with the Prudential Insurance Company lease amortized at a rate of 8% per year. | |
| Loan No. 7 – Hall Office Park 16 – The Second Largest Tenant, Jamba Juice Company, has the right to terminate its lease effective April 30, 2024, upon 12 months’ notice and payment of a termination fee equal to four months’ rent and any unamortized leasing costs at 8.0%. The Fourth Largest Tenant, Amica Insurance, has a one-time right to terminate its lease at any time on October 31, 2020, with nine months’ notice, subject to a termination fee equal to (i) two times the monthly gross rent and (ii) unamortized leasing costs at 8.0%. |
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| Loan No. 8 – Gas Company Tower & World Trade Center Parking Garage – The Largest Tenant, Southern California Gas Co., has a termination option for the entirety of its space leased pursuant to its main lease effective November 9, 2021 upon notice by May 9, 2020, and payment of a termination fee equal to the then unamortized sum of (A) the total tenant improvement allowance granted to the tenant and (B) the free rent paid by the landlord. The Largest Tenant, Southern California Gas Co., also has seven contraction options; (i) the ongoing right to terminate Suite 270 upon three months written notice; (ii) the one-time right to contract one full floor, either the uppermost or lowest full floor or their space at the Mortgaged Property, on November 9, 2019 upon notice given on August 9, 2018; (iii) provided that if the tenant does not exercise the preceding right to contract a full floor, the tenant may contract up to two full floors of its space consisting of (a) the two uppermost floors or (b) two lowest full floors with payment of a termination fee equal to the sum of the unamortized TI/LC and free rent. Notice of election to contract space must be given on or before (A) August 9, 2019 if the tenant is only terminating one floor, and (B) May 19, 2019 if the tenant is terminating two floors; (iv) a one-time right to terminate up to 12,805 sq. ft. in Suite 2200 on December 31, 2016 upon three months written notice; (v) may terminate Suite 2300 effective March 24, 2017 or March 24, 2018 upon six months written notice; (vi) a one-time right to contract 14,500 sq. ft. in Suite 2800 effective July 31, 2017 upon written notice on April 30, 2017 and (vii) an ongoing right to terminate 10,655 sq. ft. of storage space in suites 0650S, GE05, P604, P605, P706, P717 upon 30 days’ notice. The Second Largest Tenant, Sidley Austin LLP, has a contraction right effective as of December 31, 2018 with notice by December 31, 2017. Contraction space can be one full floor or all of the tenant’s continuous space on any floor where the tenant leases a portion of the floor and will either be the uppermost or lowermost floor of Sidley Austin’s contiguous floors or any noncontiguous floor subject to a contraction fee equal to the sum of (a) unamortized free rent, tenant improvement allowance, early refurbishment allowance, brokerage fees and commissions, and (b) three months of base rent and additional rent/pass through. The Third Largest Tenant, Deloitte, has a one-time right to contract up to one full floor of either the highest or lowest floor of the tenant’s space. Deloitte must exercise the right on or before November 30, 2021 which contraction becomes effective February 28, 2023. The contraction fee is equal to a sum of the unamortized concessions, leasehold improvements, any free rent and brokerage fees. | |
| Loan No. 14 – Deerbrook Commons – The Third Largest Tenant, The Woodland Religious Community Inc., has the ongoing right to terminate its lease effective September 30 of each year of the lease term through September 30, 2019 upon written notice 60 days prior to the termination date and the payment of a termination fee equal to the borrower’s unamortized lease costs. | |
| Loan No. 19 – 465 Columbus Ave – The Largest Tenant, the NYC Department of Environmental Protection, has the right to terminate its lease effective April 2018, April 2020 and April 2022 upon one year’s prior written notice. The Second Largest Tenant, Westchester Health Associates, has the right to terminate its lease effective July 2021 and July 2023 upon eight month’s written notice. | |
| Loan No. 31 – Emporia Marketplace – The Second Largest Tenant, Peebles, has the right to terminate its lease at any time by written notice if, for a period of 12 months, more than 30% of the gross leasable area of the Mortgaged Property (excluding the Peebles space) is closed for business to the public. | |
| (22) | The following major tenants (listed on Annex A-1) are currently subleasing all or a significant portion of its leased space: |
| Loan No. 3 – Westfield San Francisco Centre – The Largest Tenant, San Francisco State University, is subleasing approximately 18,354 sq. ft. to San Francisco Examiner and approximately 18,712 sq. ft. to Westfield Labs. The sub-leased premises will be subject to the San Francisco State University lease that expires December 31, 2021. In addition, the Second Largest Tenant, Crunchyroll, Inc., is subleasing approximately 30,000 sq. ft. to GoPro, Inc. The sublease expires in June, 2017. During the sublease period, Crunchyroll, Inc. is required to pay the borrower, as additional rent, 50% of all rent, additional rent or other consideration paid by GoPro, Inc. to Crunchyroll, Inc. in excess of the rent and additional rent already payable for such space under the prime lease. The lender did not include any related sublease income in its underwriting | |
| Loan No. 4 – Prudential Plaza – McGraw Hill Financial, Inc. is currently a tenant under various leases that represent in the aggregate 175,888 square feet, of which 151,662 sq. ft. will expire on November 30, 2016. McGraw Hill Financial, Inc. currently subleases 23,199 sq. ft. to The University of Chicago and 49,998 sq. ft. to McDermott Will & Emery LLP, with both subleases expiring on November 30, 2016. McDermott Will & Emery LLP has signed a direct lease to take over the space that it is currently subleasing from McGraw Hill Financial, |
A-1-20
| Inc. when McGraw Hill Financial, Inc.’s lease expires on November 30, 2016. Other than the lease for 24,226 sq. ft. that expires on November 30, 2026, the McGraw Hill Financial, Inc. leased space was not given any value in underwriting the Prudential Plaza Whole Loan. | |
| (23) | The following major tenants shown on Annex A-1 have abated, free or prepaid rent: |
| Loan No. 1 – 10 Hudson Yards – At origination the borrower deposited $34,160,073 into an free rent reserve account of which $1,851,106 is related to the Second Largest Tenant, L’Oreal, $12,032,622 is related to the Third Largest Tenant, BCG, $10,529,239 is related to the Fourth Largest Tenant, SAP and $3,367,625 related to the Fifth Largest Tenant, Intersection. | |
| Loan No. 4 – Prudential Plaza – At origination, the borrower deposited $12,911,435 into a free rent reserve for existing rent abatement amounts for monthly payments starting August 2015 through June 2017 for free rents. | |
| Loan No. 7 – Hall Office Park 16 – At origination, the borrower deposited approximately $1,200,786 into a rent abatement reserve account of which $529,855 is related to the Largest Tenant, Paycor, and $609,144 related to the Second Largest Tenant, Jamba Juice. | |
| Loan No. 8 – Gas Company Tower & World Trade Center Parking Garage – At origination, the borrower deposited $4,478,325 into a free rent reserve account of which $4,160,360 relates to a free rent period for the Largest Tenant, Southern California Gas Co. through October 2016 and $317,695 of which relates to the Third Largest Tenant, Latham & Watkins. | |
| Loan No. 10 – 60 East 55th Street – At origination, the borrower deposited $257,500 into a free rent reserve account with respect to the second largest tenant, Sweetgreen, for six months of free rent. | |
| (24) | The tenants shown in the Annex A-1 have signed leases but may or may not be open for business as of the Cut-off Date of the securitization. |
| Loan No. 1 – 10 Hudson Yards – The Third Largest Tenant, BCG, is expected to take occupancy by the end of 2016, with rent commencing in May 2017. The Fourth Largest Tenant, SAP, is expected to take occupancy in the fall of 2016, with rent commencing in June 2017. The Fifth Largest Tenant, Intersection, is expected to take occupancy in the fall of 2016, with rent commencing in January 2017 for the space on the 26th floor and July 2017 for the space on the 27th floor. | |
| Loan No. 4 – Prudential Plaza – The Largest Tenant, Optiver US LLC, currently occupies approximately 73,779 sq. ft. at the Mortgaged Property, has entered into a lease to occupy an additional approximately 25,450 sq. ft., which will commence in May 2017. In addition, the Second Largest Tenant, Clark Hill, has entered into a lease to occupy approximately 71,813 sq. ft. which will commence in January 2017. | |
| Loan No. 7 – Hall Office Park 16 – The Second Largest Tenant, Jamba Juice Company, has entered into a lease to occupy approximately 25,381 sq. ft., which will commence in October 2016. The Largest Tenant, Paycor, has entered into a lease to expand its space by 25,321 sq. ft. and is expected to take occupancy effective August 2016. | |
| Loan No. 9 – Vertex Pharmaceuticals HQ – The Fourth Largest Tenant, which totals 0.6% of the net rentable area, represents unoccupied space that is master leased by an affiliate of the original developer of the property. Underwritten revenues include income from the Fourth Largest Tenant. | |
| Loan No. 10 – 60 East 55th Street – The Second Largest Tenant, Sweetgreen, which leases approximately 12.4% of the NRA at the Mortgaged Property, has executed a lease but has not commenced paying rent. At origination, the borrower deposited $1,545,000 (3 years’ worth of Sweetgreen rent) into a holdback reserve account; provided, that such funds were released to the borrower following the borrower’s satisfaction of certain conditions, including that the lender is in receipt of an executed commencement date agreement between the borrower and Sweetgreen confirming among other things that the lease commencement date is deemed to be July 25, 2016. In addition, at origination, the borrower deposited $257,500 into a free rent reserve account. | |
| Loan No. 14 – Deerbrook Commons – The Fifth Largest Tenant, Deerbrook Beauty Supply, has entered into a lease to occupy approximately 6,416 sq. ft., which will commence in August 2016. |
A-1-21
| Loan No. 20 – Shoppes at Vickery Village – The Largest Tenant, The ReThink Group, has commenced paying rent for its retail space at the Mortgaged Property (5.1% of the NRA) but is not yet opened for business. The tenant also occupies two office spaces currently open for business at the Mortgaged Property, which total 10.3% of the NRA. | |
| (25) | Loan No. 14 – Deerbrook Commons – The Largest Tenant at the Mortgaged Property, Spirit Halloween, is currently occupying 29,500 sq. ft. of net rentable area on a lease that expires on November 16, 2016. The tenant was not included in the Most Recent Occupancy calculation and the lender did not include any related income in its underwriting. |
| (26) | Loan No. 12 – Columbia Gorge Premium Outlets – The borrowers, Austell Columbia Gorge Equities LLC, TEI Diversified Columbia Gorge LLC and TEI Columbia Gorge Investors LLC are structured as tenants-in-common and are each Delaware limited liability companies, respectively, each a single purpose entity structured to be bankruptcy-remote, with one independent director in its organizational structure. The sponsor of the borrowers and non-recourse carve-out guarantor is Francis Greenburger. |
| (27) | All upfront reserve balances reflect the upfront reserve amount at loan origination. The current balance may be different than the amount shown. |
| Loan No. 7 – Hall Office Park 16 – The borrower is entitled to receive annual payments from the City of Frisco, Texas (the “City”) pursuant to a tax rebate agreement to reimburse it for a portion of the annual ad valorem taxes paid by the borrower. The borrower reserved $731,841 with lender, which amount may be returned to the borrower upon delivery of the City’s consent to an assignment of the tax rebate agreement to the lender, and its successors and assigns, in the event of a foreclosure. In the event that the borrower does not obtain the consent of the City, the Mortgage Loan documents provide that the amounts on reserve the may be reimbursed to the borrower from time to time upon delivery by the borrower of a receipt or other documentation evidencing a tax reimbursement payment to borrower from the City pursuant to the tax rebate agreement. | |
| (28) | All ongoing reserve balances reflect the ongoing reserve amount at loan origination. The current balance may be greater than or less than the amount shown. Monthly reserves required to be deposited in such accounts may be capped pursuant to the related mortgage loan documents. |
| (29) | Loan No. 4 – Prudential Plaza – Commencing on the payment date in August 2016, borrower will deposit $236,236 in a future leasing reserve account until August 2018, on which date the amount will increase to $377,978. Such payments will continue until either (i) 85% of the Mortgaged Property’s net rentable area is leased or (ii) a transfer or assumption of the Mortgaged Property with a third party in an arm’s length transaction occurs; provided that in either case monthly deposits of $190,686 will be required if the future leasing reserve balance drops below $5,000,000 for so long as it is less than $8,000,000. |
| Loan No. 13 – Hilton Garden Inn San Leandro – The borrower is required to deposit the greater of (i) 1/12th of 2.0% of the prior year’s gross revenues through and including June 6, 2017, 1/12th of 3.0% of the prior year’s gross revenues beginning July 6, 2017 through and including June 6, 2018 and 1/12th of 4.0% of the prior year’s gross revenues thereafter or (ii) any amount required under the franchise agreement for FF&E work. | |
| Loan No. 27 – Holiday Inn Express Cocoa Beach – On the origination date, the borrower deposited $100,000 into a Seasonal Working Capital Reserve. If the amount of the Seasonal Working Capital Reserve falls below $50,000, then (i) if a Trigger Period is continuing, on each monthly payment date, all available cash is required to be deposited with lender until the balance in the Seasonal Working Capital Reserve Account equals or exceeds $100,000, or (ii) if no Trigger Period is continuing, then on each monthly payment date in January, February, March, April, May, June, July, October and November the borrower is required to make deposits into the Seasonal Working Capital Reserve Account in an amount equal to $11,000 until the balance in Seasonal Working Capital Reserve Account equals or exceeds $100,000. | |
| Loan No. 28 – Hampton Inn Eugene – On each monthly payment date occurring in October and November, the borrower is required to deposit $22,000 into the Seasonal Working Capital Reserve. | |
| Loan No. 28 – Hampton Inn Eugene – On each monthly payment date beginning in August 2016 through and including the monthly payment date in October 2016, the borrower is required to deposit $16,667 into the Tax Reserve, and on each monthly payment date occurring in November 2016 and each monthly payment date |
A-1-22
| thereafter, the borrower is required to deposit an amount equal to one-twelfth of the estimated taxes that will be payable in the following 12 months, initially estimated to be $4,167, into the Tax Reserve. | |
| Loan No. 31 – Emporia Marketplace – On each monthly payment date, the borrower is required to deposit $4,283 into the replacement reserve account until such time that the roof at the Mortgaged Property has been replaced. Upon completion of the roof replacement, the monthly deposit into the replacement reserve account will be reduced to $988. | |
| (30) | Loan No. 3 – Westfield San Francisco Centre – In lieu of making payments to any of the reserve accounts, the borrowers may deliver to lender a letter of credit or guaranty with respect to any reserve. Additionally, the borrowers may deliver to the lender a letter of credit in lieu of deposits previously made to any of the reserve accounts. Other than with respect to the Zara Letter of Credit, upon delivery of a letter of credit, the lender will disburse an amount equal to the face value of the letter of credit from the applicable reserve account to the borrowers. At loan origination, the borrowers delivered to lender two letters of credit in the aggregate amount of $4,300,000 from UBS AG Bank in lieu of depositing a cash reserve to lender to cover the gap rent and the tenant improvement obligations associated with the Zara lease. |
| Loan No. 8 – Gas Company Tower & World Trade Center Parking Garage – In lieu of making a cash payment for deposit into a springing reserve that is triggered upon the Mortgage Loan’s debt service coverage ratio falling below the levels required by the loan documents, the borrower may deliver to the lender a letter of credit in an amount sufficient to cure such debt service coverage shortfall. | |
| (31) | Loan No. 14 – Deerbrook Commons – The Phase I environmental report for the Deerbrook Commons Mortgaged Property recommended that a Phase II report be completed to assess whether subsurface soil and/or groundwater have been significantly impacted by the historical use of an on-site dry cleaner. The Phase II investigation was completed on August 24, 2015 and recommended no further investigation be taken at this time. |
| (32) | With respect to the Mortgage Loans identified below, the lender is insured under an environmental insurance policy obtained (i) in lieu of obtaining a Phase II Environmental Site Assessment, (ii) in lieu of providing an indemnity or guaranty from a sponsor or (iii) to address environmental conditions or concerns. For additional information, see “Risk Factors—Risks Related to the Mortgage Loans— Adverse Environmental Conditions at or Near Mortgaged Properties May Result in Losses” in this preliminary prospectus. |
| Loan No. | Mortgage Loan | Mortgage Loan Cut-off Date Balance | % of Initial Outstanding Pool Balance | Maximum Policy Amount | Premium Paid in Full | Expiration Date | ||||||
| 5 | U-Haul AREC Portfolio | $48,500,000 | 6.9% | $10,000,000 | Yes | 8/12/2019 | ||||||
| 17 | NY Rite Aid Portfolio – Rite Aid – Cheektowaga | $2,816,485(1) | 1.7% | $1,000,000 | Yes | 6/26/2026 |
| (1) The Mortgage Loan Cut-off Balance represents the allocated loan amount for the Rite Aid - Cheektowaga Mortgaged Property. |
| (33) | Loan No. 1 – 10 Hudson Yards - There is neither a nonrecourse carveout guarantor nor an environmental indemnitor other than the related borrower. |
| (34) | Summary of Existing Pari Passu Debt |
| Loan No. | Mortgage Loan | Mortgage Loan Cut-off Date Balance | Pari Passu Companion Loan Cut-off Date Balance | Whole Loan Cut-off Date Balance | Whole Loan U/W NCF DSCR | Whole Loan Cut-off Date LTV Ratio | Whole Loan Cut- off Date U/W NOI Debt Yield | |||||||
| 1 | 10 Hudson Yards(1) | $65,000,000 | $643,100,000 | $708,100,000 | 3.29x | 41.9% | 10.2% | |||||||
| 3 | Westfield San Francisco Centre(2) | $60,000,000 | $373,077,000 | $433,077,000 | 3.68x | 35.5% | 13.1% | |||||||
| 4 | Prudential Plaza | $50,000,000 | $365,000,000 | $415,000,000 | 1.77x | 64.6% | 9.0% | |||||||
| 5 | U-Haul AREC Portfolio | $48,500,000 | $46,000,000 | $94,500,000 | 1.64x | 67.4% | 10.3% | |||||||
| 6 | Birch Run Premium Outlets | $43,000,000 | $80,000,000 | $123,000,000 | 2.90x | 59.4% | 13.2% | |||||||
| 8 | Gas Company Tower & World Trade Center Parking Garage(3) | $40,000,000 | $104,000,000 | $144,000,000 | 5.23x | 23.6% | 19.9% | |||||||
| 9 | Vertex Pharmaceuticals HQ | $30,000,000 | $395,000,000 | $425,000,000 | 6.28x | 35.5% | 17.9% | |||||||
| 15 | 401 South State Street | $15,742,454 | $31,964,374 | $47,706,828 | 1.59x | 62.4% | 11.5% |
| (1) The Whole Loan Cut-off Date Balance excludes two subordinate companion notes in the original principal amount of approximately $191.9 million. | |
| (2) The Whole Loan Cut-off Date Balance excludes four subordinate companion notes in the original principal amount of approximately $124.9 million. | |
| (3) The Whole Loan Cut-off Date Balance excludes two subordinate companion notes in the aggregate original principal amount of $175.0 million. |
A-1-23
| (35) | Summary of Existing Mezzanine Debt |
| Loan No. | Mortgage Loan | Mortgage Loan Cut-off Date Balance | % of Initial Outstanding Pool Balance | Mezzanine Debt Cut-off Date Balance | Annual Interest Rate on Mezzanine Loan | Mezzanine Loan Maturity Date / ARD | Intercreditor Agreement | Total Debt Cut- off Date LTV Ratio | Total Debt U/W NCF DSCR | Total Debt U/W NOI Debt Yield | ||||||||||
| 1 | 10 Hudson Yards(1) | $65,000,000 | 9.2% | $300,000,000 | 4.6500% | 8/6/2026 | Yes | 55.8% | 2.17x | 7.6% | ||||||||||
| 8 | Gas Company Tower & World Trade Center Parking Garage(2) | $40,000,000 | 5.7% | $131,000,000 | 6.5000% | 8/6/2021 | Yes | 73.6% | 1.34x | 6.4% | ||||||||||
| 9 | Vertex Pharmaceuticals HQ | $30,000,000 | 4.3% | $195,000,000 | 5.1250%(3) | 8/6/2026 | Yes | 51.8% | 3.42x | 12.3% | ||||||||||
| 15 | 401 South State Street | $15,742,454 | 2.2% | $7,830,000(4) | 12.000% | 7/6/2026 | Yes | 72.6% | 1.21x | 9.9% |
| (1) The Total Debt U/W NCF DSCR, Total Debt Cut-off Date LTV Ratio and Total Debt U/W NOI Debt Yield were calculated based on the total debt amount of $1.2 billion, which includes the 10 Hudson Yards Mortgage Loan and ten other seniorpari passucompanion loans in an aggregate original amount of $708.1 million, two subordinate companion loans with an original amount of $191.9 million and one mezzanine loan with an original amount of $300.0 million. | |
| (2) The Total Debt U/W NCF DSCR, Total Debt Cut-off Date LTV Ratio and Total Debt U/W NOI Debt Yield were calculated based on the total debt amount of $450.0 million, which includes the Gas Company Tower & World Trade Center Parking Garage Mortgage Loan and five other seniorpari passucompanion loans in an aggregate original amount of $144.0 million, two subordinate companion loans with an original amount of $175.0 million and one mezzanine loan with an original amount of $131.0 million. | |
| (3) The related mezzanine loan bears interest at an increased rate, payable currently, after its anticipated repayment date. The mezzanine loan’s final maturity date is November 6, 2028. | |
| (4) The related mezzanine loan may be increased to a maximum principal balance of $9,830,000 based on certain conditions being satisfied under the related mezzanine loan documents. |
| (36) | Summary of Future Mezzanine Debt |
| Loan No. | Mortgage Loan | Mortgage Loan Cut-off Date Balance | % of Initial Outstanding Pool Balance | Intercreditor Agreement Required | Combined Minimum DSCR | Combined Maximum LTV | Combined Minimum Debt Yield | |||||||
| 4 | Prudential Plaza | $50,000,000 | 7.1% | Yes | 1.40x | 64.6% | 9.0% | |||||||
| 15 | 401 South State Street(1) | $15,742,454 | 2.2% | Yes | 1.45x | N/A | 9.5% | |||||||
| 18 | Kahana Retail | $11,900,000 | 1.7% | Yes | 1.25x | 75.0% | 7.5% | |||||||
| 21 | San Marin Shopping Center | $9,300,000 | 1.3% | Yes | 1.25x | 65.0% | 8.0% |
| (1) The related mezzanine borrower may request one or more advances of principal under the existing mezzanine loan as a result of which the mezzanine loan may be increased to a maximum principal balance of $9,830,000, subject to the satisfaction by the mezzanine borrower of certain conditions contained in the related mezzanine loan documents, including the debt service coverage ratio and debt yield requirements listed in the foregoing table. |
A-1-24
ANNEX A-2
CERTAIN POOL CHARACTERISTICS OF THE MORTGAGE LOANS
AND MORTGAGED PROPERTIES
Distribution of Cut-off Date Balances(1)
Weighted Averages | ||||||||||||||||
Range of Cut-off Date Balances | Number of | Aggregate Cut-off Date | % of Initial | Mortgage Rate |
Stated | U/W | Cut-off | LTV Ratio | ||||||||
| $3,775,000 - $7,499,999 | 9 | $49,093,296 | 7.0% | 4.6758% | 120 | 1.69x | 65.9% | 54.1% | ||||||||
| $7,500,000 - $14,999,999 | 7 | $72,776,294 | 10.3% | 4.5241% | 118 | 1.40x | 69.2% | 58.1% | ||||||||
| $15,000,000 - $24,999,999 | 6 | $112,850,396 | 16.0% | 4.7190% | 115 | 1.81x | 66.8% | 57.1% | ||||||||
| $25,000,000 - $49,999,999 | 6 | $228,500,000 | 32.5% | 3.7740% | 108 | 3.05x | 53.0% | 45.1% | ||||||||
| $50,000,000 - $65,000,000 | 4 | $240,000,000 | 34.1% | 3.7029% | 118 | 2.74x | 48.3% | 44.6% | ||||||||
| Total/Weighted Average | 32 | $703,219,986 | 100.0% | 4.0420% | 114 | 2.48x | 56.2% | 48.8% | ||||||||
Distribution of Mortgage Rates(1)
| Weighted Averages | ||||||||||||||||
Range of Mortgage Rates | Number of | Aggregate Cut-off Date | % of Initial | Mortgage Rate |
Stated | U/W | Cut-off | LTV Ratio | ||||||||
| 2.7982% - 4.4999% | 15 | $473,650,000 | 67.4% | 3.7154% | 114 | 2.89x | 51.8% | 45.6% | ||||||||
| 4.5000% - 4.7499% | 9 | $128,233,398 | 18.2% | 4.6002% | 113 | 1.55x | 65.1% | 56.0% | ||||||||
| 4.7500% - 5.1500% | 8 | $101,336,588 | 14.4% | 4.8624% | 118 | 1.73x | 65.3% | 54.6% | ||||||||
| Total/Weighted Average | 32 | $703,219,986 | 100.0% | 4.0420% | 114 | 2.48x | 56.2% | 48.8% | ||||||||
Property Type Distribution(1)(3)
Weighted Averages | ||||||||||||||||||||||
Property Type | Number of | Aggregate | % of Initial | Number | Cut-off Date | Mortgage | Stated | Occupancy | U/W NCF | Cut-off Date | LTV Ratio at | |||||||||||
| Office | 9 | $291,517,454 | 41.5% | 6,446,611 | $246 | 3.8504% | 118 | 92.3% | 2.55x | 55.9% | 48.9% | |||||||||||
| CBD | 5 | $169,242,454 | 24.1% | 5,769,021 | $286 | 3.6712% | 116 | 88.0% | 3.33x | 46.0% | 42.4% | |||||||||||
| Suburban | 3 | $118,500,000 | 16.9% | 668,828 | $183 | 4.0824% | 120 | 98.1% | 1.47x | 69.7% | 58.1% | |||||||||||
| Medical | 1 | $3,775,000 | 0.5% | 8,762 | $431 | 4.6000% | 120 | 100.0% | 1.37x | 67.5% | 52.0% | |||||||||||
| Mixed Use | 4 | $135,675,464 | 19.3% | 2,281,511 | $408 | 3.6853% | 102 | 92.5% | 3.53x | 36.5% | 33.8% | |||||||||||
| Super Regional Mall/Office | 1 | $60,000,000 | 8.5% | 794,521 | $545 | 3.3940% | 120 | 95.6% | 3.68x | 35.5% | 35.5% | |||||||||||
| Office/Parking | 1 | $40,000,000 | 5.7% | 1,372,329 | $105 | 3.4727% | 60 | 83.0% | 5.23x | 23.6% | 23.6% | |||||||||||
| Office/Retail | 2 | $35,675,464 | 5.1% | 114,661 | $516 | 4.4136% | 120 | 98.0% | 1.39x | 52.6% | 42.5% | |||||||||||
| Retail | 11 | $125,461,559 | 17.8% | 1,271,783 | $187 | 4.4089% | 115 | 85.6% | 2.03x | 66.2% | 60.1% | |||||||||||
| Anchored(4) | 10 | $118,661,559 | 16.9% | 1,252,287 | $178 | 4.4054% | 114 | 84.8% | 2.07x | 66.2% | 60.2% | |||||||||||
| Unanchored | 1 | $6,800,000 | 1.0% | 19,496 | $349 | 4.4700% | 119 | 100.0% | 1.40x | 66.0% | 57.8% | |||||||||||
| Hospitality | 4 | $55,038,303 | 7.8% | 438 | $132,128 | 4.8626% | 117 | 81.8% | 2.07x | 63.5% | 54.2% | |||||||||||
| Full Service | 2 | $43,275,000 | 6.2% | 317 | $141,563 | 4.9094% | 116 | 83.2% | 1.97x | 63.7% | 55.1% | |||||||||||
| Limited Service | 2 | $11,763,303 | 1.7% | 121 | $97,418 | 4.6904% | 120 | 76.3% | 2.44x | 62.7% | 51.1% | |||||||||||
| Self Storage | 25 | $53,494,265 | 7.6% | 1,351,348 | $89 | 3.8087% | 120 | 91.1% | 1.62x | 67.2% | 48.4% | |||||||||||
| Multifamily | 4 | $37,432,942 | 5.3% | 1,116 | $33,736 | 4.6743% | 119 | 94.6% | 1.60x | 68.0% | 56.5% | |||||||||||
| Garden | 4 | $37,432,942 | 5.3% | 1,116 | $33,736 | 4.6743% | 119 | 94.6% | 1.60x | 68.0% | 56.5% | |||||||||||
| Manufactured Housing Community | 1 | $4,600,000 | 0.7% | 103 | $44,600 | 4.4500% | 120 | 98.1% | 1.36x | 69.7% | 56.2% | |||||||||||
| Total/Weighted Average | 58 | $703,219,986 | 100.0% | 4.0420% | 114 | 90.4% | 2.48x | 56.2% | 48.8% | |||||||||||||
A-2-1
Geographic Distribution(1)(3)
Weighted Averages | ||||||||||||||||
State/Location | Number of Mortgage Properties | Aggregate Cut-off Date Balance | % of Initial Outstanding Pool Balance | Mortgage Rate |
Stated Remaining Term (Mos.) | U/W | Cut-off | LTV Ratio | ||||||||
| California | 5 | $136,375,000 | 19.4% | 3.7307% | 102 | 3.61x | 39.0% | 36.9% | ||||||||
| Northern(5) | 3 | $89,575,000 | 12.7% | 3.7898% | 120 | 3.06x | 43.8% | 41.2% | ||||||||
| Southern(5) | 2 | $46,800,000 | 6.7% | 3.6176% | 69 | 4.67x | 29.8% | 28.6% | ||||||||
| New York | 7 | $113,450,830 | 16.1% | 3.5962% | 120 | 2.99x | 43.1% | 38.8% | ||||||||
| New York City(5) | 2 | $90,000,000 | 12.8% | 3.3407% | 120 | 3.41x | 36.4% | 33.9% | ||||||||
| New York State(5) | 5 | $23,450,830 | 3.3% | 4.5764% | 119 | 1.37x | 68.9% | 57.5% | ||||||||
| Georgia | 6 | $95,237,165 | 13.5% | 4.2171% | 120 | 1.50x | 67.7% | 57.2% | ||||||||
| Texas | 6 | $80,044,265 | 11.4% | 4.2410% | 118 | 1.51x | 71.5% | 58.8% | ||||||||
| Illinois | 3 | $69,517,454 | 9.9% | 4.6525% | 111 | 1.40x | 60.4% | 52.6% | ||||||||
| Missouri | 1 | $43,000,000 | 6.1% | 4.2090% | 114 | 2.90x | 59.4% | 59.4% | ||||||||
| Oregon | 3 | $35,513,303 | 5.1% | 4.4945% | 116 | 1.98x | 71.9% | 61.0% | ||||||||
| Massachusetts | 1 | $30,000,000 | 4.3% | 2.7982% | 120 | 6.28x | 35.5% | 35.5% | ||||||||
| Ohio | 1 | $23,000,000 | 3.3% | 5.0500% | 113 | 1.95x | 67.8% | 58.8% | ||||||||
| Florida | 8 | $22,750,959 | 3.2% | 4.1652% | 120 | 1.76x | 65.8% | 49.9% | ||||||||
| Hawaii | 1 | $11,900,000 | 1.7% | 4.6900% | 113 | 1.34x | 69.2% | 57.9% | ||||||||
| Nevada | 3 | $8,625,147 | 1.2% | 3.7200% | 120 | 1.64x | 67.4% | 48.0% | ||||||||
| New Jersey | 3 | $8,174,839 | 1.2% | 3.7200% | 120 | 1.64x | 67.4% | 48.0% | ||||||||
| Louisiana | 1 | $5,900,000 | 0.8% | 4.7500% | 120 | 1.45x | 67.8% | 55.3% | ||||||||
| Maryland | 2 | $4,575,831 | 0.7% | 3.7200% | 120 | 1.64x | 67.4% | 48.0% | ||||||||
| Virginia | 1 | $4,160,729 | 0.6% | 5.1500% | 119 | 1.25x | 72.4% | 59.8% | ||||||||
| South Carolina | 2 | $3,048,245 | 0.4% | 3.7200% | 120 | 1.64x | 67.4% | 48.0% | ||||||||
| Arizona | 1 | $2,667,214 | 0.4% | 3.7200% | 120 | 1.64x | 67.4% | 48.0% | ||||||||
| Idaho | 1 | $2,251,544 | 0.3% | 3.7200% | 120 | 1.64x | 67.4% | 48.0% | ||||||||
| Minnesota | 1 | $1,929,400 | 0.3% | 3.7200% | 120 | 1.64x | 67.4% | 48.0% | ||||||||
| Iowa | 1 | $1,098,061 | 0.2% | 3.7200% | 120 | 1.64x | 67.4% | 48.0% | ||||||||
| Total/Weighted Average | 58 | $703,219,986 | 100.0% | 4.0420% | 114 | 2.48x | 56.2% | 48.8% | ||||||||
| Other | 31 | $208,595,272 | 29.7% | 4.1283% | 117 | 2.64x | 62.0% | 53.2% | ||||||||
Distribution of Cut-off Date LTV Ratios(1)(2)
Weighted Averages | ||||||||||||||||
Range of Cut-off Date LTV Ratios | Number of Mortgage Loans | Aggregate Cut-off Date Balance | % of Initial Outstanding Pool Balance | Mortgage Rate |
Stated Remaining Term (Mos.) | U/W | Cut-off | LTV Ratio | ||||||||
| 23.6% - 54.9% | 5 | $220,000,000 | 31.3% | 3.3053% | 109 | 4.20x | 33.7% | 32.7% | ||||||||
| 55.0% - 59.9% | 4 | $119,375,000 | 17.0% | 4.5006% | 113 | 2.06x | 59.3% | 54.8% | ||||||||
| 60.0% - 64.9% | 4 | $37,136,719 | 5.3% | 4.6257% | 119 | 1.55x | 63.3% | 52.9% | ||||||||
| 65.0% - 69.9% | 14 | $238,746,708 | 34.0% | 4.2889% | 118 | 1.58x | 67.8% | 55.6% | ||||||||
| 70.0% - 74.8% | 5 | $87,961,559 | 12.5% | 4.3458% | 118 | 1.55x | 73.7% | 60.9% | ||||||||
| 23.6% - 54.9% | 5 | $220,000,000 | 31.3% | 3.3053% | 109 | 4.20x | 33.7% | 32.7% | ||||||||
| Total/Weighted Average | 32 | $703,219,986 | 100.0% | 4.0420% | 114 | 2.48x | 56.2% | 48.8% | ||||||||
Distribution of LTV Ratios at Maturity or ARD(1)(2)
Weighted Averages | ||||||||||||||||
Range of LTV Ratios at Maturity | Number of Mortgage Loans | Aggregate Cut-off Date Balance | % of Initial Outstanding Pool Balance | Mortgage Rate |
Stated Remaining Term (Mos.) | U/W | Cut-off | LTV Ratio | ||||||||
| 23.6% - 49.9% | 7 | $274,600,000 | 39.0% | 3.4124% | 111 | 3.71x | 40.2% | 35.7% | ||||||||
| 50.0% - 54.9% | 8 | $119,050,022 | 16.9% | 4.6526% | 115 | 1.58x | 61.3% | 52.3% | ||||||||
| 55.0% - 59.9% | 12 | $241,819,134 | 34.4% | 4.3446% | 118 | 1.75x | 67.5% | 58.4% | ||||||||
| 60.0% - 63.4% | 5 | $67,750,830 | 9.6% | 4.4411% | 115 | 1.67x | 71.5% | 61.6% | ||||||||
| Total/Weighted Average | 32 | $703,219,986 | 100.0% | 4.0420% | 114 | 2.48x | 56.2% | 48.8% | ||||||||
A-2-2
Distribution of Underwritten NCF DSCR(1)
Weighted Averages | ||||||||||||||||
Range of Underwritten NCF DSCR | Number of Mortgage Loans | Aggregate Cut-off Date | % of Initial Outstanding Pool Balance | Mortgage Rate |
Stated Remaining Term (Mos.) | U/W | Cut-off | LTV Ratio | ||||||||
| 1.25x - 1.39x | 10 | $126,362,022 | 18.0% | 4.5942% | 114 | 1.35x | 65.3% | 55.8% | ||||||||
| 1.40x - 1.44x | 4 | $78,794,265 | 11.2% | 4.2113% | 120 | 1.41x | 64.1% | 51.7% | ||||||||
| 1.45x - 1.54x | 4 | $103,382,942 | 14.7% | 4.2241% | 118 | 1.52x | 67.8% | 58.1% | ||||||||
| 1.55x - 1.99x | 6 | $123,567,454 | 17.6% | 4.3725% | 118 | 1.76x | 65.4% | 52.0% | ||||||||
| 2.00x - 2.49x | 2 | $27,450,000 | 3.9% | 4.5889% | 115 | 2.13x | 69.6% | 60.2% | ||||||||
| 2.50x - 2.87x | 1 | $5,663,303 | 0.8% | 4.5400% | 119 | 2.57x | 65.9% | 53.4% | ||||||||
| 2.88x - 6.28x | 5 | $238,000,000 | 33.8% | 3.3672% | 109 | 4.26x | 37.1% | 37.1% | ||||||||
| Total/Weighted Average | 32 | $703,219,986 | 100.0% | 4.0420% | 114 | 2.48x | 56.2% | 48.8% | ||||||||
Original Terms to Maturity or ARD (1)
Weighted Averages | ||||||||||||||||
Original Terms to Maturity or ARD | Number of Mortgage Loans | Aggregate Cut-off Date | % of Initial Outstanding Pool Balance | Mortgage Rate |
Stated Remaining Term (Mos.) | U/W | Cut-off | LTV Ratio | ||||||||
| 60 – 60 | 1 | $40,000,000 | 5.7% | 3.4727% | 60 | 5.23x | 23.6% | 23.6% | ||||||||
| 120 – 120 | 31 | $663,219,986 | 94.3% | 4.0763% | 118 | 2.31x | 58.2% | 50.3% | ||||||||
| Total/Weighted Average | 32 | $703,219,986 | 100.0% | 4.0420% | 114 | 2.48x | 56.2% | 48.8% | ||||||||
Distribution of Remaining Terms to Maturity or ARD(1)
Weighted Averages | ||||||||||||||||
Range of Remaining Terms to Maturity or ARD | Number of Mortgage Loans | Aggregate Cut-off Date | % of Initial Outstanding Pool Balance | Mortgage Rate |
Stated Remaining Term (Mos.) | U/W | Cut-off | LTV Ratio | ||||||||
| 60 – 60 | 1 | $40,000,000 | 5.7% | 3.4727% | 60 | 5.23x | 23.6% | 23.6% | ||||||||
| 108 – 114 | 6 | $166,250,000 | 23.6% | 4.5286% | 112 | 1.94x | 63.9% | 58.0% | ||||||||
| 119 – 120 | 25 | $496,969,986 | 70.7% | 3.9251% | 120 | 2.44x | 56.2% | 47.8% | ||||||||
| Total/Weighted Average | 32 | $703,219,986 | 100.0% | 4.0420% | 114 | 2.48x | 56.2% | 48.8% | ||||||||
Distribution of Underwritten NOI Debt Yields(1)
Weighted Averages | ||||||||||||||||
Range of Underwritten NOI Debt Yields | Number of Mortgage Loans | Aggregate Cut-off Date | % of Initial Outstanding Pool Balance | Mortgage Rate |
Stated Remaining Term (Mos.) | U/W | Cut-off | LTV Ratio | ||||||||
| 8.3% - 8.9% | 8 | $120,050,830 | 17.1% | 4.3089% | 119 | 1.38x | 66.3% | 54.4% | ||||||||
| 9.0% - 9.9% | 7 | $144,505,458 | 20.5% | 4.3735% | 116 | 1.43x | 64.7% | 55.9% | ||||||||
| 10.0% - 12.4% | 7 | $124,275,396 | 17.7% | 4.2455% | 118 | 1.59x | 67.0% | 52.8% | ||||||||
| 12.5% - 14.9% | 6 | $232,625,000 | 33.1% | 3.8152% | 118 | 3.21x | 47.8% | 45.4% | ||||||||
| 15.0% - 19.9% | 4 | $81,763,303 | 11.6% | 3.4004% | 91 | 5.21x | 33.6% | 31.9% | ||||||||
| Total/Weighted Average | 32 | $703,219,986 | 100.0% | 4.0420% | 114 | 2.48x | 56.2% | 48.8% | ||||||||
Amortization Types(1)
Weighted Averages | ||||||||||||||||
Amortization Type | Number of Mortgage Loans | Aggregate Cut-off Date | % of Initial Outstanding Pool Balance | Mortgage Rate |
Stated Remaining Term (Mos.) | U/W | Cut-off | LTV Ratio | ||||||||
| Interest Only, then Amortizing | 11 | $245,525,830 | 34.9% | 4.4510% | 115 | 1.59x | 65.8% | 57.4% | ||||||||
| Interest Only | 4 | $208,000,000 | 29.6% | 3.4493% | 107 | 3.97x | 37.3% | 37.3% | ||||||||
| Amortizing Balloon | 15 | $171,194,156 | 24.3% | 4.4848% | 120 | 1.51x | 65.7% | 53.0% | ||||||||
| Amortizing Balloon, ARD | 1 | $48,500,000 | 6.9% | 3.7200% | 120 | 1.64x | 67.4% | 48.0% | ||||||||
| Interest Only, ARD | 1 | $30,000,000 | 4.3% | 2.7982% | 120 | 6.28x | 35.5% | 35.5% | ||||||||
| Total/Weighted Average | 32 | $703,219,986 | 100.0% | 4.0420% | 114 | 2.48x | 56.2% | 48.8% | ||||||||
A-2-3
FOOTNOTES TO ANNEX A-2
| (1) | With respect to the 10 Hudson Yards, Westfield San Francisco Centre, Prudential Plaza, U-Haul AREC Portfolio,Birch Run Premium Outlets, Gas Company Tower & World Trade Center Parking Garage, Vertex Pharmaceuticals HQ and 401 South State Street Mortgage Loans, Cut-off Date Balance per Room/Unit/NRA, U/W NCF DSCR, Cut-off Date LTV Ratio and U/W NOI Debt Yield calculations include the relatedpari passu companion loan(s) and exclude the related subordinate companion loans and mezzanine loans. The Stated Remaining Term (Mos.) of each of the U-Haul AREC Portfolio Mortgage Loan and the Vertex Pharmaceuticals HQ Mortgage Loan is through the related Anticipated Repayment Date. |
| (2) | For the ARD Loans, the Original Term to Maturity or ARD, Stated Remaining Term (Mos.) and LTV Ratio at Maturity or ARD are through the related Anticipated Repayment Date. |
| (3) | With respect to the 10 Hudson Yards Mortgage Loan, representing 9.2% of the Initial Outstanding Pool Balance, the Cut-off Date LTV Ratio and LTV Ratio at Maturity Date or ARD have been calculated based on the “Hypothetical As Is” value. With respect to the Hall Office Park 16 Mortgage Loan, representing 6.0% of the Initial Outstanding Pool Balance, Cut-off Date LTV Ratio and the LTV Ratio at Maturity Date or ARD has been calculated based on the “As-Is with Reserves” value. With respect to the Hilton Garden Inn San Leandro Mortgage Loan and Huntington Park Mortgage Loan, representing 2.9% and 0.8%, respectively, of the Initial Outstanding Pool Balance, the Cut-off Date LTV Ratio and LTV Ratio at Maturity Date or ARD have been calculated based on the “As Stabilized” value. With respect to the Hampton Inn Eugene Mortgage Loan, representing 0.8% of the Initial Outstanding Pool Balance, the LTV Ratio at Maturity Date or ARD has been calculated based on the “As Complete” value. For additional information, see the Footnotes to Annex A-1. |
| (4) | Because this table presents information relating to the Mortgaged Properties and not the Mortgage Loans, the information for Mortgaged Properties that relate to Mortgage Loans secured by more than one Mortgaged Property is based on Allocated Loan Amounts. |
| (5) | Includes anchored, single tenant and shadow anchored properties. |
| (6) | Northern California properties have a zip code greater than 93600. Southern California properties have a zip code less than or equal to 93600. |
A-2-4
ANNEX A-3
DESCRIPTION OF TOP TWENTY MORTGAGE LOANS AND ADDITIONAL MORTGAGE LOAN INFORMATION
A-3-1
10 Hudson Yards New York, NY 10001 | Collateral Asset Summary – Loan No. 1 10 Hudson Yards | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 32.9% 4.18x 12.9% |
A-3-2
10 Hudson Yards New York, NY 10001 | Collateral Asset Summary – Loan No. 1 10 Hudson Yards | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 32.9% 4.18x 12.9% |
A-3-3
10 Hudson Yards New York, NY 10001 | Collateral Asset Summary – Loan No. 1 10 Hudson Yards | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 32.9% 4.18x 12.9% |
| Mortgage Loan Information | |
| Loan Seller: | GACC |
| Loan Purpose: | Recapitalization |
| Sponsor: | Podium Fund HY REIT Owner LP |
| Borrower: | Legacy Yards Tenant LP |
| Original Balance(2): | $65,000,000 |
| Cut-off Date Balance(2): | $65,000,000 |
| % by Initial UPB: | 9.2% |
| Interest Rate: | 2.9833333% |
| Payment Date: | 6thof each month |
| First Payment Date: | September 6, 2016 |
| Maturity Date: | August 6, 2026 |
| Amortization: | Interest Only |
| Additional Debt(2)(3): | $643,100,000Pari Passu Debt; $191,900,000 Subordinate Secured Debt; $300,000,000 Mezzanine Debt |
| Call Protection(4): | L(24), D(91), O(5) |
| Lockbox / Cash Management: | Hard / Springing |
| Reserves(5) | ||
| Initial | Monthly | |
| Taxes: | $0 | Springing |
| Insurance: | $0 | Springing |
| Replacement: | $0 | Springing |
| TI/LC: | $0 | Springing |
| Free Rent: | $34,160,073 | NAP |
| Remaining Construction Work: | $90,969,679 | NAP |
| Existing TI/LC: | $34,414,188 | NAP |
| Lease Sweep: | $0 | Springing |
| Owners’ Association: | $0 | Springing |
| Financial Information | ||||
| Senior Notes(6) | Whole Loan(7) | Total Debt(8) | ||
| Cut-off Date Balance / Sq. Ft.: | $390 | $496 | $662 | |
| Balloon Balance / Sq. Ft.: | $390 | $496 | $662 | |
| Cut-off Date LTV(9): | 32.9% | 41.9% | 55.8% | |
| Balloon LTV(9): | 32.9% | 41.9% | 55.8% | |
| Underwritten NOI DSCR: | 4.27x | 3.36x | 2.21x | |
| Underwritten NCF DSCR: | 4.18x | 3.29x | 2.17x | |
| Underwritten NOI Debt Yield: | 12.9% | 10.2% | 7.6% | |
| Underwritten NCF Debt Yield: | 12.7% | 10.0% | 7.5% | |
| Underwritten NOI Debt Yield at Balloon: | 12.9% | 10.2% | 7.6% | |
| Underwritten NCF Debt Yield at Balloon: | 12.7% | 10.0% | 7.5% | |
| Property Information | |
| Single Asset / Portfolio: | Single Asset |
| Property Type: | CBD Office |
| Collateral: | Fee Simple |
| Location: | New York, NY |
| Year Built / Renovated: | 2016 / NAP |
| Total Sq. Ft.: | 1,813,465 |
| Property Management: | Related Hudson Yards Manager LLC |
| Underwritten NOI: | $91,514,392 |
| Underwritten NCF: | $89,620,071 |
| “As-is” Appraised Value: | $2,050,000,000 |
| “As-is” Appraisal Date: | July 1, 2016 |
| “Hypothetical As-is” Appraised Value(10): | $2,150,000,000 |
| “Hypothetical As-is” Appraisal Date: | July 1, 2016 |
| Historical NOI | |
| Most Recent NOI: | NAP |
| 2015 NOI: | NAP |
| 2014 NOI: | NAP |
| 2013 NOI: | NAP |
| Historical Occupancy | |
| Most Recent Occupancy: | 93.2% (July 1, 2016) |
| 2015 Occupancy: | NAP |
| 2014 Occupancy: | NAP |
| 2013 Occupancy: | NAP |
| (1) | Moody’s/Fitch/DBRS provided the above ratings for the 10 Hudson Yards mortgage loan in the context of its inclusion in the mortgage pool. On a standalone basis, Fitch rated the 10 Hudson Yards mortgage loan “BBB”. |
| (2) | The Original Balance and Cut-off Date Balance of $65.0 million represents the senior non-controlling Note A-1-C1 which, together with the remainingpari passu senior notes with an aggregate original principal balance of $643.1 million and the junior notes with an aggregate original principal balance of $191.9 million, comprises the 10 Hudson Yards Whole Loan with an aggregate original principal balance of $900.0 million. For additional information regarding thepari passu senior notes and junior notes, see “The Loan” herein. |
| (3) | See “Current Mezzanine or Subordinate Indebtedness” herein. |
| (4) | The lockout period will be at least 24 payment dates beginning with and including the first payment date of September 6, 2016. Prepayment with defeasance of the full $900.0 million 10 Hudson Yards Whole Loan is permitted after the date that is the earlier to occur of (i) two years after the closing date of the securitization that includes the lastpari passunote to be securitized, and (ii) August 1, 2019. The assumed lockout period of 24 payments is based on the expected CD 2016-CD1 securitization closing date in August 2016. The actual lockout period may be longer. |
| (5) | See “Initial Reserves” and “Ongoing Reserves” herein. |
| (6) | DSCR, LTV, Debt Yield and Balance / Sq. Ft. calculations are based on the Senior Notes only, which have an aggregate principal balance of $708.1 million. |
| (7) | DSCR, LTV, Debt Yield and Balance / Sq. Ft. calculations are based on the 10 Hudson Yards Whole Loan only, which has an aggregate principal balance of $900.0 million, which includes $191.9 million of Junior Notes. |
| (8) | DSCR, LTV, Debt Yield and Balance / Sq. Ft. calculations are based on the Total Debt in the aggregate amount of $1.2 billion, which includes $191.9 million of Junior Notes and a $300.0 million mezzanine loan. |
| (9) | The Cut-off Date LTV and Balloon LTV are calculated based on the “Hypothetical As-is” Appraised Value. Based on the “As-Is” Appraised Value, the Cut-off Date LTV for the Senior Notes is 34.5%, the Cut-off Date LTV for the 10 Hudson Yards Whole Loan is 43.9% and the Cut-off Date LTV for the Total Debt is 58.5%. |
| (10) | The “Hypothetical As-is” Appraised Value assumes the remaining obligations and costs of approximately $108.6 million, consisting of approximately $50.1 million in hard/direct costs, $5.7 million in project contingency, $29.1 million in tenant improvements and $14.7 million in soft/indirect costs are expended as of July 1, 2016. As of August 1, 2016, approximately $91.0 million of contractual obligations and costs remain unexpended. Such amount was reserved upon origination of the 10 Hudson Yards Whole Loan. |
A-3-4
10 Hudson Yards New York, NY 10001 | Collateral Asset Summary – Loan No. 1 10 Hudson Yards | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 32.9% 4.18x 12.9% |
| Tenant Summary(1)(2) | |||||||
Tenant | Ratings (Fitch/Moody’s/S&P)(3) | Net Rentable Area (Sq. Ft.) | % of Net Rentable Area | U/W Base Rent PSF | % of Total U/W Base Rent | Lease Expiration | |
| Coach | BBB/Baa2/BBB- | 693,938 | 38.3% | $65.00 | 38.8% | 7/31/2036 | |
| L’Oreal(4) | NR/NR/A-1+ | 411,358 | 22.7% | $69.75 | 24.7% | 8/31/2031 | |
| BCG(5) | NR/NR/NR | 193,295 | 10.7% | $83.00 | 13.8% | 4/30/2032 | |
| SAP(6) | NR/A2/A | 144,065 | 7.9% | $83.00 | 10.3% | 6/30/2032 | |
| Intersection(7) | NR/NR/NR | 67,058 | 3.7% | $77.00 | 4.4% | 1/31/2027 | |
| Subtotal / Wtd. Avg. | 1,509,714 | 83.3% | $70.85 | 92.0% | |||
| Other | 180,191 | 9.9% | $51.36 | 8.0% | |||
| Total / Wtd. Avg. Occupied | 1,689,905 | 93.2% | $68.77 | 100.0% | |||
| Vacant | 123,560 | 6.8% | |||||
| Total / Wtd. Avg. | 1,813,465 | 100.0% | |||||
| (1) | Based on the rent roll dated July 1, 2016. |
| (2) | No tenants at the 10 Hudson Yards Property have termination options. BCG has a future contraction option which may be exercised either (i) between January 31, 2026 and January 31, 2027 or (ii) between January 31, 2028 and January 31, 2029, provided 18 months’ prior written notice. BCG may choose to exercise such contraction for up to two full contiguous floors (either in the top half or bottom half of their space) and must pay a contraction payment equal to the sum of (i) unamortized commissions, work allowance, free rent, and (ii) four months of escalated rent for the exercised space. BCG can contract up to two of its highest or lowest contiguous floors: (i) floors 46 and 47 (62,746 sq. ft.) or (ii) floors 42 and 43 (66,107 sq. ft.). |
| (3) | Certain ratings are those of the parent company whether or not the parent company guarantees the lease. |
| (4) | L’Oreal took occupancy in July 2016, with rent commencing in September 2016. At origination, a free rent reserve was established for the month of August 2016. |
| (5) | BCG is expected to take occupancy by the end of 2016, with rent commencing in May 2017. At origination, a free rent reserve was established for the months of August 2016 through April 2017. |
| (6) | SAP is expected to take occupancy in the fall of 2016, with rent commencing in June 2017. At origination, a free rent reserve was established for the months of August 2016 through June 2017. |
| (7) | Intersection is expected to take occupancy in the fall of 2016, with rent commencing in January 2017 for the space on the 26th floor and July 2017 for the space on the 27thfloor. At origination, a free rent reserve was established for the months of August 2016 through January 2017 for the space on the 26th floor and August 2016 through July 2017 for the space on the 27th floor. |
| Lease Rollover Schedule(1) | ||||||||
| Year | # of Leases Expiring | Total Expiring Sq. Ft. | % of Total Sq. Ft. Expiring | Cumulative Sq. Ft. Expiring | Cumulative % of Sq. Ft. Expiring | Annual U/W PSF | % U/W Rolling | Cumulative % of U/W Base Rent |
| 2016 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2017 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2018(2) | 1 | 58,989 | 3.3% | 58,989 | 3.3% | $0.00 | 0.0% | 0.0% |
| 2019 | 0 | 0 | 0.0% | 58,989 | 3.3% | $0.00 | 0.0% | 0.0% |
| 2020 | 0 | 0 | 0.0% | 58,989 | 3.3% | $0.00 | 0.0% | 0.0% |
| 2021 | 0 | 0 | 0.0% | 58,989 | 3.3% | $0.00 | 0.0% | 0.0% |
| 2022 | 1 | 21,788 | 1.2% | 80,777 | 4.5% | $75.00 | 1.4% | 1.4% |
| 2023 | 0 | 0 | 0.0% | 80,777 | 4.5% | $0.00 | 0.0% | 1.4% |
| 2024 | 0 | 0 | 0.0% | 80,777 | 4.5% | $0.00 | 0.0% | 1.4% |
| 2025 | 0 | 0 | 0.0% | 80,777 | 4.5% | $0.00 | 0.0% | 1.4% |
| 2026 | 1 | 65,836 | 3.6% | 146,613 | 8.1% | $77.00 | 4.4% | 5.8% |
| Thereafter | 6 | 1,543,292 | 85.1% | 1,689,905 | 93.2% | $70.96 | 94.2% | 100.0% |
| Vacant | NAP | 123,560 | 6.8% | 1,813,465 | 100.0% | NAP | NAP | 0.0% |
| Total / Wtd. Avg. | 9 | 1,813,465 | 100.0% | $68.77 | 100.0% | |||
| (1) | Certain tenants may have contraction options that may become exercisable prior to the originally stated expiration date of the tenant lease that are not considered in this lease rollover schedule. |
| (2) | 58,989 sq. ft. represents the parking garage which pays a percentage rent component. Commencing in 2017, the initial base rent for the parking garage is expected to be $1.75 million, in addition to the percentage rent component. |
The Loan. The 10 Hudson Yards loan (the “10 Hudson Yards Loan”) is a fixed rate loan secured by the borrower’s fee simple interests in a 52-story, Class A office building located at 10 Hudson Yards, New York, New York (the “10 Hudson Yards Property”) with an original principal balance of $65.0 million. The 10 Hudson Yards Loan is evidenced by the non-controlling Note A-1-C1 and is a part of a $900.0 million whole loan that is evidenced by thirteen promissory notes: eleven senior notes with an aggregate original principal balance of $708.1 million (the “Senior Notes”) and two junior notes with an aggregate original principal balance of $191.9 million (the “Junior Notes” and, together with the Senior Notes, the “10 Hudson Yards Whole Loan”). Only the 10 Hudson Yards Loan will be included in the CD 2016-CD1 mortgage trust. Two of the Senior Notes with an aggregate original principal balance of $408.1 million
A-3-5
10 Hudson Yards New York, NY 10001 | Collateral Asset Summary – Loan No. 1 10 Hudson Yards | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 32.9% 4.18x 12.9% |
along with the Junior Notes are expected to be contributed to the Hudson Yards 2016-10HY mortgage trust. The remaining Senior Notes with an original principal balance of $235.0 million are expected to be held by DBNY or an affiliate and Goldman Sachs Mortgage Company (“GSMC”) or an affiliate and contributed to one or more future securitizations.
The relationship between the holders of the Senior Notes and the Junior Notes is governed by a co-lender agreement as described under“Description of the Mortgage Pool–The Whole Loans–10 Hudson Yards Whole Loan” in the Prospectus.
| Whole Loan Summary | |||||
| Note | Original Balance | Cut-off Date Balance | Note Holder | Controlling Piece | |
| A-1-C1 | $65,000,000 | $65,000,000 | CD 2016-CD1 | No | |
| A-1-S, A-2-S | $408,100,000 | $408,100,000 | Hudson Yards 2016-10HY | Yes | |
| B-1, B-2 | $191,900,000 | $191,900,000 | Hudson Yards 2016-10HY | Yes | |
| A-1-C2, A-1-C3, A-1-C4, A-1-C5, A-1-C6 | $147,500,000 | $147,500,000 | DBNY | No | |
| A-2-C1, A-2-C2, A-2-C3 | $87,500,000 | $87,500,000 | GSMC | No | |
| Total | $900,000,000 | $900,000,000 | |||
The 10 Hudson Yards Loan has a 10-year term and pays interest only for the term of the loan. The 10 Hudson Yards Loan accrues interest at a fixed rate equal to 2.9833333% and has a Cut-off Date Balance of $65.0 million. The 10 Hudson Yards Whole Loan proceeds, in addition to new sponsor equity of approximately $503.4 million and approximately $446.6 million of existing partnership equity, were used to refinance existing debt of $478.1 million, purchase the fee interest and collapse the existing Metropolitan Transportation Authority (“MTA”) ground lease for approximately $119.9 million, purchase Coach’s equity for approximately $674.3 million, reinvest approximately $446.6 million of existing partnership equity, return approximately $171.0 million to KIA (as defined below), fund approximately $159.5 million in upfront reserves and pay transaction costs of approximately $100.6 million. Based on the Hypothetical As-is appraised value of $2.15 billion as of July 1, 2016, the Cut-off Date LTV for the Senior Notes is 32.9%. The most recent prior financing of the 10 Hudson Yards Property was not included in a securitization.
| Sources and Uses | ||||||
| Sources | Proceeds | % of Total | Uses | Proceeds | % of Total | |
| Mortgage Loan | $900,000,000 | 41.9% | Refinance Existing Debt | $478,089,883 | 22.2% | |
| Mezzanine Loan | $300,000,000 | 14.0% | Deferred Fee Purchase | $119,885,511 | 5.6% | |
| New Sponsor Equity | $503,372,132 | 23.4% | Payoff of Coach Interest | $674,253,004 | 31.4% | |
| Existing Partnership Equity | $446,627,868 | 20.8% | Existing Partnership Reinvestment | $446,627,868 | 20.8% | |
| KIA Return of Equity | $171,037,133 | 8.0% | ||||
| Upfront Reserves | $159,543,940 | 7.4% | ||||
| Closing Costs | $100,562,661 | 4.7% | ||||
| Total Sources | $2,150,000,000 | 100.0% | Total Uses | $2,150,000,000 | 100.0% | |
The Borrower / Sponsor.The borrower, Legacy Yards Tenant LP, is a single purpose Delaware limited partnership structured to be bankruptcy-remote with two independent directors in its organizational structure. The sponsor is Podium Fund HY REIT Owner LP, a joint venture among The Related Companies, LP (“Related”, 8.9%), Oxford Properties Group (“Oxford”, 8.9%), (JPMorgan Asset Management (“JPM”, 18.2%), Kuwait Investment Authority (“KIA”, 19.6%) and Allianz SE (“Allianz”, 44.3%) (collectively, the “Sponsor”). There is no separate non-recourse carve-out guarantor or environmental indemnitor for the 10 Hudson Yards Loan.
Related is a privately owned real estate firm in the United States with an existing portfolio consisting of over $15 billion in best-in-class mixed-use, residential, retail, office and affordable housing properties.
Oxford is a global platform for real estate investment, development and management, with over $37 billion of real estate assets. Oxford’s real estate portfolio consists of approximately 57 million sq. ft. and over 150 properties that total approximately 3,600 hotel rooms and over 9,500 residential units.
JPM is multinational banking and financial services holding company with approximately $2.4 trillion in assets under supervision and over $1.7 trillion in assets under management, as of year-end 2015.
Allianz is a European financial services company headquartered in Munich, Germany with core businesses in insurance and asset management. As of the first quarter of 2015, the Allianz Global Investors division had approximately €1,933 billion of assets under management, of which €1,408 billion are third-party assets.
A-3-6
10 Hudson Yards New York, NY 10001 | Collateral Asset Summary – Loan No. 1 10 Hudson Yards | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 32.9% 4.18x 12.9% |
The Property.The10 Hudson Yards Property is a 52-story recently constructed glass and concrete Class A office building, located on the northwest corner of 10th Avenue and 30th Street, situated in Manhattan’s Hudson Yards. The 10 Hudson Yards Property is integrated with, and bridges over, the Manhattan’s The High Line, a 1.45 mile-long, elevated public park built on a historic freight rail line. The 10 Hudson Yards Property is the first office building to be completed as part of the Hudson Yards redevelopment project, which the Sponsor estimates to be the largest private real estate development in the history of the United States and the largest development in New York City since Rockefeller Center. When redevelopment of Hudson Yards is completed, the site is expected to include approximately 17 million sq. ft. of commercial and residential space consisting of office buildings, more than 100 shops, a collection of restaurants, approximately 4,000 residences, approximately 14 acres of public open space, a 750-seat public school and a 200-room luxury hotel.
The 10 Hudson Yards Property was 93.2% occupied as of July 1, 2016 and consists of approximately 1.81 million sq. ft. in an 895 ft. tall building. The building includes approximately 1,698,748 sq. ft. of office space, 13,744 sq. ft. of retail space, 8,406 sq. ft. of storage space, a 58,989 sq. ft. (239-space) parking garage and a 33,578 sq. ft. food hall. The total land area of the 10 Hudson Yards Property is 2.675 acres, or approximately 116,500 sq. ft.
The construction of the 10 Hudson Yards Property began in December 2012 and was designed by Kohn Pederson Fox Associates. The 10 Hudson Yards Property features large column-free floor plates ranging from 22,000 sq. ft. to 54,000 sq. ft., ceiling heights of 13’6” and views of the Hudson River and downtown skyline with floor-to-ceiling windows. Additionally, the building is expect to gain LEED platinum certification and has its own CoGeneration power plant. The CoGeneration plant is expected to have 1.2MW of gas-fired micro turbines, which will generate power and heat for use within the 10 Hudson Yards Property, providing energy efficiency and additional standby power.
The 10 Hudson Yards Property will serve as the new corporate headquarters for three of the top five tenants, including Coach (38.3% of NRA, BBB/Baa2/BBB- by Fitch/Moody’s/S&P), L’Oreal (U.S. headquarters) (22.7% of NRA, A-1+ by S&P) and Intersection (3.7% of NRA). The remaining top five tenants are BCG (10.7% of NRA) and SAP (7.9% of NRA, A2/A by Moody’s/S&P). Additionally, the top five tenants at the 10 Hudson Yards Property occupy 83.3% of the NRA, comprise 92.0% of the underwritten base rent and have a weighted average remaining lease term of 17.3 years as of the cut-off date.
Environmental Matters.The Phase I environmental report dated June 30, 2016 revealed no evidence of recognized environmental conditions, except for an active 13,875 gallon above ground storage tank containing diesel fuel located in the cellar. This tank is associated with the storage of the diesel fuel for the on-site generator. The Phase I environmental report recommended the storage tank be registered with the New York State Department of Environmental Conservation. The borrower is required to file for registration of the storage tank with evidence of such registration to be provided to lender by October, 1, 2016.
Major Tenants.
Coach (693,938 sq. ft.; 38.3% of NRA; 38.8% of U/W Base Rent; BBB/Baa2/BBB- by Fitch/Moody’s/S&P), (NYSE: COH) is an American luxury fashion company founded in 1941 known for accessories and gifts for women and men, including handbags, men’s bags, women’s and men’s small leather goods, footwear, outerwear, watches, travel accessories, scarves, sunwear, fragrance, jewelry and other accessories. Headquartered in New York, New York, Coach Inc., operates over 450 Coach stores in North America, approximately 500 directly-operated locations in Asia and over 30 in Europe. The 10 Hudson Yards Property will serve as the new corporate headquarters for Coach. Coach is expected to move approximately 1,400 employees from three primary locations in Manhattan. As of the first quarter of 2016, Coach reported sales of approximately $1.03 billion, an increase of 11.2% year-over-year. In 2015, Coach reported sales of approximately $4.2 billion and operating income of approximately $618.0 million.
L’Oreal (411,358 sq. ft.; 22.7% of NRA; 24.7% of U/W Base Rent; A-1+ by S&P), (NYSE: COH) is a subsidiary of L’Oreal Group, the parent company, which is a beauty and cosmetics company. Founded in 1909, L’Oreal Group focuses on five key cosmetics segments: hair care, skin care, make-up and fragrances. The L’Oreal Group brand portfolio includes Garnier, L’Oreal Paris, Yves Saint Laurent Beaute, Ralph Lauren, Maybelline, Diesel and The Body Shop. L’Oreal is present in 140 countries on five continents. In 2015, L’Oreal Group reported sales of approximately €25.26 billion and operating income of approximately €4.39 billion. 27.4% of L’Oreal Group’s sales are derived from North America. L’Oreal is relocating its U.S. headquarters from Midtown Manhattan to the 10 Hudson Yards Property. L’Oreal is expected to move approximately 1,300 employees and will occupy 10 floors at the 10 Hudson Yards Property. The majority of L’Oreal’s corporate functions and brand teams including Essie, Garnier, Lancome, La Roche-Posay, L’Oreal Paris, Matrix, Maybelline, Redken and SkinCeuticals will be housed at the 10 Hudson Yards Property.
L’Oreal has an existing expansion option (exercisable with 18 months’ prior written notice) to lease up to the entire 37th floor (currently vacant). L’Oreal has the right to take occupancy within a 12-month period starting on the fifth anniversary of their rent commencement date for a period which would be coterminous with the existing lease at a rental rate of 100% of fair market value.
Boston Consulting Group, Inc. (“BCG”) (193,295 sq. ft.; 10.7% of NRA; 13.8% of U/W Base Rent), is a management consulting firm with 85 offices in 48 countries. The firm advises clients in the private, public, and not-for-profit sectors around the world, including more than two-thirds of the Fortune 500. Founded in 1963 and headquartered in Boston, BCG has over 12,000 employees and 900 partners.
A-3-7
10 Hudson Yards New York, NY 10001 | Collateral Asset Summary – Loan No. 1 10 Hudson Yards | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 32.9% 4.18x 12.9% |
Although the company is privately held, BCG reported annual revenues of approximately $5.0 billion in 2015, which makes it amongst the largest 100 private companies in the world by total revenue.
BCG has existing expansion options (exercisable within 12 months’ prior written notice) to lease up to the entire 40th and 41st floors (both currently vacant). With respect to the 40th floor, BCG has the right to take occupancy on the 10th anniversary of their rent commencement date, May 1, 2027, for a period which would be coterminous with the existing lease at a rental rate of 100% of fair market value. With respect to the 41st floor, BCG has the right to take occupancy on the fifth anniversary of their rent commencement date for a period which would be coterminous with the existing lease at a rental rate of 100% of fair market value.
The Market.The 10 Hudson Yards Property is located in the West Side submarket within the Midtown West Office District. Midtown West is bounded by 30th Street and 42nd Street west of the Avenue of Americas to the Hudson River and by 42nd Street to 72nd Street west of Seventh Avenue, to the Hudson River. As of the first quarter of 2016, the three office statistical areas that comprise the Midtown West Office Market contain approximately 37.8 million sq. ft. of Class A office space, 23.6 million sq. ft. of Class B office space and less than 14.0 million sq. ft. of Class C office space in these submarkets.
According to the appraisal, the overall Class A Midtown West office market direct rental rate of $78.40 PSF is 18.1% above the current average in-place rent of $68.77 PSF at the 10 Hudson Yards Property. Below is a detailed chart, as of the first quarter of 2016, of the Midtown West Office Market.
| Midtown West Office Market - Class A(1) | ||||
| Westside | Penn Station | Times Square South | Market Summary (Total) | |
| Number of Buildings | 34 | 7 | 12 | 53 |
| Inventory (sq. ft.) | 23,809,400 | 6,668,090 | 7,323,711 | 37,801,201 |
| Total Space Available | 2,336,372 | 434,470 | 734,233 | 3,505,075 |
| Direct Space Available | 2,014,054 | 352,037 | 558,396 | 2,924,487 |
| Direct Vacancy Rate | 8.5% | 5.3% | 7.6% | 7.7% |
| Total Vacancy Rate | 9.8% | 6.5% | 10.0% | 9.3% |
| Direct Rental Rate | $78.83 | $67.33 | $83.84 | $78.40 |
| YTD Leasing Activity | 416,424 | 171,452 | 116,875 | 704,751 |
| (1) | Source: Appraisal. |
The appraiser identified 40 comparable properties totaling approximately 43.7 million sq. ft. that exhibited a rental range of $45.00 PSF to $150.00 PSF and a weighted average occupancy rate of approximately 94.1% for direct space.
Of the 40 buildings, 10 are considered directly competitive with the 10 Hudson Yards Property in terms of the building classification, asking rents, rentable office square footage and quality. The weighted average occupancy for the directly competitive buildings is approximately 97.5%, compared to approximately 94.1% for the full competitive set and approximately 91.7% for Class A space within Midtown West Office market as a whole.
The appraiser concluded, based on completion, location and the state-of-the-art Class A quality of the 10 Hudson Yards Property, the 10 Hudson Yards Property should command office rental rates ranging from $80 PSF for floors nine to 24, $90 PSF for floors 25 to 37 and $100 PSF for floors 40 to 52 with a weighted average office rental rate of $88.04 PSF, an approximately 28.0% increase from the 10 Hudson Yards Property’s weighted average in place rents as of July 1, 2016.
A-3-8
10 Hudson Yards New York, NY 10001 | Collateral Asset Summary – Loan No. 1 10 Hudson Yards | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 32.9% 4.18x 12.9% |
| Directly Competitive Buildings(1) | |||||||
Property | Office Area (NRA) | Direct Available Sq. Ft. | Sublease Available Sq. Ft. | % Occupied (Direct) | % Occupied (Total) | Direct Asking Rent | |
| Low | High | ||||||
| Four Times Square | 1,477,631 | 0 | 0 | 100.0% | 100.0% | $80.00 | $90.00 |
| Five Times Square | 1,062,203 | 0 | 0 | 100.0% | 100.0% | N/A | N/A |
| Seven Times Square | 1,000,000 | 31,488 | 0 | 96.9% | 96.9% | $72.00 | $90.00 |
| Eleven Times Square | 1,056,851 | 158,144 | 0 | 85.0% | 85.0% | $102.00 | $120.00 |
| 750 Seventh Avenue | 533,076 | 0 | 0 | 100.0% | 100.0% | N/A | N/A |
| 810 Seventh Avenue | 603,000 | 41,324 | 0 | 93.2% | 93.2% | $60.00 | $72.00 |
| 250 West 55th Street | 896,000 | 66,617 | 0 | 92.6% | 92.6% | $97.00 | $138.00 |
| 620 Eighth Avenue | 1,500,000 | 0 | 13,589 | 100.0% | 99.1% | N/A | N/A |
| 825 Eighth Avenue | 1,550,212 | 0 | 74,443 | 100.0% | 95.2% | N/A | N/A |
| 1 Bryant Park | 2,100,000 | 0 | 9,445 | 100.0% | 99.6% | N/A | N/A |
| 10 Hudson Yards Property(2) | 1,813,465 | 123,560 | 0 | 93.2% | 93.2% | $65.00 | $83.00 |
| Total/Wtd. Avg.(3) | 11,778,973 | 24,045 | 13,212 | 97.5% | 96.6% | ||
| (1) | Source: Appraisal. |
| (2) | Based on the rent roll dated July 1, 2016. |
| (3) | Total/Wtd. Avg. does not include the 10 Hudson Yards Property. |
Cash Flow Analysis.
| Cash Flow Analysis | |||
| Sponsor Year 1 | U/W | U/W PSF | |
| Total Minimum/Base Rent(1) | $120,287,803 | $116,217,937 | $64.09 |
| Step Rents(2) | 0 | $7,148,763 | $3.94 |
| Value of Vacant Space(3) | 0 | $11,286,175 | $6.22 |
| Gross Potential Rent | $120,287,803 | $134,652,875 | $74.25 |
| Recoveries | 440,331 | 5,769,615 | $3.18 |
| Parking Revenue | 1,581,086 | 2,499,996 | $1.38 |
| DR Income | 756,160 | 971,594 | $0.54 |
| CoGen Income | 983,656 | 983,656 | $0.54 |
| Miscellaneous Tenant Income | 2,267,224 | 2,267,224 | $1.25 |
| Event Space Income | 50,000 | 50,000 | $0.03 |
| Destination Retail Recovery | 102,598 | 102,598 | $0.06 |
| Less: Vacancy(4) | 0 | (11,286,175) | ($6.22) |
| Effective Gross Income | $126,468,858 | $136,011,383 | $75.00 |
| Total Expenses | $33,837,347 | $44,496,991 | $24.54 |
| Net Operating Income | $92,631,511 | $91,514,392 | $50.46 |
| Reserves for Replacements | 0 | 362,693 | $0.20 |
| Leasing Commissions | 0 | 899,367 | $0.50 |
| Tenant Improvements | 0 | 632,261 | $0.35 |
| Net Cash Flow | $92,631,511 | $89,620,071 | $49.42 |
| (1) | Sponsor Year 1 Total Minimum/Base Rent includes credit for contractual free rent reserves and excludes the budgeted free rent associated with the speculative lease-up of floors 40 and 41, as U/W excludes any revenue associated with the same. |
| (2) | U/W Step Rents include $4,373,024 for Coach, $1,639,935 for L’Oreal, $588,617 for BCG and $547,187 for SAP, which represents the net present value of the total rent steps through each the lease term. BCG’s step rents are capped for BCG’s contraction option for the two largest contiguous suites. |
| (3) | U/W Value of Vacant Space is based on the sponsor’s market leasing assumptions. |
| (4) | U/W Vacancy is based on the in-place economic occupancy. |
A-3-9
10 Hudson Yards New York, NY 10001 | Collateral Asset Summary – Loan No. 1 10 Hudson Yards | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 32.9% 4.18x 12.9% |
Property Management. The 10 Hudson Yards Property is managed by Related Hudson Yards Manager LLC, an affiliate of the borrower.
Lockbox / Cash Management.The 10 Hudson Yards Mortgage Loan is structured with a hard lockbox and springing cash management. The borrower was required to send direction letters to all tenants instructing them to deposit all rents into a clearing account controlled by the lender. Provided no Trigger Period (as defined below) exists, amounts on deposit in the clearing account are required to be transferred daily to the borrower’s operating account. During a Trigger Period, any transfers to the borrower’s operating account are required to cease and sums on deposit in the clearing account will be transferred on a daily basis to a deposit account controlled by the lender and applied to payment of all monthly amounts due under the loan documents (including mezzanine loan debt service when no event of default exists under the loan).
A “Trigger Period” will commence upon the occurrence of (i) an event of default or (ii) the commencement of a Low Debt Yield Period (as defined below), (iii) the occurrence of a mezzanine loan default or (iv) the commencement of a Lease Sweep Period (as defined below); and will end if, (A) with respect to clause (i), the event of default commencing the Trigger Period has been cured and such cure has been accepted by the lender (and no other event of default is then continuing), (B) with respect to clause (ii), the Low Debt Yield Period has ended, (C) with respect to clause (iii), the mezzanine loan default has been cured (and no other mezzanine event of default is then continuing) or (D) with respect to clause (iv), the Lease Sweep Period has ended (and no other Lease Sweep Period is then continuing).
A “Low Debt Yield Period” will commence if, as of the last day of any calendar quarter, (a) the debt yield (on a mortgage loan only basis) falls below 8.0% or (b) the debt yield (on a mortgage loan plus mezzanine loan basis) falls below 8.0%, and will cease to exist if (i) the debt yield (on a mortgage loan only basis) is at least 8.0% and (ii) the debt yield (on a mortgage loan plus mezzanine loan basis) is at least 6.0% for two consecutive quarters.
Initial Reserves. At loan origination, the borrower deposited (i) $34,414,188 into an existing TI/LC account, (ii) $34,160,073 into a free rent reserve account and (iii) $90,969,679 into a remaining construction work reserve account.
Ongoing Reserves.On a monthly basis, upon the occurrence of a Trigger Period, on a monthly basis the borrower is required to deposit reserves of (i) 1/12 of estimated annual taxes, (ii) provided an acceptable blanket policy is no longer in place, 1/12 of annual insurance premiums, (iii) capital expenditures in the amount of $30,224, (iv) tenant improvement and leasing commissions in the amount of $151,122, (v) 1/12 of annual owner’s association charges and assessments and (vi) during a Lease Sweep Period, all excess cash will be swept into the lease sweep reserve account.
A “Lease Sweep Period” will commence on the first payment date following the occurrence of any of the following: (i) the date that the Lease Sweep Lease (as defined below) is surrendered, cancelled or terminated with respect to at least 25% of the rentable square footage leased thereunder (exclusive of any space covered by unexercised expansion options) prior to its then current expiration date, or the receipt by borrower or property manager of notice from Lease Sweep Tenant (as defined below) of a valid surrender, cancellation or termination of the Lease Sweep Lease with respect to at least 25% of the rentable square footage leased thereunder (exclusive of any space covered by unexercised expansion options) prior to its then current expiration date; (ii) the filing or commencement of a bankruptcy or insolvency proceeding of a Lease Sweep Tenant.
As used herein, (i) a “Lease Sweep Lease” means the Coach lease and any replacement lease covering all or substantially all the space currently demised under such lease and (ii) “Lease Sweep Tenant” means any tenant under a Lease Sweep Lease.
Current Mezzanine or Subordinate Indebtedness. The 10 Hudson Yards Whole Loan includes the Junior Notes with an original principal balance of $191,900,000, which notes are expected to be contributed to the Hudson Yards 2016-10HY transaction. In addition, a $300,000,000 mezzanine loan was funded concurrently with the origination of the 10 Hudson Yards Whole Loan and thereafter sold to 10HY Mezzanine Lender LLC. The mezzanine loan is coterminous with the 10 Hudson Yards Whole Loan and accrues interest at a fixed per annum rate equal to 4.6500%. An intercreditor agreement is in place with respect to the 10 Hudson Yards Whole Loan and the related mezzanine loan.
Future Mezzanine or Subordinate Indebtedness Permitted. None.
PILOT. The 10 Hudson Yards Property benefits from a payments in lieu of taxes (“PILOT”) program from the New York City Industrial Development Agency (the “IDA”).The borrower, who owns the fee simple interest in the 10 Hudson Yards Property, has entered into (i) a company lease agreement, dated as of August 1, 2016 (the “Company Lease”), between the borrower, as landlord, and the IDA, as tenant, pursuant to which borrower leased the 10 Hudson Yards Property to the IDA, and (ii) an agency lease agreement, dated as of August 1, 2016 (the “IDA Lease”), between the IDA, as sublandlord, and the borrower, as subtenant, pursuant to which the IDA subleased the 10 Hudson Yards Property to the borrower. The Company Lease and the IDA Lease each have terms expiring on June 30, 2043, approximately 17 years beyond the maturity of the 10 Hudson Yards Whole Loan, with no extension options. During the term of the IDA Lease, the borrower is required to make payments in lieu of New York City real property taxes (“PILOT”) with respect to the 10 Hudson Yards Property in the amounts set forth in a schedule to the IDA Lease.After the 15th fiscal tax year, the PILOT amounts
A-3-10
10 Hudson Yards New York, NY 10001 | Collateral Asset Summary – Loan No. 1 10 Hudson Yards | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 32.9% 4.18x 12.9% |
payable by the borrower under the IDA Lease increase annually thereafter until the 20th fiscal tax year when the borrower is required topay 100% of the New York City real property taxes that would otherwise be payable with respect to the 10 Hudson Yards Property in the absence of any real property tax exemption. Real estate taxes were underwritten on the basis of the PILOT payments. The borrower’s obligation to pay PILOT under the IDA Lease is secured by three fee and leasehold PILOT mortgages (collectively, the “PILOT Mortgages”), from the borrower and the IDA in favor of the Hudson Yards Infrastructure Corporation (“HYIC”) in the aggregate principal amount of $475,000,000 encumbering the borrower’s fee interest in the 10 Hudson Yards Property and subtenant’s interest under the IDA Lease and the IDA’s interest under the Company Lease. The liens of the PILOT Mortgages are senior in priority to the mortgage securing the 10 Hudson Yards Whole Loan.
A-3-11
10 Hudson Yards New York, NY 10001 | Collateral Asset Summary – Loan No. 1 10 Hudson Yards | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 32.9% 4.18x 12.9% |
A-3-12
10 Hudson Yards New York, NY 10001 | Collateral Asset Summary – Loan No. 1 10 Hudson Yards | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 32.9% 4.18x 12.9% |
A-3-13
2900 & 2950 Westside Parkway Alpharetta, GA 30004 | Collateral Asset Summary – Loan No. 2 Fiserv at 2900 Westside | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 67.1% 1.52x 9.5% |
A-3-14
2900 & 2950 Westside Parkway Alpharetta, GA 30004 | Collateral Asset Summary – Loan No. 2 Fiserv at 2900 Westside | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 67.1% 1.52x 9.5% |
| Mortgage Loan Information | |
| Loan Seller: | GACC |
| Loan Purpose: | Acquisition |
| Sponsor: | LCN North American Fund II REIT |
| Borrower: | LCN FIS Alpharetta (GA) LLC |
| Original Balance: | $65,000,000 |
| Cut-off Date Balance: | $65,000,000 |
| % by Initial UPB: | 9.2% |
| Interest Rate: | 4.0100% |
| Payment Date: | 6thof each month |
| First Payment Date: | September 6, 2016 |
| Maturity Date: | August 6, 2026 |
| Amortization: | Interest only for first 36 months; 360 months thereafter |
| Additional Debt(1): | Subordinate Debt |
| Call Protection: | L(24), D(91), O(5) |
| Lockbox / Cash Management: | Hard / In-Place |
| Reserves(2) | ||
| Initial | Monthly | |
| Taxes: | $0 | Springing |
| Insurance: | $0 | Springing |
| Replacement: | $0 | Springing |
| TI/LC: | $0 | Springing |
| Lease Sweep: | $0 | Springing |
| Financial Information | ||
| Cut-off Date Balance / Sq. Ft.: | $173 | |
| Balloon Balance / Sq. Ft.: | $149 | |
| Cut-off Date LTV: | 67.1% | |
| Balloon LTV: | 58.1% | |
| Underwritten NOI DSCR(3): | 1.66x | |
| Underwritten NCF DSCR(3): | 1.52x | |
| Underwritten NOI Debt Yield: | 9.5% | |
| Underwritten NCF Debt Yield: | 8.7% | |
| Underwritten NOI Debt Yield at Balloon: | 11.0% | |
| Underwritten NCF Debt Yield at Balloon: | 10.1% | |
| Property Information | |
| Single Asset / Portfolio: | Single Asset |
| Property Type: | Suburban Office |
| Collateral: | Fee Simple(4) |
| Location: | Alpharetta, GA |
| Year Built / Renovated: | 2001 / 2015 |
| Total Sq. Ft.: | 376,351 |
| Property Management: | Self-managed |
| Underwritten NOI: | $6,203,445 |
| Underwritten NCF: | $5,684,826 |
| Appraised Value: | $96,800,000 |
| Appraisal Date: | June 27, 2016 |
| Historical NOI(5) | |
| Most Recent NOI: | NAV |
| 2015 NOI: | NAV |
| 2014 NOI: | NAV |
| 2013 NOI: | NAV |
| Historical Occupancy | |
| Most Recent Occupancy: | 100.0% (August 6, 2016) |
| 2015 Occupancy: | 100.0% (December 31, 2015) |
| 2014 Occupancy(6): | NAP |
| 2013 Occupancy(6): | NAP |
| (1) | See “Current Mezzanine or Subordinate Indebtedness” herein. |
| (2) | See “Initial Reserves” and “Ongoing Reserves” herein. |
| (3) | Based on the amortizing debt service payments. Based on the current interest only payments, the Underwritten NOI DSCR and Underwritten NCF DSCR are 2.35x and 2.15x, respectively. |
| (4) | The borrower’s fee simple interest in the Fiserv at 2900 Westside Property was temporarily transferred to the local development authority in exchange for the related ground lease interest. See “Tax Abatement Structure” herein. |
| (5) | Historical NOI is unavailable as the Fiserv at 2900 Westside Property was recently acquired and the previous owner did not provide historical financials. |
| (6) | The former sole tenant at the Fiserv at 2900 Westside Property vacated in 2013. The sponsor subsequently leased the entirety of the Fiserv at 2900 Westside Property to Fiserv Solutions, Inc. (“Fiserv”) pursuant to a lease that commenced on July 1, 2015. |
A-3-15
2900 & 2950 Westside Parkway Alpharetta, GA 30004 | Collateral Asset Summary – Loan No. 2 Fiserv at 2900 Westside | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 67.1% 1.52x 9.5% |
| Tenant Summary | |||||||
Tenant |
Ratings (Fitch/Moody’s/S&P)(1) | Net Rentable Area (Sq. Ft.) | % of Net Rentable Area |
| U/W Base Rent PSF | % of Total U/W Base Rent | Lease Expiration |
| Fiserv(2) | NR/Baa2/BBB | 376,351 | 100.0% | $16.10 | 100.0% | 12/31/2027 | |
| Total Occupied Collateral | 376,351 | 100.0% | $16.10 | 100.0% | |||
| Vacant | 0 | 0.0% | |||||
| Total | 376,351 | 100.0% | |||||
| (1) | Credit ratings represent Fiserv Inc., the parent company of Fiserv. Fiserv, Inc. guarantees the lease of Fiserv. |
| (2) | Fiserv has three, five-year extension options upon 12 months written notice at 95.0% of fair market value. Fiserv also has two contraction options which can be executed upon 12 months written notice. The contraction options are described in the “Tenant” section below. |
| Lease Rollover Schedule(1)(2) | ||||||||
| Year | # of Leases Expiring | Total Expiring Sq. Ft. | % of Total Sq. Ft. Expiring | Cumulative Sq. Ft. Expiring | Cumulative % of Sq. Ft. Expiring | Annual U/W Base Rent PSF | % U/W Base Rent Rolling | Cumulative % of U/W Base Rent |
| MTM | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2016 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2017 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2018 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2019 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2020(2) | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2021 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2022(2) | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2023 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2024 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2025 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2026 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2027 | 1 | 376,351 | 100.0% | 376,351 | 100.0% | $16.10 | 100.0% | 100.0% |
| Thereafter | 0 | 0 | 0.0% | 376,351 | 100.0% | $0.00 | 0.0% | 100.0% |
| Vacant | NAP | 0 | 0.0% | 376,351 | 100.0% | NAP | NAP | |
| Total / Wtd. Avg. | 1 | 376,351 | 100.0% | $16.10 | 100.0% | |||
| (1) | Based on the August 6, 2016 rent roll. |
| (2) | Fiserv has two contraction options which allow the tenant to contract its space in December 31, 2020 and December 31, 2022. The contraction options are further described in the “Tenant” section below and are not considered in the lease rollover schedule. |
The Loan. The Fiserv at 2900 Westside loan (the “Fiserv at 2900 Westside Loan”) is a fixed rate loan secured by the borrower’s fee interest (which has been temporarily transferred to the local development authority in exchange for the related leasehold interest, as described below under “Tax Abatement Structure” herein) in two, six-story, Class A office buildings totaling 376,351 sq. ft. located at 2900 & 2950 Westside Parkway in Alpharetta, Georgia (the “Fiserv at 2900 Westside Property”) with an original principal balance of $65.0 million. The Fiserv at 2900 Westside Property has a 10-year term and amortizes on a 30-year schedule after an initial 36-month interest only period. The Fiserv at 2900 Westside Loan accrues interest at a fixed rate equal to 4.0100% and has a cut-off date balance of $65.0 million. Loan proceeds, along with approximately $27.6 million in equity from the borrower, were used to acquire the Fiserv at 2900 Westside Property for $92.2 million and pay closing costs of approximately $0.4 million. Based on the appraised value of $96.8 million as of June 27, 2016, the cut-off date LTV is 67.1%. The most recent prior financing of the Fiserv at 2900 Westside Property was not included in a securitization.
| Sources and Uses | ||||||
| Sources | Proceeds | % of Total | Uses | Proceeds | % of Total | |
| Loan Amount | $65,000,000 | 70.2% | Purchase Price | $92,200,000 | 99.5% | |
| Sponsor Equity | $27,634,302 | 29.8% | Closing Costs | $434,302 | 0.5% | |
| Total Sources | $92,634,302 | 100.0% | Total Uses | $92,634,302 | 100.0% | |
A-3-16
2900 & 2950 Westside Parkway Alpharetta, GA 30004 | Collateral Asset Summary – Loan No. 2 Fiserv at 2900 Westside | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 67.1% 1.52x 9.5% |
The Borrower / Sponsor. The borrower, LCN FIS Alpharetta (GA) LLC, is a single purpose Delaware limited liability company structured to be bankruptcy-remote, with two independent directors in its organizational structure. The sponsor of the borrower and the nonrecourse carve-out guarantor is LCN North American Fund II REIT.
LCN North American Fund II REIT is a real estate investment fund managed by LCN Capital Partners, a private equity firm that invests in corporate real estate across several industry sectors in North America and Europe. LCN Capital Partners’ senior management team has experience in corporate and real estate finance, having held senior leadership roles in investment banking, capital markets, asset management, and commercial real estate. Co-founder Edward V. LaPuma created and led W.P. Carey’s international businesses during his over 15-year tenure, working in the sale leaseback market in Europe as well as serving as president of two successful REITs valued at over $2.0 billion and $700.0 million each. Co-founder Bryan York Colwell is a 17-year veteran of Goldman Sachs Investment Banking and M&A division. Bryan York Colwell also served as a global group head at ABN Amro Bank, and also has experience in business creation and restructuring as a private investor.
The Property. The Fiserv at 2900 Westside Property consists of two, six-story Class A office buildings connected by a 17,773 sq. ft. lobby positioned on a 22.9-acre parcel in Alpharetta, Georgia, approximately 28 miles north of the Atlanta, Georgia central business district. The Fiserv at 2900 Westside Property features amenities including a fitness center, cafeteria, covered parking, The Cube, which is a specialty showcase and training center, wi-fi internet access across the entire campus and a newly developed lobby that connects the two buildings. Parking is provided via 1,305 surface parking spaces and 681 garage parking stalls for a total of 1,986 parking spaces, which equates to a ratio of 5.3 spaces per 1,000 sq. ft. of NRA. In addition, the Fiserv at 2900 Westside Property includes 24 parking spaces for electric vehicles.
The Fiserv at 2900 Westside Property was developed in 2001 as a build-to-suit for Nortel Networks, which occupied the entire building. Nortel Networks vacated the Fiserv at 2900 Westside Property in 2006 and the building was subsequently leased to AT&T who remained the sole tenant for seven years until 2013. After AT&T vacated in 2013, the previous lender foreclosed on the previous owner and sold the property to M&J Wilkow for $20.1 million ($53.41 PSF) in February 2013. After acquisition, M&J Wilkow leased the entire space to Fiserv, which lease commenced on July 1, 2015. After leasing the space, Fiserv and M&J Wilkow invested approximately $92.9 million ($246.75 PSF) in capital improvements at the Fiserv at 2900 Westside Property. Of the $92.9 million in capital improvements, Fiserv invested approximately $56.0 million ($148.80 PSF) and M&J Wilkow invested the remaining approximately $36.9 million ($97.95 PSF). Notable renovations included updating the Fiserv at 2900 Westside Property’s technological systems and infrastructure, building systems upgrades, installation of energy-efficient improvements including solar panels, building a 681-stall parking garage and building The Cube, a showcase and training center and a lobby that connects the two office buildings. The Cube is a two-story center with floor-to-ceiling glass, touch-screen walls, presentation equipment, and its own elevator for training and showcasing purposes. Fiserv uses The Cube for hands-on software training and interaction with clients.
The Fiserv at 2900 Westside Property serves as the primary corporate campus for Fiserv outside of its headquarters in Brookfield, Wisconsin. Fiserv operates 11 of its 14 business segments on-site and consolidated six separate locations around the Atlanta area into the Fiserv at 2900 Westside Property. Fiserv also relocated nearly 2,000 employees from nearby offices to the Fiserv at 2900 Westside Property. Fiserv uses the atrium to conduct software training with large clients and holds its annual shareholder meeting in The Cube space.
Environmental Matters. The Phase I environmental report dated June 27, 2016 recommended no further action at the Fiserv at 2900 Westside Property.
Tenant.
Fiserv Solutions Inc.(376,351 sq. ft., 100.0% of NRA, 100.0% of U/W Base Rent, rated Baa2/BBB by Moody’s/S&P) Fiserv (NASDAQ:FISV) is a provider of technology solutions to financial corporations, including banks, credit unions, securities processing organizations and insurance companies, among others. Fiserv is a Fortune 500 company and was honored as a Fortune magazine’s “World’s Most Admired Company” and as one of Forbes magazine’s America’s Best Employers in 2015. Fiserv has more than 13,000 clients and approximately 22,000 associates worldwide across 120 offices in 115 cities. Fiserv reported revenue of approximately $5.3 billion in 2015 and a net income of approximately $712.0 million.
A-3-17
2900 & 2950 Westside Parkway Alpharetta, GA 30004 | Collateral Asset Summary – Loan No. 2 Fiserv at 2900 Westside | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 67.1% 1.52x 9.5% |
Fiserv’s lease is guaranteed by the tenant’s parent entity, Fiserv, Inc. and is structured as a triple net lease with 2.0% annual rental rate increases which begin on January 1, 2019. Fiserv has three, five-year extension options which can be executed upon 12 months written notice at 95% of fair market value. Fiserv has two contraction options which can be executed with at least 12 months written notice. The first contraction option allows Fiserv to contract up to one full floor in the East Building, effective as of December 31, 2020. The second contraction option allows Fiserv to contract up to two full floors in the East Building, inclusive of any space contracted by the exercise of the first contraction option, effective as of December 31, 2022. If the second contraction option is exercised, the related space must be contiguous space to any space contracted through exercise of the first contraction option and include the balance of the floor on which the first contraction space was located if the first contraction space is less than one full floor. Any space contracted through exercise of either the first or second contraction option must consist of at least one-half of the rentable sq. ft. on a floor.
The Market. The Fiserv at 2900 Westside Property is located in the North Fulton submarket within the Atlanta, Georgia metropolitan statistical area (the “Atlanta MSA”). The Atlanta MSA is the ninth largest metro area in the United States by population and has experienced significant growth in recent years, gaining nearly 425,000 in population from 2010 to 2015. The Atlanta MSA has the nation’s third largest concentration of Fortune 500 companies and approximately 75.0% of Fortune 1000 companies have a presence in the metropolitan area. Notable companies headquartered in the Atlanta MSA include The Home Depot, UPS, Coca Cola, Delta Air Lines, Southern Company, Genuine Parts, First Data, HD Supply and SunTrust. Moreover, according to KPMG LLP’s “Competitive Alternatives” study, Atlanta was determined to be the least costly place to do business in the United States. According to preliminary data from the U.S. Bureau of Labor Statistics, the Atlanta MSA gained 77,800 jobs during the 12-month period ending February 2016, growing 2.9% to over 2.7 million jobs. The Atlanta MSA’s unemployment rate was 5.3% as of February 2016.
The Atlanta office market has experienced positive growth in asking rents and declining vacancy over the past year. Asking rents rose to $21.28 as of the second quarter of 2016, a 6.7% increase year-over year. Similarly, vacancy decreased 1.2% over the past 12 months to 12.0% as of the second quarter of 2016. The Atlanta office market’s growth is fueled by the area’s strong population growth, demographic trends, educated workforce and low cost of doing business. The office market is largely driven by the professional and business services and financial sectors but has also experienced a recent surge in growth in the information and technology sector. According to an industry report, Atlanta’s information and technology sector is ranked tenth among the Top 50 US tech talent markets. Moreover, since the beginning of 2015, there has been an influx of corporations announcing new technology and research and development centers in the Atlanta MSA. Notable developments include the Home Depot Technology Center at Tech Square, Twitter’s expansion to Ponce City Market, Google Fiber’s move to the Atlanta market and Coca-Cola, Microsoft, and WorldPay’s development of innovation offices near Georgia Tech’s Atlanta Technology Development Center.
The Fiserv at 2900 Westside Property is located in Alpharetta within the North Fulton submarket, approximately 28 miles north of the Hartsfield-Jackson International Airport. The 2900 at Fiserv Property is in close proximity to Georgia 400, an interstate expressway and primary traffic artery in the Alpharetta area. Georgia 400 provides access to the downtown Atlanta area and surrounding communities and also extends north into the adjoining Forsyth County, a growing residential, office and light industrial area. The surrounding area around the Fiserv at 2900 Westside Property is developed with a variety of office, commercial and residential land uses. The population and average household income within a 5-mile radius of the Fiserv at 2900 Westside Property was 77,319 and $138,749, respectively, as of year-end 2015.
During the 1990’s, the City of Alpharetta and private groups installed extensive fiber optic cabling throughout the city to help create a high-speed broadband network and communications infrastructure for surrounding business operations. In addition, Georgia Power, the state’s largest electricity provider, established a series of redundant electric networks throughout the city to support the network and reduce the risk of power outages. The infrastructure earned Alpharetta the nickname the “Technology City of the South” and has helped attract major companies such as ADP, Fiserv, NCR and Verizon to Alpharetta. Furthermore, the Alpharetta Technology Commission, which is represented by major companies such as Hewlett Packard, McKesson, Microsoft, Siemens, and Verint, is developing and maintaining a 15-year strategic infrastructure and incentive plan to attract and keep additional technology-oriented firms.
The North Fulton office submarket contains approximately 3.8 million sq. ft. of gross leasable area, approximately 10.3% of the total Atlanta MSA office market, and features a vacancy rate of 10.3% and asking rents of $20.70 PSF as of the second quarter of 2016. The submarket generated 248,665 sq. ft. of positive absorption in 2016 and has 405,240 sq. ft. of office space currently under construction. Class A office space in the North Fulton submarket commanded higher rents and featured a lower vacancy than the overall market in the second quarter of 2016 at $23.69 PSF and 9.9%, respectively. The appraiser determined six recent comparable office leases with base rents ranging from $21.50 to $26.00 PSF and determined a market rent of $26.00 PSF for office tenants at the Fiserv at 2900 Westside Property.
A-3-18
2900 & 2950 Westside Parkway Alpharetta, GA 30004 | Collateral Asset Summary – Loan No. 2 Fiserv at 2900 Westside | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 67.1% 1.52x 9.5% |
| Office Lease Comparables(1) | ||||||||||
| Property | NRA (SF) (2) | Year Built | Tenant Name(2) | Lease NRA (SF) (2) | Term (Years)(2) | Rental Rate (PSF) (2) | Lease Type | Free Rent (Months) | TI’s (PSF) | |
| Fiserv at 2900 Westside Property | 376,351 | 2001 | Fiserv | 376,351 | 12.5 | $16.10 | Modified | 6.0 | ||
| Preston Ridge IV | 150,320 | 2000 | Confidential | 12,084 | 3.0 | $24.50 | Modified | 1.0 | $10.00 | |
| Mansell Overlook 100 | 163,000 | 1996 | Heartland Payment Systems | 28,619 | 7.0 | $24.75 | Modified | 5.0 | $25.00 | |
| Lakeview III at Sanctuary Park | 180,773 | 1997 | Confidential | 5,390 | 3.0 | $23.00 | Modified | 0.0 | $0.00 | |
| Mansell Overlook 200 | 163,000 | 1997 | Signal Holdings | 5,300 | 5.0 | $25.00 | Modified | 5.0 | $15.00 | |
| 600 Northwinds | 150,376 | 2000 | Muscle Up Marketing | 5,060 | 7.0 | $26.00 | Modified | 5.0 | $35.00 | |
| 200 North Point Center East | 130,140 | 1996 | Confidential | 107,697 | 15.0 | $21.50 | Modified | 21.0 | NAV | |
| Total / Wtd. Avg.(3) | 937,609 | 164,150 | 6.4 | $24.17 | 5.6 | $14.17 | ||||
| (1) | Source: Appraisal. |
| (2) | Source: rent roll dated August 6, 2016 for the Fiserv at 2900 Westside Property. |
| (3) | Total / Wtd. Avg. does not include the Fiserv at 2900 Westside Property. |
Cash Flow Analysis.
| Cash Flow Analysis | ||
| U/W | U/W PSF | |
| Base Rent(1) | $6,059,252 | $16.10 |
| Step Rents(2) | $480,788 | $1.28 |
| Gross Potential Rent | $6,540,040 | $17.38 |
| Total Recoveries | 191,859 | 0.51 |
| Less: Vacancy(3) | (336,595) | (0.89) |
| Effective Gross Income | $6,395,304 | $16.99 |
| Total Operating Expenses | 191,859 | 0.51 |
| Net Operating Income | $6,203,445 | $16.48 |
| TI/LC | 443,349 | 1.18 |
| Capital Expenditures | 75,270 | 0.20 |
| Net Cash Flow | $5,684,826 | $15.11 |
| (1) | U/W Base Rent is based on the August 6, 2016 rent roll. |
| (2) | Step Rents are based on the contractual rent increases occurring through December 2027 lease expiration. |
| (3) | U/W Vacancy represents a vacancy of 5.0%. The Fiserv at 2900 Westside Property is 100.0% occupied. |
Property Management. The Fiserv at 2900 Westside Property is managed by the sole tenant, Fiserv.
Lockbox / Cash Management. The Fiserv at 2900 Westside Loan is structured with a hard lockbox and in-place cash management. All rents and other payments are required to be deposited directly into a clearing account controlled by lender. All amounts on deposit in the clearing account are required to be swept daily into a deposit account and disbursed in accordance with the loan documents. Provided no Trigger Period (as defined below) is continuing, excess cash in the deposit account will be disbursed in accordance with the Fiserv at 2900 Westside Loan documents.
A “Trigger Period” will commence (i) upon an event of default, (ii) if the debt service coverage ratio falls below 1.15x on the last day of any calendar quarter, or (iii) upon the commencement of a Lease Sweep Period (as defined below). A Trigger Period will continue until such time as (a) with respect to clause (i) above, such event of default has been cured, (b) with respect to clause (ii), the debt service coverage ratio is at least 1.20x for one calendar quarter, and (c) with respect to clause (iii), such Lease Sweep Period has ended.
A “Lease Sweep Period” will commence on the first monthly payment date following (i) the date by which any tenant under a Lease Sweep Lease (as defined below) is required to give notice of its exercise of a renewal option under its lease, (ii) the date that the Lease Sweep Lease is surrendered, cancelled or terminated prior to its then current expiration date or receipt by any borrower of notice from the tenant under the Lease Sweep Lease that it intends to surrender, cancel or terminate its lease prior to its then current expiration date (other than Fiserv’s contraction option if the borrower delivers the termination payment owed to the borrower to the lender), (iii) the date that the tenant under the Lease Sweep Lease discontinues its business (i.e., “goes dark”) with respect to 25.0% of its space at the Fiserv at 2900 Westside Property (exclusive of any space demised under the Fiserv lease that Fiserv has surrendered in connection with the exercise of any contraction options under the Fiserv lease), (iv) a monetary or material non-monetary default under the Lease
A-3-19
2900 & 2950 Westside Parkway Alpharetta, GA 30004 | Collateral Asset Summary – Loan No. 2 Fiserv at 2900 Westside | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 67.1% 1.52x 9.5% |
Sweep Lease that continues beyond any applicable notice or cure period, (v) an insolvency proceeding involving the tenant under the Lease Sweep Lease or (vi) a decline in the credit rating of a tenant under a Lease Sweep Lease by any two rating agencies (so long as the tenant under the Lease Sweep Lease in question is rated by more than one rating agency) below “BBB-” by S&P, “Baa3” by Moody’s or, if rated by Fitch, a “BBB-” rating by Fitch.
A “Lease Sweep Period” will end once the entire space demised under the Lease Sweep Lease in question is either irrevocably renewed or is leased pursuant to qualified leases, as defined in the loan documents, and sufficient funds have accumulated in the lease sweep account to cover all anticipated TI/LCs and free rent periods set forth in such qualified lease or, if such Lease Sweep Period commenced as described in clause (iv) above, the default has been cured or, if such Lease Sweep Period commenced as described in clause (v) above, the insolvency proceeding has been terminated and the applicable Lease Sweep Lease has been affirmed or assumed or, if such Lease Sweep Period commenced as described in clause (vi) above, the credit rating has been restored to at least “BBB–” or equivalent by relevant rating agencies or funds on deposit in the lease sweep account are at least equal to the Lease Sweep Credit Rating Decline Cap (as defined below).
The “Lease Sweep Credit Rating Decline Cap” means (i) for so long as the credit rating of the tenant under such Lease Sweep Lease (or its parent entity) is below “BBB-” but remains above “BB-”, an amount equal to the total rentable sq. ft. of the applicable Lease Sweep Lease multiplied by $1.00 per year, commencing on the commencement of the applicable Lease Sweep Period and thereafter, on every anniversary of the commencement of the applicable Lease Sweep Period until funds in the lease sweep account have reached an amount equal to the total rentable sq. ft. of the applicable Lease Sweep Lease multiplied by $5.00 and (ii) for so long as the credit rating of the tenant under such Lease Sweep Lease (or its parent entity) is “BB-” or below, an amount equal to the total rentable sq. ft. of the applicable Lease Sweep Lease multiplied by $15.00.
A “Lease Sweep Lease” means (i) the Fiserv lease or (ii) any replacement lease that, either individually, or when taken together with any other lease covers 50,000 or more rentable sq. ft.
Initial Reserves. None.
Ongoing Reserves. On a monthly basis, the borrower will be required to deposit 1/12 of the annual real estate taxes and 1/12 of the annual insurance premiums into their respective accounts if Fiserv (i) is no longer obligated to pay the real estate taxes or insurance premiums under its lease, (ii) exercises a contraction option, (iii) fails to pay all taxes and all insurance premiums and other charges before they are due or (iv) fails to provide evidence that taxes, insurance premiums and other charges have been paid. In addition, (a) the borrower will be required to make monthly deposits of $0.20 PSF per annum, subject to a cap of $225,811, into the replacement account during (i) the continuance of a Lease Sweep Period or (ii) any period the Fiserv at 2900 Westside Property is not leased pursuant to the Fiserv lease or another triple net lease which requires such tenant to pay for all capital expenditures at the Fiserv at 2900 Westside Property (and, in such situation such monthly collection will be calculated based on the portion of the property not subject to the Fiserv lease or another triple net lease), (b) the borrower will be required to deposit an amount equal to the net rentable sq. ft. at the property not occupied by Fiserv under the Fiserv Lease, multiplied by $1.18 into the rollover reserve account and (c) during the continuance of a Lease Sweep Period, all excess cash will be transferred into the lease sweep reserve account.
Current Mezzanine or Subordinate Indebtedness. U.S. Bank National Association is the holder (on behalf of the holder of the Authority Bonds (as defined below)) of a subordinate mortgage (“Subordinate Mortgage”) encumbering the fee estate of the DAA (as defined below) in the Fiserv at 2900 Westside Property. The subordinate mortgage secures the DAA’s obligations under its Series 2014 bonds (the “Authority Bonds”). The borrower is the owner of the Authority Bonds. The holder of the subordinate mortgage is a party to both the Subordinate Mortgage and a pledge, assignment and subordination agreement which documents the Subordinate Mortgage to the related mortgage. The Fiserv at 2900 Westside Property will automatically be released from the lien of the Subordinate Mortgage on or before December 31, 2025, as described below under “Tax Abatement Structure”.
Future Mezzanine or Subordinate Indebtedness Permitted. None.
Tax Abatement Structure. In order to obtain and maintain certain real property tax abatements, the predecessor to the borrower entered into a municipal bond structure with the local development authority, the Development Authority of Alpharetta (the “DAA”) pursuant to which, the DAA acquired the fee interest in the Fiserv at 2900 Westside Property in 2014 and issued certain municipal bonds (the “DAA Bonds”). In exchange, the predecessor to the borrower obtained the leasehold interest in the Fiserv at 2900 Westside Property and received 100.0% of the DAA Bonds. In connection with the acquisition of the Fiserv at 2900 Westside Property, the borrower acquired ownership of the leasehold interest in the Fiserv at 2900 Westside Property, subject to the DAA’s temporary fee interest. The rent payable by the borrower to the DAA under the ground lease is equal to the principal and interest payments due to the borrower under the DAA Bonds and, therefore the rental payments and bond payments offset each other. At any time prior to December 31, 2025, the borrower is entitled to purchase the Fiserv at 2900 Westside Property back from the DAA, terminate the ground lease and Fiserv at 2900 Westside Property will automatically be released from the lien of the Subordinate Mortgage. In order to effectuate the purchase, (i) the DAA has executed a deed conveying the property to borrower, which deed is currently held in escrow with a third party escrow agent and (ii) such deed of conveyance will be recorded upon the surrender of the DAA Bonds by the borrower to the bond trustee and payment of certain nominal fees and expenses in connection with such surrender. The loan documents require
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2900 & 2950 Westside Parkway Alpharetta, GA 30004 | Collateral Asset Summary – Loan No. 2 Fiserv at 2900 Westside | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 67.1% 1.52x 9.5% |
the borrower to exercise this purchase option at the expiration of the ground lease term on December 31, 2025 and the fee interest will revert to the borrower. The DAA Bonds are additional collateral for the Fiserv at 2900 Westside Loan and the DAA has encumbered its fee interest in the Fiserv at 2900 Westside Property in favor of the lender.
A-3-21
2900 & 2950 Westside Parkway Alpharetta, GA 30004 | Collateral Asset Summary – Loan No. 2 Fiserv at 2900 Westside | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $65,000,000 67.1% 1.52x 9.5% |
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A-3-23
865 Market Street San Francisco, CA 94103 | Collateral Asset Summary – Loan No. 3 Westfield San Francisco Centre | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $60,000,000 35.5% 3.68x 13.1% |
A-3-24
865 Market Street San Francisco, CA 94103 | Collateral Asset Summary – Loan No. 3 Westfield San Francisco Centre | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $60,000,000 35.5% 3.68x 13.1% |
| Mortgage Loan Information | |
| Loan Seller: | GACC |
| Loan Purpose: | Refinance |
| Sponsor: | Westfield America, Inc. |
| Borrowers: | Emporium Mall LLC; S.F. Centre Limited Partnership |
| Original Balance(2): | $60,000,000 |
| Cut-off Date Balance(2): | $60,000,000 |
| % by Initial UPB: | 8.5% |
| Interest Rate: | 3.3940% |
| Payment Date: | 1stof each month |
| First Payment Date: | September 1, 2016 |
| Maturity Date: | August 1, 2026 |
| Amortization: | Interest Only |
| Additional Debt(2)(3): | $373,077,000Pari PassuDebt; $124,923,000 Subordinate Secured Debt |
| Call Protection(4): | L(24), DorYM1(92), O(4) |
| Lockbox / Cash Management: | Hard / Springing |
| Reserves(5) | |||
| Initial | Monthly | ||
| Taxes: | $0 | Springing | |
| Insurance: | $0 | Springing | |
| Replacement: | $0 | Springing | |
| TI/LC: | $0 | Springing | |
| Ground Rent: | $0 | Springing | |
| Zara Free Rent / TI (LOC)(6): | $4,300,000 | NAP | |
| Financial Information | ||
| Senior Notes(7) | Total Debt(8) | |
| Cut-off Date Balance / Sq. Ft.: | $545 | $702 |
| Balloon Balance / Sq. Ft.: | $545 | $702 |
| Cut-off Date LTV: | 35.5% | 45.7% |
| Balloon LTV: | 35.5% | 45.7% |
| Underwritten NOI DSCR: | 3.79x | 2.95x |
| Underwritten NCF DSCR: | 3.68x | 2.85x |
| Underwritten NOI Debt Yield: | 13.1% | 10.1% |
| Underwritten NCF Debt Yield: | 12.7% | 9.8% |
| Underwritten NOI Debt Yield at Balloon: | 13.1% | 10.1% |
| Underwritten NCF Debt Yield at Balloon: | 12.7% | 9.8% |
| Property Information | |
| Single Asset / Portfolio: | Single Asset |
| Property Type: | Super Regional Mall / Office |
| Collateral: | Fee Simple/Leasehold |
| Location: | San Francisco, CA |
| Year Built / Renovated: | 1908, 1988 / 2006 |
| Total Sq. Ft.: | 794,521 |
| Property Management: | Westfield Property Management LLC |
| Underwritten NOI: | $56,554,190 |
| Underwritten NCF: | $54,817,690 |
| Appraised Value: | $1,220,000,000 |
| Appraisal Date: | April 27, 2016 |
| Historical NOI | |
| Most Recent NOI: | $51,963,988 (T-12 March 31, 2016) |
| 2015 NOI: | $50,954,179 (December 31, 2015) |
| 2014 NOI: | $48,128,023 (December 31, 2014) |
| 2013 NOI: | $48,398,462 (December 31, 2013) |
| Historical Occupancy | |
| Most Recent Occupancy: | 95.6% (April 30, 2016) |
| 2015 Occupancy: | 93.4% (December 31, 2015) |
| 2014 Occupancy: | 95.1% (December 31, 2014) |
| 2013 Occupancy: | 92.1% (December 31, 2013) |
| (1) | Moody’s/Fitch/DBRS provided the above ratings for the Westfield San Francisco Centre mortgage loan in the context of its inclusion in the mortgage pool. On a standalone basis, Fitch rated the Westfield San Francisco Centre mortgage loan “A”. |
| (2) | The Original Balance and Cut-off Date Balance of $60.0 million represents the senior non-controlling Notes A-1-EMP-C2, A-1-SFC-C2, A-1-EMP-C3 and A-1-SFC-C3 which, together with the pari passu Senior Notes, with an aggregate original principal balance of $373.077 million, and four subordinate Junior Notes, with an aggregate original principal balance of $124.923 million, comprises the Westfield San Francisco Centre Whole Loan with an aggregate original principal balance of $558.0 million. For additional information regarding the pari passu Senior Notes and the Junior Notes, see “The Loan” herein. |
| (3) | See “Current Mezzanine or Subordinate Indebtedness herein. |
| (4) | The borrowers have the option of prepayment in full together with the greater of 1% or yield maintenance or defeasance in full. The lockout period will be at least 24 payment dates beginning with and including the first payment date of September 1, 2016. Defeasance of the full $558.0 million Westfield San Francisco Centre Whole Loan is permitted after the date that is the earlier to occur of (i) two years after the closing date of the securitization that includes the lastpari passu note to be securitized and (ii) August 1, 2019. The assumed lockout period of 24 payments is based on the expected CD 2016-CD1 securitization closing date in August 2016. The actual lockout period may be longer. In addition, in connection with a DSCR Trigger Period (as defined below) the borrowers may prepay a portion of the Westfield San Francisco Centre Whole Loan to achieve a higher DSCR. See “Ongoing Reserves” below. |
| (5) | See “Initial Reserves” and “Ongoing Reserves” herein. |
| (6) | In lieu of depositing a cash reserve to cover the free rent and landlord’s work associated with the Zara lease, the borrowers have delivered two letters of credit in the aggregate amount of $4,300,000 from UBS AG bank. See “Letters of Credit” herein. |
| (7) | DSCR, LTV, Debt Yield and Balance / Sq. Ft. calculations are based on the aggregate Senior Notes only, which have an aggregate principal balance of $433.077 million. |
| (8) | Total Debt DSCR, LTV, Debt Yield and Balance / Sq. Ft. calculations are based on the aggregate Westfield San Francisco Centre Whole Loan balance of $558.0 million, which includes the $124.923 million Junior Notes. |
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865 Market Street San Francisco, CA 94103 | Collateral Asset Summary – Loan No. 3 Westfield San Francisco Centre | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $60,000,000 35.5% 3.68x 13.1% |
| Retail Tenant Summary | ||||||||
| Tenant Mix | Ratings (Fitch/Moody’s/S&P)(1) | Total Sq. Ft.(2) | % of Retail Collateral Sq. Ft. | % of Total Collateral Sq. Ft. | Base Rent PSF(2) | Lease Expiration | T-12 March 2016 Sales (000s)(3) | T-12 March 2016 Sales PSF(3) |
| Anchors(non-collateral) | ||||||||
| Bloomingdale’s | BBB/Baa2/BBB | 338,928 | NAP | NAP | NAP | NAP | $122,876 | $363 |
| Nordstrom | BBB+/Baa1/BBB+ | 312,000 | NAP | NAP | NAP | NAP | $89,220 | $286 |
| Total Anchor Tenants | 650,928 | $212,096 | $326 | |||||
| Major Tenants(>10,000 sq. ft.) | ||||||||
| Century Theatres(4) | NR/B2/BB | 52,636 | 9.5% | 6.6% | $27.00 | 9/30/2021 | $6,377 | $708,598 |
| Bespoke | NR/NR/NR | 36,977 | 6.7% | 4.7% | $25.75 | 12/31/2021 | NAP | NAP |
| Zara(5) | NR/NR/NR | 27,579 | 5.0% | 3.5% | $108.78 | 3/31/2027 | $11,874 | $1,403 |
| H&M | NR/NR/NR | 25,289 | 4.6% | 3.2% | $71.07 | 1/31/2022 | $11,170 | $442 |
| Bristol Farms | NR/NR/NR | 22,135 | 4.0% | 2.8% | $42.27 | 1/31/2017 | $10,690 | $483 |
| Abercrombie & Fitch | NR/NR/BB- | 16,488 | 3.0% | 2.1% | $107.29 | 1/31/2022 | $12,907 | $783 |
| Express/Express Men | NR/NR/NR | 15,660 | 2.8% | 2.0% | $74.00 | 1/31/2023 | $4,587 | $293 |
| J. Crew | NR/B2/B- | 11,284 | 2.0% | 1.4% | $83.44 | 1/31/2022 | $11,033 | $978 |
| Victoria’s Secret | NR/NR/NR | 11,037 | 2.0% | 1.4% | $76.41 | 1/31/2023 | $14,772 | $1,338 |
| Total Major Tenants(6) | 219,085 | 39.6% | 27.6% | $58.51 | $77,032 | $698 | ||
| In-line | 218,415 | 39.5% | 27.5% | $91.28 | $173,234 | $793 | ||
| Restaurant/Food Court | 38,711 | 7.0% | 4.9% | $109.69 | $39,331 | $1,016 | ||
| Exterior | 29,808 | 5.4% | 3.8% | $172.03 | $32,956 | $1,106 | ||
| Specialty Leasing(7) | 5,203 | 0.9% | 0.7% | NAP | NAP | NAP | ||
| Kiosk/ATM | 4,360 | 0.8% | 0.5% | NAP | NAP | NAP | ||
| Patio | 2,672 | 0.5% | 0.3% | $71.57 | NAP | NAP | ||
| Total Occupied Retail Collateral | 518,254 | 93.7% | 65.2% | |||||
| Vacant Retail | 35,112 | 6.3% | 4.4% | |||||
| Total Retail Collateral Sq. Ft. | 553,366 | 100.0% | 69.6% | |||||
| (1) | Certain ratings are those of the parent company whether or not the parent company guarantees the lease. |
| (2) | Total Sq. Ft. and Base Rent PSF are based on the April 30, 2016 rent roll. |
| (3) | All sales information presented herein with respect to the Westfield San Francisco Centre Property is based upon information provided by the borrowers; in certain instances, sales figures represent estimates because the tenants are not required to report, or otherwise may not have timely reported sales. |
| (4) | T-12 March 2016 Sales PSF for Century Theatres represents sales per screen based on nine screens. |
| (5) | T-12 March 2016 Sales PSF figures for Zara are based upon the 8,463 sq. ft. that Zara currently occupies at the Westfield San Francisco Centre Property. The Total Sq. Ft. for Zara above includes Zara’s expansion space. The Zara expansion space is expected to be delivered to the tenant April 1, 2017 and the tenant will commence paying rent on October 1, 2017. |
| (6) | Century Theatres’ sales are excluded from the total T-12 March 2016 Sales and T-12 March 2016 Sales PSF. |
| (7) | Specialty Leasing represents tenants with short-term lease or license agreements with a duration that is typically 12 months or less. |
| Office Tenant Summary | |||||||
| Tenant Name | Ratings (Fitch/Moody’s/S&P)(1) | Net Rentable Area (Sq. Ft.) | % of Office Sq. Ft. | % of Collateral Sq. Ft. | Underwritten Base Rent PSF | Underwritten Gross Rent PSF | Lease Expiration |
| San Francisco State University(2) | A+/Aa3/AA- | 125,483 | 52.0% | 15.8% | $37.12 | $37.95 | 12/31/2021 |
| Crunchyroll, Inc.(3) | NR/NR/NR | 71,614 | 29.7% | 9.0% | $58.71 | $60.50 | 1/31/2020 |
| True Ultimate Standards Every | NR/NR/NR | 28,217 | 11.7% | 3.6% | $53.56 | $55.35 | 2/29/2020 |
| Burke Williams Day Spa | NR/NR/NR | 15,841 | 6.6% | 2.0% | $44.00 | $54.87 | 1/31/2022 |
| Total / Wtd. Avg. Occupied | 241,155 | 100.0% | 30.4% | $45.90 | $47.80 | ||
| (1) | Certain ratings are those of the parent company whether or not the parent company guarantees the lease. |
| (2) | San Francisco State University subleases 18,354 sq. ft. to San Francisco Examiner through December 2021 and 18,712 sq. ft. to Westfield Labs, a Westfield affiliate, through December 2021. San Francisco State University has a termination option for the entirety of its space effective December 31, 2018 which requires 15 months prior notice and the payment of a termination fee equal to three months of base rent and the unamortized tenant improvement and broker commissions. |
| (3) | Crunchyroll, Inc. subleases 30,000 sq. ft. to GoPro, Inc. through June 2017. |
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865 Market Street San Francisco, CA 94103 | Collateral Asset Summary – Loan No. 3 Westfield San Francisco Centre | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $60,000,000 35.5% 3.68x 13.1% |
| Lease Rollover Schedule(1)(2) | ||||||||
| Year | # of Leases Expiring | Total Expiring Sq. Ft. | % of Total Sq. Ft. Expiring | Cumulative Sq. Ft. Expiring | Cumulative % of Sq. Ft. Expiring | Annual U/W Base Rent PSF | % U/W Base Rent Rolling | Cumulative % of U/W Base Rent |
| Specialty(3) | 2 | 5,203 | 0.7% | 5,203 | 0.7% | $0.00 | 0.0% | 0.0% |
| MTM | 19 | 35,382 | 4.5% | 40,585 | 5.1% | $105.14 | 7.0% | 7.0% |
| 2016 | 6 | 9,979 | 1.3% | 50,564 | 6.4% | $40.88 | 0.8% | 7.7% |
| 2017 | 39 | 84,308 | 10.6% | 134,872 | 17.0% | $112.54 | 17.8% | 25.5% |
| 2018 | 13 | 19,948 | 2.5% | 154,820 | 19.5% | $73.74 | 2.8% | 28.3% |
| 2019 | 10 | 4,929 | 0.6% | 159,749 | 20.1% | $191.71 | 1.8% | 30.0% |
| 2020 | 11 | 108,570 | 13.7% | 268,319 | 33.8% | $62.61 | 12.7% | 42.8% |
| 2021 | 19 | 244,139 | 30.7% | 512,458 | 64.5% | $35.13 | 16.1% | 58.8% |
| 2022 | 22 | 114,412 | 14.4% | 626,870 | 78.9% | $83.76 | 17.9% | 76.8% |
| 2023 | 10 | 43,434 | 5.5% | 670,304 | 84.4% | $70.79 | 5.8% | 82.5% |
| 2024 | 5 | 16,070 | 2.0% | 686,374 | 86.4% | $70.83 | 2.1% | 84.7% |
| 2025 | 5 | 13,601 | 1.7% | 699,975 | 88.1% | $179.66 | 4.6% | 89.2% |
| 2026 | 8 | 15,341 | 1.9% | 715,316 | 90.0% | $125.73 | 3.6% | 92.9% |
| Thereafter | 4 | 44,093 | 5.5% | 759,409 | 95.6% | $86.54 | 7.1% | 100.0% |
| Vacant | NAP | 35,112 | 4.4% | 794,521 | 100.0% | NAP | NAP | |
| Total / Wtd. Avg. | 173 | 794,521 | 100.0% | $70.31 | 100.0% | |||
| (1) | Based on the April 30, 2016 rent roll. |
| (2) | Certain tenants have lease termination options that may become exercisable prior to the originally stated expiration date of the tenant lease that are not considered in the lease rollover schedule. |
| (3) | Specialty tenants represent tenants with short-term leases or license agreements with a duration that is typically 12 months or less. Rent for the specialty tenants was not included in underwritten base rent but has been underwritten with other income. |
The Loan. The Westfield San Francisco Centre loan (the “Westfield San Francisco Centre Loan”) is a fixed rate loan secured by the borrowers’ fee simple and leasehold interests in 794,521 sq. ft. of a 1,445,449 sq. ft. super regional mall and office property located at 865 Market Street in the Union Square neighborhood of San Francisco, California (the “Westfield San Francisco Centre Property”). The Westfield San Francisco Centre Loan is evidenced by the senior non-controlling notes A-1-EMP-C2, A-1-SFC-C2, A-1-EMP-C3 and A-1-SFC-C3 with an aggregate original principal balance of $60.0 million and is a part of a $558.0 million whole loan that is evidenced by 28 promissory notes: 24pari passu senior notes with an aggregate original principal balance of $433.077 million (collectively, the “Senior Notes”) and four subordinate notes with an aggregate original principal balance of $124.923 million (collectively, the “Junior Notes” and, together with the Senior Notes, the “Westfield San Francisco Centre Whole Loan”). The Westfield San Francisco Centre Whole Loan was co-originated by Deutsche Bank AG, New York Branch (an affiliate of GACC) and JPMorgan Chase Bank, National Association. Only the Westfield San Francisco Centre Loan will be included in the CD 2016-CD1 mortgage trust. Eight of the Senior Notes with an aggregate original principal balance of $182.019 million and all of the Junior Notes are included in the DBJPM 2016-SFC mortgage trust. Four of the Senior Notes with an aggregate original principal balance of $84.0 million were contributed to the DBJPM 2016-C3 mortgage trust. The remaining Senior Notes are expected to be held by Deutsche Bank AG, New York Branch (“DBNY”) or an affiliate and JPMCB or an affiliate and contributed to one or more future securitizations.
The relationship between the holders of the Senior Notes and the Junior Notes will be governed by a co-lender agreement as described under “Description of the Mortgage Pool—The Whole Loans —Westfield San Francisco Centre Whole Loan”in the Prospectus.
| Whole Loan Summary | ||||
| Original Balance | Cut-off Date Balance | Note Holder | Control | |
| A-1-EMP-C2, A-1-SFC-C2, A-1-EMP-C3 , A-1-SFC-C3 | $60,000,000 | $60,000,000 | CD 2016-CD1 | No |
| DBJPM 2016-SFC Mortgage Trust Notes | $306,942,000 | $306,942,000 | DBJPM 2016-SFC | Yes |
| A-1-EMP-C1, A-1-SFC-C1, A-2-EMP-C1 , A-2-SFC-C1 | $84,000,000 | $84,000,000 | DBJPM 2016-C3 | No |
| DBNY Non-Trust Senior Notes | $23,529,000 | $23,529,000 | DBNY | No |
| JPMCB Non-Trust Senior Notes | $83,529,000 | $83,529,000 | JPMCB | No |
| Total Debt | $558,000,000 | $558,000,000 | ||
The Westfield San Francisco Centre Loan has a 10-year term and pays interest only for the duration of the term. The Westfield San Francisco Centre Loan accrues interest at a rate equal to 3.3940% per annum and has a Cut-off Date Balance of approximately $60.0 million. The Westfield San Francisco Centre Whole Loan proceeds were used to refinance existing debt of approximately $555.5 million and pay closing costs of approximately $4.2 million. Based on the appraised value of $1.22 billion as of April 27, 2016, the Cut-off Date LTV for the Senior Notes is 35.5%. Previous financing on the property consisted of a $120.5 million floating-rate loan encumbering the leasehold interest in the San Francisco Centre and a $435.0 million fixed-rate loan encumbering the fee interest in the Emporium retail
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865 Market Street San Francisco, CA 94103 | Collateral Asset Summary – Loan No. 3 Westfield San Francisco Centre | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $60,000,000 35.5% 3.68x 13.1% |
and office building. The $435.0 million loan was bifurcated into a $300.0 million senior note which was included in the LBUBS 2007-C1 transaction and a $135.0 million junior note which was sold separately.
| Sources and Uses | ||||||
| Sources | Proceeds | % of Total | Uses | Proceeds | % of Total | |
| Whole Loan | $558,000,000 | 99.7% | Loan Payoff | $555,500,000 | 99.3% | |
| Sponsor Equity | $1,661,400 | 0.3% | Closing Costs | $4,161,400 | 0.7% | |
| Total Sources | $559,661,400 | 100.0% | Total Uses | $559,661,400 | 100.0% | |
The Borrowers / Sponsor. The borrowers are Emporium Mall LLC, a Delaware limited liability company and S.F. Centre Limited Partnership, a Delaware limited partnership, each structured to be bankruptcy-remote with two independent directors in its organizational structure. The sponsor of the borrowers and the non-recourse carve-out guarantor is Westfield America, Inc. (“Westfield”), provided that (i) any related recourse liability is subject to a cap of 10% of the then outstanding principal balance of the Westfield San Francisco Centre Whole Loan and (ii) in no event will Westfield be liable for losses solely related to the borrowers’ failure to (a) pay debt service on or repay the Westfield San Francisco Centre Whole Loan, (b) remain solvent, (c) remain adequately capitalized or (d) pay their debts as they become due.
Emporium Mall LLC owns the Emporium retail and office building in fee simple and S.F. Centre Limited Partnership holds the leasehold interest in the San Francisco Centre. Westfield and Forest City indirectly own a majority of the S.F. Centre Limited Partnership and Emporium Mall LLC. Westfield indirectly controls both S.F. Centre Limited Partnership and Emporium Mall LLC.
Westfield, an affiliate of Westfield Corporation, is a real estate investment trust that is in the business of owning, operating, developing, and acquiring iconic retail destinations in the world’s leading cities (including in major metropolitan areas in the United States) attracting over 330 million shopper visits last year, Westfield’s portfolio of 32 shopping centers in the United States includes nearly 5,800 stores encompassing approximately 40 million sq. ft. of retail space in eight states.
The Property. The Westfield San Francisco Centre Property is a portion of a 1,445,449 sq. ft. super regional mall and office property located at 865 Market Street in San Francisco’s Union Square neighborhood. The Westfield San Francisco Centre Property is divided between the San Francisco Centre (23.4% of collateral NRA) and the Emporium retail and office building (76.6% of collateral NRA). The San Francisco Centre portion of the mall was originally developed in 1988 and purchased by Westfield in 2002. The Emporium portion of the mall, which is a redevelopment of the historic Emporium department store that dates back to the 1890s, was co-developed by Westfield and Forest City in 2006. The San Francisco Centre is subject to a ground lease with an initial expiration of June 30, 2043 and includes one renewal option for a 15-year term. The retail portion of the Westfield San Francisco Centre Property is anchored by the west coast flagship of Bloomingdale’s and the second largest Nordstrom in the United States, neither of which are collateral for the Westfield San Francisco Centre Whole Loan.
As of April 30, 2016, the Westfield San Francisco Centre Property’s retail portion was 93.7% leased by approximately 160 tenants (97.1% including non-collateral anchor tenants). The Westfield San Francisco Centre Property features a nine-screen movie theater and several noteworthy major and in-line tenants, including Zara, H&M, J. Crew, Victoria’s Secret, Banana Republic, Foot Locker, and Champs Sports. Furthermore, the Westfield San Francisco Centre Property offers approximately 23 restaurant and dining concepts. No tenant contributes more than 5.6% of gross rent. Sales for all reporting categories, including non-collateral tenants, for the trailing 12 months ending March 2016 totaled $599.3 million, with specialty store (all tenants excluding major tenants and theatre tenants) sales of $1,028 PSF. From 2011 to 2015, specialty store sales PSF has grown at a compound annual growth rate of 7.4%.
The retail portion of the Westfield San Francisco Centre Property also features a new digital space, called Bespoke, which Westfield unveiled in May of 2015. Bespoke, which is a Westfield affiliate, consists of co-working, technology demonstration, and event spaces. As of July 2016, Bespoke hosted over 100 events, showcased over 30 demonstrations, and was home to more than 75 retail-tech start-ups. Clients of Bespoke include several prominent technology companies including Google, Salesforce and Facebook. The co-working space has over 200 paying members and achieved 100% occupancy in its first nine months.
According to the appraisal, the Westfield San Francisco Centre Property is located in one of the top retail destinations in the country (Market Street in San Francisco’s Union Square neighborhood), with strong historical sales and average mall and office occupancies of 96.6% and 97.5%, respectively, from 2007 to 2015 (including non-collateral anchors). As of April 30, 2016, the Westfield San Francisco Centre Property’s office portion was 100.0% leased to four tenants.
| Historical Occupancy(1) | ||||||||||
| 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | Apr-16 | |
| Collateral Retail Occupancy | 99.3% | 95.8% | 93.6% | 87.7% | 89.6% | 89.1% | 89.4% | 94.5% | 93.7% | 93.7% |
| Total Mall Occupancy | 99.7% | 98.1% | 97.1% | 94.4% | 95.3% | 95.0% | 95.1% | 97.5% | 97.1% | 97.1% |
| Office Occupancy | 94.0% | 96.0% | 100.0% | 100.0% | 100.0% | 100.0% | 98.3% | 96.6% | 92.7% | 100.0% |
| (1) | Source: borrower. |
A-3-28
865 Market Street San Francisco, CA 94103 | Collateral Asset Summary – Loan No. 3 Westfield San Francisco Centre | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $60,000,000 35.5% 3.68x 13.1% |
Since January 2015, 29,853 sq. ft. of new in-line tenants have been signed at the retail portion of the Westfield San Francisco Centre Property. These leases are 27.4% higher than the average in-place base rent PSF of all in-line tenants. Additionally, Zara signed a lease to expand their space by 19,116 sq. ft. in June 2016. The space is expected to be delivered to Zara in April 2017 and Zara is required to begin paying rent in October 2017. The borrower has delivered a letter of credit in the amount of $4,300,000 to cover gap rent and the tenant improvement obligations of the borrower associated with the Zara lease. The average in-place gross office rent of $47.80 PSF is a 19.1% discount to the most recently signed office leases at the Westfield San Francisco Centre Property (Crunchyroll, Inc. and TRUSTe).
| Historical Sales PSF(1) | ||||||
| Tenant | 2012 PSF | 2013 PSF | 2014 PSF | 2015 PSF | T-12 March 2016 Sales | T-12 March 2016 PSF |
| Anchors (Non Collateral)(2) | ||||||
| Bloomingdale’s | $320 | $361 | $376 | $364 | $122,875,937 | $363 |
| Nordstrom | $334 | $321 | $297 | $277 | $89,219,568 | $286 |
| Major Tenants (>10,000 Sq. Ft.) | ||||||
| H&M | $466 | $441 | $448 | $448 | $11,170,323 | $442 |
| Bristol Farms | $524 | $505 | $475 | $472 | $10,690,027 | $483 |
| Abercrombie & Fitch | $1,122 | $977 | $837 | $786 | $12,906,555 | $783 |
| Express/Express Men | $0 | $401 | $312 | $299 | $4,587,178 | $293 |
| J. Crew | $1,133 | $1,143 | $1,032 | $980 | $11,033,132 | $978 |
| Victoria’s Secret | $0 | $1,103 | $1,151 | $1,332 | $14,771,539 | $1,338 |
| Total Major | $727 | $685 | $637 | $640 | $65,158,754 | $639 |
| Comp In-line (<10,000 Sq. Ft.)(3) | $847 | $881 | $898 | $909 | $170,664,253 | $915 |
| Exterior Tenants | ||||||
| Adidas | $506 | $591 | $630 | $751 | $8,899,470 | $805 |
| Timberland | $603 | $895 | $1,028 | $889 | $2,056,192 | $879 |
| Tourneau | $4,314 | $4,941 | $5,469 | $5,147 | $13,477,648 | $5,132 |
| American Eagle Outfitters | $1,190 | $1,050 | $940 | $1,029 | $8,522,466 | $1,013 |
| Total Exterior | $1,160 | $1,246 | $1,295 | $1,332 | $32,955,776 | $1,349 |
| Century Theatres(4) | $675,847 | $642,737 | $618,177 | $663,681 | $6,377,379 | $708,598 |
| (1) | All sales information presented herein with respect to the Westfield San Francisco Centre Property is based upon information provided by the borrower; in certain instances, sales figures represent estimates because the tenants are not required to report, or otherwise may not have timely reported sales. |
| (2) | Anchor sales reflect estimates from the general manager’s communication with the tenant. |
| (3) | Comp In-line Sales include tenants that have reported two full years of sales. |
| (4) | Sales for Century Theatres reflect sales per screen based on nine screens. |
Environmental Matters. The Phase I environmental report dated May 5, 2016 reported a recognized environmental condition in connection with a 4,000 gallon underground storage tank, which is being monitored in compliance with regulatory standards and, according to the Phase I report, warrants no further action. The report also identified, de minimis leaks of hydraulic fluid associated with the two truck elevators on lower level 1, which, according to the Phase I report, does not represent a significant environmental concern.
The Market. The Westfield San Francisco Centre Property is located in the Union Square neighborhood within the greater San Francisco Bay Area. According to the appraiser, Union Square is the San Francisco Bay Area’s premier retail district and part of a class of national top tier high end shopping districts, such as New York’s Fifth/Madison Avenues, Chicago’s North Michigan Avenue and Beverly Hills’ Rodeo Drive.
According to industry reports, the San Francisco retail market did not experience much change in market conditions in the first quarter of 2016. The vacancy rate went from 2.1% in the previous quarter to 2.2% in the current quarter. Net absorption was negative 88,851 sq. ft., and vacant sublease space decreased by 5,885 sq. ft. Quoted rental rates increased from fourth quarter 2015 levels, ending at $37.92 PSF per year. There was no new retail space delivered to the market in the first quarter, and there is currently 356,786 sq. ft. still under construction as of the end of the quarter.
According to industry reports, the Union Square submarket has a retail inventory of 3.29 million sq. ft. The submarket had a vacancy rate of 2.9%, net absorption of 20,476 sq. ft. and an average rental rate of $72.16 PSF, triple net. The appraiser determined a stabilized vacancy of 4.0% for the Westfield San Francisco Centre Property. As of the first quarter of 2016, the population within a 5-mile radius of the Westfield San Francisco Centre Property was 724,333, with expected growth of 1.15% over the next five years, and average household income was $129,484.
A-3-29
865 Market Street San Francisco, CA 94103 | Collateral Asset Summary – Loan No. 3 Westfield San Francisco Centre | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $60,000,000 35.5% 3.68x 13.1% |
The appraiser noted that the Westfield San Francisco Centre Property is well-located for a super-regional mall and office project and represents a prime destination retail property that acts as the anchor for the larger surrounding Union Square District. Due to its size and location, the Westfield San Francisco Centre Property has little comparable competition. However, according to industry reports there are five retail centers located between six and 12 miles away, which are summarized in the chart below.
| Competitive Set(1) | ||||||
| Name | Westfield San Francisco Centre Property | Stonestown Galleria | Bay Street | Serramonte Center | Shops at Tanforan | Village at Corte Madera |
| Distance from Property (mi) | N/A | 6 | 8 | 9 | 11 | 12 |
| Property Type | Mall | Mall | Lifestyle Center | Mall | Mall | Mall |
| Year Built / Renovated | 1908, 1988 / 2006 | 1952 / 1988 | 2002 | 1968 / 2007 | 1971 / 2005 | 1985 / 2005 |
| Owner(s) | Westfield / Forest City | General Growth | Madison Marquette | Equity One, Inc. | QIC Limited | Calpers / Macerich |
| Total Occupancy | 98.0% | 97.0% | 90.0% | 91.0% | 89.0% | 98.0% |
| Sales PSF(2) | $960 | $610 | $300 | $490 | $375 | $1,070 |
| Size (Sq. Ft.) | 1,220,000(3) | 836,454 | 400,000 | 865,000 | 979,000 | 460,000 |
| Anchors / Major Tenants | Bloomingdale’s / Nordstrom | Macy’s / Nordstrom / Trader Joe’s / United Artists Theatres | AMC Theatres | Dick’s Sporting Goods/ JCPenney / Macy’s / Target | Century Theatres / JCPenney / Sears Target / Toys R Us | Macy’s / Nordstrom / Tesla Motors |
| (1) | Source: Retail Industry Report. |
| (2) | Sales PSF figures exclude Apple where applicable. |
| (3) | Based on the retail sq. ft. only. Variances between the above table and the underwritten sq. ft. are due to measurement differences and/or reporting methodology. |
Cash Flow Analysis.
| Cash Flow Analysis | ||||||
| 2013 | 2014 | 2015 | T-12 3/31/2016 | U/W | U/W PSF | |
| Base Rent(1) | $45,697,435 | $46,482,470 | $48,326,548 | $49,319,480 | $53,475,187 | $67.30 |
| Straight Line Rent(2) | 0 | 0 | 0 | 0 | 242,069 | 0.30 |
| Step Rents(3) | 0 | 0 | 0 | 0 | 1,261,179 | 1.59 |
| Value of Vacant Space(4) | 0 | 0 | 0 | 0 | 3,985,753 | 5.02 |
| Gross Potential Rent | $45,697,435 | $46,482,470 | $48,326,548 | $49,319,480 | $58,964,187 | $74.21 |
| Total Recoveries | 28,021,791 | 29,445,379 | 30,419,008 | 30,668,606 | 31,197,107 | 39.27 |
| Total Other Income | 10,401,563 | 8,693,512 | 9,857,994 | 10,666,686 | 8,841,187 | 11.13 |
| Less: Vacancy(5) | 0 | 0 | 0 | 0 | (3,985,753) | (5.02) |
| Effective Gross Income | $84,120,789 | $84,621,362 | $88,603,550 | $90,654,772 | $95,016,729 | $119.59 |
| Total Operating Expenses | 35,722,327 | 36,493,338 | 37,649,371 | 38,690,784 | 38,462,539 | 48.41 |
| Net Operating Income | $48,398,462 | $48,128,023 | $50,954,179 | $51,963,988 | $56,554,190 | $71.18 |
| TI/LC | 0 | 0 | 0 | 0 | 1,578,636 | 1.99 |
| Capital Expenditures | 0 | 0 | 0 | 0 | 157,864 | 0.20 |
| Net Cash Flow | $48,398,462 | $48,128,023 | $50,954,179 | $51,963,988 | $54,817,690 | $68.99 |
| (1) | Underwritten Base Rent is based on the April 2016 rent roll with base rent equal to the contractual amount as of August 1, 2016. Underwritten Base Rent includes an adjustment for recently signed leases and the Zara expansion lease. The Zara expansion space is expected to be delivered to the tenant April 1, 2017 and the tenant is required to commence paying rent on October 1, 2017. Base rent generated by the leases currently encumbering the Zara expansion space was removed from the Underwritten Base Rent. Excludes straight lining of rents. |
| (2) | Straight Line average of Microsoft’s and San Francisco State University’s contractual base rent through tenants’ lease expiration date. |
| (3) | Step Rents are based on the contractual minimum rent increases occurring between August 1, 2016 and August 1, 2017. |
| (4) | Value of Vacant Space is grossed up at the average contractual base rent PSF for leases signed since January 1, 2015 by leasing category. |
| (5) | Vacancy haircut based on in-place economic vacancy. |
Property Management. The Westfield San Francisco Centre Property is managed by Westfield Property Management LLC, a borrower affiliate.
A-3-30
865 Market Street San Francisco, CA 94103 | Collateral Asset Summary – Loan No. 3 Westfield San Francisco Centre | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $60,000,000 35.5% 3.68x 13.1% |
Lockbox / Cash Management. The Westfield San Francisco Centre Loan is structured with a hard lockbox and springing cash management. The borrowers are required to instruct tenants to deposit all rents directly into a clearing account controlled by the lender (the “Lockbox Account”). Prior to a Cash Sweep Period (as defined below), funds on deposit in the Lockbox Account will be transferred on a daily basis into the borrowers’ operating account. During the continuance of a Cash Sweep Period, funds deposited into the Lockbox Account will be swept on a weekly basis and on each monthly payment date into a deposit account controlled by the lender, to be applied and disbursed in accordance with the loan documents. Any excess cash, during the continuance of a Cash Sweep Period, will be deposited into an eligible account (the “Excess Cash Flow Reserve Account”) and held by the lender as additional security for the Westfield San Francisco Centre Whole Loan. All sums remaining on deposit in the Excess Cash Flow Reserve Account will be disbursed to the borrowers on the earlier to occur of (i) payment in full of the debt or (ii) discontinuation of a Cash Sweep Period.
A “Cash Sweep Period” will commence upon the occurrence or commencement of an event of default and will end on the date upon which the event of default has been cured.
Initial Reserves. None.
Letters of Credit.The borrowers have delivered two letters of credit in the aggregate amount of $4,300,000 from UBS AG bank to cover gap rent and the tenant improvement obligations of the borrowers associated with the Zara lease. The landlord’s work letter of credit is in the amount of $1,756,435 and the gap rent letter of credit is in the amount of $2,543,565 (together the “Zara Letter of Credit”).
Ongoing Reserves. During a DSCR Trigger Period (as defined below), the borrowers will be required to make monthly deposits of (i) 1/12 of the annual real estate taxes, and to the extent a blanket insurance policy is not in effect, 1/12 of annual insurance premiums into a tax and insurance reserve account, (ii) $13,155 into a replacement reserve account subject to a cap of $315,727, (iii) $82,221 into a leasing reserve account subject to a cap of $1,973,295 as well as any sum or termination fee payable to the borrowers in connection with any tenant’s election to exercise any early termination option and (iv) 1/12 of the base rent due to the ground lessor under the ground lease during the ensuing 12 months and 1/12 of the percentage or additional rents and other charges paid under the ground lease in the prior calendar year.
In lieu of making payments to any of the reserve accounts, the borrowers may deliver to the lender a letter of credit with respect to any reserve. Additionally, the borrowers may deliver to the lender a letter of credit in lieu of deposits previously made to any of the reserve accounts. Other than with respect to the Zara Letter of Credit, upon delivery of a letter of credit, the lender will disburse an amount equal to the face value of the letter of credit from the applicable reserve account to the borrowers.
A “DSCR Trigger Period” will commence upon the occurrence of (i) an event of default or (ii) a debt service coverage ratio falling below 1.45x as of the last calendar day of any fiscal quarter and will end (a) with respect to clause (i), if the event of default has been cured, and (b) with respect to clause (ii), if (1) the Westfield San Francisco Centre Property has achieved a debt service coverage ratio of at least 1.45x for two consecutive calendar quarters or (2) the borrowers have prepaid a portion of the Westfield San Francisco Centre Whole Loan, delivered a letter of credit or deposited additional collateral acceptable to the lender in each case, in an amount sufficient to achieve a debt service coverage ratio of at least 1.45x. Any such prepayments to cure a DSCR Trigger Period prior to the occurrence of an event of default under the Westfield San Francisco Centre Whole Loan documents will be appliedpro rata andpari passu among all of the notes that evidence the Westfield San Francisco Centre Whole Loan, including the Junior Notes.
Current Mezzanine or Subordinate Indebtedness. The Westfield San Francisco Centre Whole Loan includes the Junior Notes, with an aggregate principal balance of $124.923 million. The Junior Notes are co-terminus with the Senior Notes and accrue interest at a rate of 3.3940%. The Senior Notes are generally senior in right of payment to the Junior Notes.
Future Mezzanine or Subordinate Indebtedness Permitted. None.
A-3-31
865 Market Street San Francisco, CA 94103 | Collateral Asset Summary – Loan No. 3 Westfield San Francisco Centre | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $60,000,000 35.5% 3.68x 13.1% |
A-3-32
865 Market Street San Francisco, CA 94103 | Collateral Asset Summary – Loan No. 3 Westfield San Francisco Centre | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $60,000,000 35.5% 3.68x 13.1% |
A-3-33
865 Market Street San Francisco, CA 94103 | Collateral Asset Summary – Loan No. 3 Westfield San Francisco Centre | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $60,000,000 35.5% 3.68x 13.1% |
A-3-34
865 Market Street San Francisco, CA 94103 | Collateral Asset Summary – Loan No. 3 Westfield San Francisco Centre | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $60,000,000 35.5% 3.68x 13.1% |
A-3-35
865 Market Street San Francisco, CA 94103 | Collateral Asset Summary – Loan No. 3 Westfield San Francisco Centre | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $60,000,000 35.5% 3.68x 13.1% |
A-3-36
865 Market Street San Francisco, CA 94103 | Collateral Asset Summary – Loan No. 3 Westfield San Francisco Centre | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $60,000,000 35.5% 3.68x 13.1% |
A-3-37
865 Market Street San Francisco, CA 94103 | Collateral Asset Summary – Loan No. 3 Westfield San Francisco Centre | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $60,000,000 35.5% 3.68x 13.1% |
A-3-38
865 Market Street San Francisco, CA 94103 | Collateral Asset Summary – Loan No. 3 Westfield San Francisco Centre | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $60,000,000 35.5% 3.68x 13.1% |
A-3-39
130 East Randolph Street & 180 North Stetson Avenue Chicago, IL 60601 | Collateral Asset Summary – Loan No. 4 Prudential Plaza | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $50,000,000 59.3% 1.34x 9.0% |
A-3-40
130 East Randolph Street & 180 North Stetson Avenue Chicago, IL 60601 | Collateral Asset Summary – Loan No. 4 Prudential Plaza | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $50,000,000 59.3% 1.34x 9.0% |
| Mortgage Loan Information | |
| Loan Seller: | GACC |
| Loan Purpose: | Refinance |
| Sponsors: | Michael Silberberg; Mark Karasick |
| Borrower: | SL PRU LLC |
| Original Balance: | $50,000,000 |
| Cut-off Date Balance: | $50,000,000 |
| % by Initial UPB: | 7.1% |
| Interest Rate: | 4.6100% |
| Payment Date: | 6thof each month |
| First Payment Date: | September 6, 2015 |
| Maturity Date: | August 6, 2025 |
| Amortization: | Interest only for first 48 months; 360 months thereafter |
| Additional Debt(1)(2): | $365,000,000Pari Passu Debt; Future Mezzanine Debt Permitted |
| Call Protection(3): | L(35), D(79), O(6) |
| Lockbox / Cash Management: | Hard / In Place |
| Reserve as of July 2016(4) | ||
| Initial | Monthly | |
| Taxes: | $788,971 | $1,134,682 |
| Insurance: | $197,877 | $82,759 |
| Replacement: | $1,071,512 | $47,671 |
| Future Leasing(5): | $25,458,542 | $236,236 |
| Existing TI/LC: | $6,115,648 | NAP |
| Rent Abatement: | $5,890,602 | NAP |
| Financial Information(6) | ||
| Cut-off Date Balance / Sq. Ft.: | $183 | |
| Balloon Balance / Sq. Ft.: | $164 | |
| Cut-off Date LTV: | 59.3% | |
| Balloon LTV: | 53.2% | |
| Underwritten NOI DSCR(7): | 1.46x | |
| Underwritten NCF DSCR(7): | 1.34x | |
| Underwritten NOI Debt Yield: | 9.0% | |
| Underwritten NCF Debt Yield: | 8.3% | |
| Underwritten NOI Debt Yield at Balloon: | 10.0% | |
| Underwritten NCF Debt Yield at Balloon: | 9.2% | |
| Property Information | |
| Single Asset / Portfolio: | Single Asset |
| Property Type: | CBD Office |
| Collateral: | Fee Simple |
| Location: | Chicago, IL |
| Year Built / Renovated: | 1955 / 1990, 2014-2015 |
| Total Sq. Ft.: | 2,269,388 |
| Property Management(8): | SL PRU Property Manager LLC |
| Underwritten NOI(9): | $37,413,770 |
| Underwritten NCF: | $34,371,248 |
| “As-is” Appraised Value: | $700,000,000 |
| “As-is” Appraisal Date: | July 20, 2016 |
| “As Stabilized” Value(10): | $830,000,000 |
| “As Stabilized” Date(10): | July 20, 2018 |
| Historical NOI | |
| Most Recent NOI: | $23,382,051 (T-12 May 31, 2016) |
| 2015 NOI: | $21,153,848 (December 31, 2015) |
| 2014 NOI: | $21,430,754 (December 31, 2014) |
| 2013 NOI: | $22,042,511 (December 31, 2013) |
| Historical Occupancy | |
| Most Recent Occupancy(11): | 76.4% (May 31, 2016) |
| 2015 Occupancy: | 68.3% (December 31, 2015) |
| 2014 Occupancy: | 64.0% (December 31, 2014) |
| 2013 Occupancy: | 69.6% (December 31, 2013) |
| (1) | The Prudential Plaza Whole Loan is evidenced by sixpari passu notes in the aggregate original principal amount of $415.0 million. The non-controlling Note A-2-1, with an original principal balance of $50.0 million, will be included in the CD 2016-CD1 mortgage trust. The controllingpari passu companion Note A-1, with an original principal balance of $115.0 million, was included in the COMM 2015-CCRE26 mortgage trust. The remaining notes arepari passu companion loans with an aggregate original principal balance of $250.0 million which will not be included in the CD 2016-CD1 mortgage trust and are expected to be held by GACC or an affiliate and contributed to one or more future securitizations. For additional information on thepari passu companion loans, see “The Loan” herein. |
| (2) | See “Future Mezzanine or Subordinate Indebtedness” herein. |
| (3) | On July 26, 2016, the holder of the non-controlling Note A-2-1, together with the other non-controllingpari passu companion notes (the “REMIC Election Notes”) made a REMIC election with respect to the REMIC Election Notes. As such, the defeasance lockout period for the Prudential Plaza Whole Loan will be through the first business day after July 26, 2018. For additional information regarding the REMIC Election Notes, see “Material Federal Income Tax Considerations” in the Prospectus. |
| (4) | See “Initial Reserves” and “Ongoing Reserves” herein for more information and the reserves balances at loan closing. |
| (5) | With respect to the Future Leasing reserve account, approximately $17,593,908 is earmarked for future TI/LC’s based on recent leases signed. Commencing on the payment date in August 2016, the borrower is required to deposit $236,236 into a future leasing reserve account until August 2018, on which date the amount will increase to $377,978. |
| (6) | DSCR, LTV, Debt Yield and Balance / Sq. Ft. calculations are based on the aggregate Prudential Plaza Whole Loan. |
| (7) | Based on amortizing debt service payments. Based on the current interest only payments, the Underwritten NOI DSCR and Underwritten NCF DSCR are 1.93x and 1.77x, respectively. |
| (8) | The Prudential Plaza Property is sub-managed by Jones Lang LaSalle Americas (Illinois), LP. |
| (9) | The increase in Underwritten NOI is due to (i) $11.0 million attributable to leases that are signed but have not yet commenced, (ii) $0.7 million in step rents taken through July 2017, (iii) $0.2 million in rent credit relating to investment grade tenants on long term leases, (iv) $0.7 million representing the differential between the underwritten management fee cap of $1.0 million against the most recent management fee of $1.66 million, (v) $5.6 million in rent abatements that were effective in the T-12 months ending May 2016, and (vi) less $4.3 million in rents attributable to expiring leases. The remaining difference is approximately $0.09 million and is attributable to rent increases that occurred within the T-12 months ending May 2016 and other miscellaneous differences. |
| (10) | The “As Stabilized” Value assumes the Prudential Plaza Property has achieved an occupancy of 90.0%. Based on the “As Stabilized” Value, the Prudential Plaza Property has an As-Stabilized Cut-off Date LTV of 50.0%. |
| (11) | Most Recent Occupancy includes 6.9% of tenants by net rentable area that have signed leases but have yet to take occupancy at the Prudential Plaza Property. |
A-3-41
130 East Randolph Street & 180 North Stetson Avenue Chicago, IL 60601 | Collateral Asset Summary – Loan No. 4 Prudential Plaza | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $50,000,000 59.3% 1.34x 9.0% |
| Tenant Summary | |||||||||||
Tenant | Ratings (Fitch/Moody’s/S&P)(1) | Net Rentable Area (Sq. Ft.) |
% of Net Rentable Area |
| U/W Base Rent PSF | % of Total U/W Base Rent | Lease Expiration | ||||
| Optiver US LLC(2) | NR/NR/NR | 73,779 | 3.3% | $20.54 | 3.8% | 4/30/2023 | |||||
| Clark Hill(3) | NR/NR/NR | 71,813 | 3.2% | $26.30 | 4.7% | 12/31/2032 | |||||
| Leydig, Voit & Mayer, Ltd.(4) | NR/NR/NR | 66,783 | 2.9% | $24.87 | 4.1% | 9/30/2025 | |||||
| CBS Radio Holdings Corp.(5) | BBB/Baa2/BBB | 63,453 | 2.8% | $20.88 | 3.3% | 4/30/2028 | |||||
| The Prudential Insurance Company(6) | NR/NR/NR | 51,646 | 2.3% | $26.31 | 3.4% | 7/31/2025 | |||||
| Total Major Tenants | 327,474 | 14.4% | $23.66 | 19.3% | |||||||
| High Office | 355,615 | 15.7% | $23.82 | 21.1% | |||||||
| Mid Office | 518,481 | 22.8% | $21.37 | 27.5% | |||||||
| Low Office | 449,880 | 19.8% | $21.14 | 23.6% | |||||||
| Retail | 59,939 | 2.6% | $39.76 | 5.9% | |||||||
| Storage | 19,768 | 0.9% | $22.78 | 1.1% | |||||||
| Antenna | 2,842 | 0.1% | $205.73 | 1.5% | |||||||
| Total Occupied Collateral(7) | 1,733,999 | 76.4% | $23.20 | 100.0% | |||||||
| Vacant | 535,389 | 23.6% | |||||||||
| Total | 2,269,388 | 100.0% | |||||||||
| (1) | Certain ratings are those of the parent company whether or not the parent company guarantees the lease. |
| (2) | Optiver US LLC has two five-year renewal options remaining. |
| (3) | Clark Hill has one five-year renewal option. The tenant has the right to terminate its lease on December 31, 2026, upon at least 15 months prior written notice, subject to a termination fee equal to then unamortized leasing costs associated with the Clark Hill lease amortized at a rate of 8% per year. |
| (4) | Leydig, Voit & Mayer, Ltd. has two renewal options each upon written notice no later than 18 months prior to the lease expiration date of September 30, 2025. The tenant holds the right to extend the term for either a five year or ten year term upon renewal. The tenant has no termination options. |
| (5) | CBS Radio Holdings Corp. executed an early renewal option for its space on floors 9-11, totaling approximately 63,228 sq. ft. CBS Radio Holdings Corp. relinquished a portion of its space on the 12th floor (8,068 sq. ft.) at a higher rent of $22.50 PSF for an additional ten years. The tenant has three 5-year renewal options remaining and no termination options. |
| (6) | The Prudential Insurance Company, has two five-year renewal options upon at least 12 months, but no more than 18 months prior written notice. The tenant has the right to terminate its lease beginning on July 31, 2022 upon 12 months written notice, subject to a termination fee equal to the sum of (i) two times the monthly gross rent and (ii) the then unamortized leasing costs associated with its lease amortized at a rate of 8% per year. |
| (7) | Includes 6.9% of tenants by net rentable area that, as of May 31, 2016, have signed leases but have yet to take occupancy at the Prudential Plaza Property. |
| Lease Rollover Schedule(1) | ||||||||
| Year | # of Leases Expiring | Total Expiring Sq. Ft. | % of Total Sq. Ft. | Cumulative Sq. Ft. Expiring | Cumulative % of Sq. Ft. Expiring | Annual U/W Base Rent | % U/W Base Rent Rolling | Cumulative % of U/W Base Rent |
| MTM | 5 | 5,666 | 0.2% | 5,666 | 0.2% | $25.85 | 0.4% | 0.4% |
| 2016 | 7 | 9,302 | 0.4% | 14,968 | 0.7% | $34.13 | 0.8% | 1.2% |
| 2017 | 22 | 100,244 | 4.4% | 115,212 | 5.1% | $19.56 | 4.9% | 6.0% |
| 2018 | 43 | 157,475 | 6.9% | 272,687 | 12.0% | $21.58 | 8.4% | 14.5% |
| 2019 | 15 | 73,151 | 3.2% | 345,838 | 15.2% | $23.44 | 4.3% | 18.7% |
| 2020 | 20 | 56,447 | 2.5% | 402,285 | 17.7% | $24.91 | 3.5% | 22.2% |
| 2021 | 21 | 99,726 | 4.4% | 502,011 | 22.1% | $22.54 | 5.6% | 27.8% |
| 2022 | 22 | 98,532 | 4.3% | 600,543 | 26.5% | $25.59 | 6.3% | 34.1% |
| 2023 | 28 | 230,817 | 10.2% | 831,360 | 36.6% | $20.62 | 11.8% | 45.9% |
| 2024 | 11 | 48,692 | 2.1% | 880,052 | 38.8% | $23.00 | 2.8% | 48.7% |
| 2025 | 27 | 220,895 | 9.7% | 1,100,947 | 48.5% | $24.51 | 13.5% | 62.2% |
| 2026 | 16 | 81800 | 3.6% | 1,182,747 | 52.1% | $36.21 | 7.4% | 69.5% |
| Thereafter | 43 | 551,252 | 24.3% | 1,733,999 | 76.4% | $22.24 | 30.5% | 100.0% |
| Vacant | NAP | 535,389 | 23.6% | 2,269,388 | 100.0% | NAP | NAP | |
| Total / Wtd. Avg. | 280 | 2,269,388 | 100.0% | $23.20 | 100.0% | |||
| (1) | Certain tenants have lease termination options that may become exercisable prior to the originally stated expiration date of the tenant lease and that are not considered in the lease rollover schedule. |
A-3-42
130 East Randolph Street & 180 North Stetson Avenue Chicago, IL 60601 | Collateral Asset Summary – Loan No. 4 Prudential Plaza | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $50,000,000 59.3% 1.34x 9.0% |
The Loan. The Prudential Plaza loan (the “Prudential Plaza Loan”) is a fixed rate loan secured by the borrower’s fee simple interest in two Class A office towers totaling 2,269,388 sq. ft. located at 130 East Randolph Street and 180 North Stetson Avenue in Chicago, Illinois (the “Prudential Plaza Property”), with an original and cut-off date principal balance of $50.0 million. The Prudential Plaza Loan is evidenced by the non-controlling Note A-2-1, with an original principal balance of $50.0 million, which will be included in the CD 2016-CD1 Mortgage Trust. Thepari passucontrolling Note A-1 with an original principal balance of $115.0 million was included in the COMM 2015-CCRE26 securitization. The remaining notes have an aggregate original principal balance of $250.0 million and will not be included in the CD 2016-CD1 mortgage trust. They are each expected to be held by GACC or an affiliate and contributed to a future securitization. Note A-1, Note A-2-2, Note A-3 and Note A-4 arepari passu companion loans (and together with the Prudential Plaza Loan, the “Prudential Plaza Whole Loan”).
The relationship between the holders of the Prudential Plaza Whole Loan will be governed by a co-lender agreement as described under“Description of the Mortgage Pool – The Whole Loans – Prudential Plaza Whole Loan” in the Prospectus.
| Whole Loan Summary | ||||
| Original Balance | Cut-off Date Balance | Note Holder | Controlling Piece | |
| A-1 | $115,000,000 | $115,000,000 | COMM 2015-CCRE26 | Yes |
| A-2-1 | $50,000,000 | $50,000,000 | CD 2016-CD1 | No |
| A-2-2, A-3 and A-4 | $250,000,000 | $250,000,000 | GACC | No |
| Total | $415,000,000 | $415,000,000 | ||
The Prudential Plaza Whole Loan has a 10-year term and amortizes on a 30-year schedule after an initial 48-month interest only period. The Prudential Plaza Whole Loan accrues interest at a fixed rate equal to 4.6100%. Loan proceeds were used to pay off existing debt of approximately $327.8 million, fund upfront reserves of approximately $73.3 million, pay closing costs of approximately $3.0 million and provide approximately $10.8 million in working capital to the borrower. The borrower covenanted to use such working capital amount (which was deposited into a borrower account) to pay operating or capital expenses related to the Prudential Plaza Property. Such amount is not being held by, and is not subject to disbursement conditions of the lender. Based on the “As-is” appraised value of $700.0 million as of July 20, 2016, the cut-off date LTV ratio is 59.3%. Based on the “As Stabilized” value of $830.0 million as of July 20, 2018, the cut-off date LTV ratio is 50.0%. The most recent prior financing of the Prudential Plaza Property was included in the JPMCC 2006-LDP7 and the JPMCC 2006-CB16 securitizations.
| Sources and Uses | ||||||
| Sources | Proceeds | % of Total | Uses | Proceeds | % of Total | |
| Loan Amount | $415,000,000 | 100.0% | Loan Payoff | $327,845,504 | 79.0% | |
| Reserves | $73,309,474 | 17.7% | ||||
| Closing Costs | $3,025,042 | 0.7% | ||||
| Working Capital | $10,819,980 | 2.6% | ||||
| Total Sources | $415,000,000 | 100.0% | Total Uses | $415,000,000 | 100.0% | |
The Borrower / Sponsor. The borrower, SL PRU LLC, is a single purpose Delaware limited liability company structured to be bankruptcy-remote, with two independent directors in its organizational structure. The sponsors of the borrower and nonrecourse carve-out guarantors are Michael Silberberg and Mark Karasick (the “Guarantors”), on a joint and several basis.
Michael Silberberg is a principal of Berkley Properties, LLC, a privately owned real estate holding company that acquires, renovates and manages hotels, offices, retail and multifamily properties in the Northeast. Additionally, directly or through affiliated companies, Berkley Properties, LLC has holdings in New York, New Jersey, Illinois, Alabama, Tennessee and Texas. Berkley Properties, LLC is headquartered in New York City.
Mark Karasick is a principal of the 601W Companies (“601W”). 601W manages private real estate acquisition, ownership, development and management portfolios. Since its founding more than 15 years ago, 601W has acquired a number of commercial properties throughout the country, totaling 24 million sq. ft. with a collective value in excess of $5.0 billion. At 601W, Mark Karasick leads the acquisition, development and management of the 601W real estate portfolio.
Michael Silberberg and Mark Karasick have worked on numerous transactions in the Chicago central business district. In 2010, Berkley Properties LLC purchased, and later sold, 180 North La Salle Street in the East Loop submarket and 601W is currently holding 550 West Jackson Avenue, an approximately 400,000 sq. ft. office property in the West Loop submarket. The Guarantors also purchased the Aon Center, a 2.7 million sq. ft. office building located adjacent to the Prudential Plaza Property in October 2015 for $712 million ($260 PSF).
The Prudential Plaza Property was acquired by the prior owner (the “Prior Owner”) in 2006 for $525 million ($231 PSF), which Prior Owner was owned and controlled by sponsorship unaffiliated with the Guarantors (the “Prior Sponsorship”). The Prudential Plaza
A-3-43
130 East Randolph Street & 180 North Stetson Avenue Chicago, IL 60601 | Collateral Asset Summary – Loan No. 4 Prudential Plaza | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $50,000,000 59.3% 1.34x 9.0% |
Property was previously security for a $410.0 million first mortgage (“the “Prior Loan”), which was deposited in equal portions in the JPMCC 2006-LDP7 and JPMCC 2006-CB16 securitization trusts (together, the “Prior Securitization”) and an affiliate of the borrower under the Prior Loan also obtained a $60.0 million original principal balance mezzanine loan from an affiliate of Northstar. In 2012, the Prior Loan was transferred into special servicing as a result of impending lease expirations with two major tenants totaling approximately 19% of the total NRA, which tenants ultimately vacated the Prudential Plaza Property.
The Guarantors reached an agreement with the Prior Sponsorship for an equity recapitalization. In June 2013, the Guarantors and the Prior Securitization special servicer agreed to bifurcate the $410 million Prior Loan into a $336 million A-note and a $74 million B-note (hope note). As part of the loan modification, the Guarantors took control of the Prudential Plaza Property and the Prior Owner and contributed $76.5 million of new equity into the property (while the Prior Sponsorship retained a minority non-controlling interest). In addition, as part of such agreement, the N-Star CDO VIII securitization, as the holder of the $60 million original principal balance mezzanine loan, agreed to modify its mezzanine loan to require payments to be made only from excess cash flow remaining following the payment of amounts then due under the Prior Loan, and a Northstar affiliate agreed to contribute $8.5 million of new equity into the property. The Guarantors and the mezzanine lender then allocated amounts payable under the modified mezzanine loan to the contributors of the new equity.
In connection with the origination of the Prudential Plaza Whole Loan, (i) the lender under the Prior Securitization accepted $336 million (a portion of the proceeds of the Prudential Plaza Whole Loan) in satisfaction of the Prior Loan, (ii) the hope note was cancelled without repayment, and (iii) the mezzanine lender entered into a standstill agreement with GACC pursuant to which it agreed to terminate the existing mezzanine loan pledge. Additionally, the standstill agreement provides that no exercise of remedies may be undertaken under the unsecured mezzanine loan until the Prudential Plaza Whole Loan is fully satisfied, and the mezzanine lender agreed that during any event of default or Trigger Period (defined below) no payments may be made on the unsecured mezzanine loan.
On February 24, 2016, the trustees of the Prior Securitization filed suit in the United States District Court for the Southern District of New York against the Guarantors and the Prior Owner alleging, among other things, that the defendants engaged in fraud, willful misconduct and intentional misrepresentation by failing to provide complete and accurate information regarding prospective leasing activity relating to the Prudential Plaza Property in connection with the preparation of an appraisal used in connection with the calculation of the discounted payoff amount. The current borrower under the Prudential Plaza Whole Loan is not named as a defendant in the suit. For more information regarding the litigation, see “Description of the Mortgage Pool – Litigation and Other Considerations” in the Prospectus.
The Property. The Prudential Plaza Property consists of two Class A office towers, One Prudential Plaza and Two Prudential Plaza, totaling 2,269,388 sq. ft. located in Chicago, Illinois. One Prudential Plaza is a 41-story, 1,252,579 sq. ft. building that was built in 1955 and renovated in 1990 and again in 2014-2015. Two Prudential Plaza is a 64-story, 1,016,809 sq. ft. building that was completed in 1990. The two towers are connected by a public mezzanine level that contains approximately 60,000 sq. ft. of restaurant and retail space. The Prudential Plaza Property has a diverse tenant base of over 120 tenants including law firms, financial services, technology, media and marketing companies. No tenant accounts for greater than 3.3% of NRA. The Prudential Plaza Property also features a five-level, 608-space underground parking facility that is run by AMPCO Parking, a third party operator, an underground connection to the Randolph Street commuter rail station, a landscaped one acre plaza and a tenant amenity space on the 11th floor. The tenant amenity space features a 10,000 sq. ft. gym, a tenant lounge and an outdoor rooftop space that includes a bar and an outdoor fireplace and offers unobstructed views of Millennium Park.
In 2014, the Guarantors invested over $30.0 million in capital expenditures and an additional approximately $26.6 million in tenant improvements for building renovations and upgrades to tenant spaces. Major projects included an elevator modernization and cab renovation, window replacements in vacant spaces, a convector replacement, the creation of the tenant amenity space on the 11th floor, exterior lighting renovations and a complete renovation of the lobby. The investments to upgrade the Prudential Plaza Property have resulted in positive leasing velocity with 649,636 sq. ft. of leases signed between January 2015 and May 2016. The table below summarizes recent leasing activity at the Prudential Plaza Property since October 2014.
A-3-44
130 East Randolph Street & 180 North Stetson Avenue Chicago, IL 60601 | Collateral Asset Summary – Loan No. 4 Prudential Plaza | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $50,000,000 59.3% 1.34x 9.0% |
| Recent Leasing(1) | ||||
| Date of Lease Execution | Lease Count | Sq. Ft. | Gross Rent | Gross Rent PSF |
| Oct-2014 | 2 | 24,267 | $819,054 | $33.75 |
| Nov-2014 | 1 | 2,489 | $80,011 | $32.15 |
| Dec-2014 | 3 | 28,471 | $946,092 | $33.23 |
| Jan-2015 | 4 | 44,249 | $1,241,990 | $28.07 |
| Feb-2015 | 1 | 239 | $6,271 | $26.24 |
| Mar-2015 | 4 | 54,103 | $1,953,948 | $36.12 |
| Apr-2015 | 4 | 6,892 | $134,245 | $19.48 |
| May-2015 | 3 | 16,704 | $621,447 | $37.20 |
| Jun-2015 | 6 | 48,139 | $1,902,909 | $39.53 |
| Jul-2015 | 11 | 127,537 | $4,487,880 | $35.19 |
| Aug-2015 | 8 | 63,228 | $2,359,173 | $37.31 |
| Sep-2015 | 1 | 2,319 | $92,377 | $39.84 |
| Oct-2015 | 1 | 577 | $23,435 | $40.62 |
| Nov-2015 | 4 | 35,486 | $1,325,724 | $37.36 |
| Dec-2015 | 8 | 173,316 | $6,676,301 | $38.52 |
| Jan-2016 | 0 | 0 | $0 | $0.00 |
| Feb-2016 | 3 | 28,699 | $1,514,381 | $52.77 |
| Mar-2016 | 3 | 23,922 | $1,275,233 | $53.31 |
| Apr-2016 | 1 | 24,226 | $955,958 | $39.46 |
| May-2016 | 0 | 0 | $0 | $0.00 |
| Total/Wtd. Avg. | 68 | 704,863 | $26,416,430 | $37.48 |
| (1) | Source: borrower. |
Total leasing at the Prudential Plaza Property between October 2014 and May 2016 included 704,863 sq. ft. (31.1% of NRA) which increased gross rent by approximately $26.4 million. This includes 351,773 sq. ft. (15.5% of NRA) leased since loan origination in July 2015. Major new leases include Clark Hill (71,813 sq. ft., 3.2% of NRA), Cision US, Inc. (49,703 sq. ft., 2.2% of NRA), Pandora (32,331 sq. ft., 1.4% of NRA), Chicago Council on Global Affairs (29,035 sq. ft., 1.3% of NRA), University of Chicago (23,710 sq. ft., 1.0% of NRA) and CA Ventures (23,672 sq. ft., 1.0% of NRA). Furthermore, McGraw Hill Financial, Inc. is currently a tenant under various leases that represent in the aggregate 175,888 sq.ft., of which 151,662 sq. ft. will expire on November 30, 2016. McGraw Hill Financial, Inc. currently subleases 23,199 sq. ft. to The University of Chicago and 49,998 sq. ft. to McDermott Will & Emery LLP, with both subleases expiring on November 30, 2016. McDermott Will & Emery LLP has signed a direct lease to take over the space that it is currently subleasing from McGraw Hill Financial, Inc. when McGraw Hill Financial, Inc.’s lease expires on November 30, 2016. Other than the lease for 24,226 sq. ft. that expires on November 30, 2026, the McGraw Hill Financial, Inc. leased space was not given any value in underwriting the Prudential Plaza Whole Loan.
The Prudential Plaza Property is situated immediately north of Millennium Park and one block east of Michigan Avenue, a major north-south roadway in Chicago. The Prudential Plaza Property is accessible via Interstate 90 from the west, Lake Shore Drive from the south and Wacker Drive. The Prudential Plaza Property also has pedestrian access via underground pedestrian corridors that provide direct access to neighboring hotels, department stores, office buildings and cultural attractions throughout the city of Chicago.
Environmental Matters. The Phase I environmental report, dated June 30, 2015, recommended no further action at the Prudential Plaza Property other than to implement an operations and maintenance plan for asbestos, which is currently in place.
Major Tenants.
Optiver US LLC(“Optiver”)(73,799 sq. ft., 3.3% of NRA, 3.8% U/W Base Rent). Optiver engages in the trading of stocks, futures, and options. Optiver was founded in 1999, and has its US headquarters in Chicago, IL. Optiver is a subsidiary of Optiver Holding B.V., a global electronic market maker that puts its own capital at risk in order to make markets more competitive, efficient, and transparent. Optiver Holdings was founded in 1986, and has over 750 employees in over 40 different nations. The company focuses on on-screen liquidity, covering listed derivatives, cash equities, ETF’s, bonds, and foreign exchange. Optiver US LLC has been at the property since 2008 and recently signed a new lease to take additional space on the 14th floor (approximately 25,000 sq. ft. with base rent of $20.25 PSF triple net) when the McGraw Hill Financial, Inc. lease expires in November 2016. Additionally, Optiver has two five-year renewal options remaining and no termination options.
Clark Hill(71,813 sq. ft., 3.2% of NRA, 4.7% U/W Base Rent). Clark Hill is an entrepreneurial, full service law firm serving clients in all areas of business legal services, government and public affairs and personal legal services. Clark Hill was founded in 1890 and has over 350 attorneys and legal professionals. The firm’s practice areas include administrative and behavioral healthcare law, corporate restructuring and bankruptcy, estate planning and probate, government and public affairs, insurance and reinsurance, municipal finance, litigation, real estate, white collar criminal defense and economic development services, among others.
A-3-45
130 East Randolph Street & 180 North Stetson Avenue Chicago, IL 60601 | Collateral Asset Summary – Loan No. 4 Prudential Plaza | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $50,000,000 59.3% 1.34x 9.0% |
Clark Hill signed a 15 year lease for 71,813 sq. ft. at the Prudential Plaza Property in December of 2015 and is not currently in occupancy at the property. The Clark Hill lease commences on January 1, 2017 and the tenant is expected to take occupancy of its space at that time. Clark Hill has one five year renewal option and the option to terminate its lease beginning on the last day of the 10th year of the lease term upon at least 15 months prior written notice, subject to termination fees as set forth in the lease documents.
Leydig, Voit & Mayer, Ltd. (66,783 sq. ft., 2.9% of NRA, 4.1% of U/W Base Rent). Leydig, Voit & Mayer, Ltd. is an intellectual property law firm based in Chicago, IL. Leydig, Voit & Mayer, Ltd. has appeared in Fortune magazine as one of “The Go-To Law Firms of the World’s Leading Companies”. It serves clients in a wide range of industries including: pharmaceuticals, chemical engineering, software, computer, electronics, manufacturing, biotechnology, medical devices, financial services, and consumer products. The firm has offices in the U.S. and Germany and has over 70 attorneys and technical advisors, along with 100 staff professionals including patent agents, law clerks, paralegals, and administrative personnel.
Leydig, Voit, & Mayer, Ltd. has two extension options remaining. For each extension option, the tenant has the option to choose either a 5-year or 10-year term upon written notice no later than 18 months prior to the lease expiration date. The tenant has no termination options.
The Market. The Prudential Plaza Property is located in the city of Chicago, Illinois, one block east of North Michigan Avenue in the East Loop office submarket. Located adjacent to Millennium Park, the Prudential Plaza Property is within walking distance of the best of Chicago’s dining, shopping and cultural attractions. Notable nearby attractions include The Harold Washington Library, the world’s largest public library, popular downtown theatres, Lyric Opera Goodman Theatre and Adler & Sullivan’s Auditorium Theatre and the Magnificent Mile, one of the world’s premier shopping districts. Several hotels are also in walking distance, including the Palmer House, which is a block from the Prudential Plaza Property, a Hilton, Hyatt Regency, Sheraton, the Renaissance, Hotel Blake and the W Hotel, among others.
The East Loop office submarket contains 83 buildings totalling approximately 27.9 million sq. ft., including 16 Class A buildings totalling 16.6 million sq. ft. The average quoted rent in the East Loop Class A submarket was $30.94 PSF as of the second quarter of 2016 and the vacancy was 14.3% in the same period. The East Loop Class A submarket also experienced positive net absorption of 228,390 sq. ft. as of the second quarter of 2016. Additionally, there is no new office construction underway or planned in the East Loop submarket. Current activity in the East Loop office sector is continued repositioning of the existing inventory. In July 2015, Kraft Heinz announced that it is moving its corporate headquarters from Northfield, Illinois to the East Loop submarket of Chicago. Kraft Heinz is expected to take over approximately 170,000 sq. ft. across five floors in the Aon Center, located next door to the Prudential Plaza Property.
The appraisal identified a set of seven comparable properties in the downtown Chicago area that it considered directly competitive with the Prudential Plaza Property. The buildings range from 737,308 to 2,744,552 sq. ft. with an occupancy range of 67% to 96%. Leases signed at the competitive properties range from $17.00 to $31.00 PSF. The table below summarizes the appraisal’s competitive set.
| Competitive Set(1) | ||||
| Property Name | Year Built | Net Rentable Area (sq. ft.) | Occupancy | Recent Leasing (PSF) |
| Prudential Plaza Property | 1955 | 2,269,388(2) | 76.4%(2) | $23.20(3) |
| Aon Center | 1974 | 2,744,552 | 90% | $19.50 - $22.50 |
| Illinois Center | 1972 | 2,132,048 | 75% | $17.50 - $18.50 |
| AMA Plaza | 1971 | 1,141,760 | 92% | $24.28 - $31.00 |
| Chicago Title and Trust Center I | 1992 | 1,068,877 | 96% | $18.08 - $30.00 |
| 303 East Wacker | 1979 | 859,187 | 67% | $17.00 - $18.50 |
| Equitable Office Building | 1966 | 737,308 | 95% | $23.00 - $25.50 |
| Total/Wtd. Avg.(4) | 8,683,732 | 85.5% | ||
| (1) | Source: Appraisal dated July 20, 2016 |
| (2) | Source: Underwritten Rent Roll dated May 31, 2016 and includes tenants who may not yet be in occupancy. |
| (3) | Represents Avg. U/W Base Rent PSF on a triple net basis for the Prudential Plaza Property. |
| (4) | Total/Wtd. Avg. excludes the Prudential Plaza Property. |
Using both the above market comparables and recent leasing in the nearby office market, the appraisal identified a market rent of $28.00 PSF for high-rise office space, $25.00 PSF for mid-rise office space, $22.00 PSF for low-rise office space, $40.00 PSF for interior retail space, $60.00 PSF for street-front retail space and $20.00 PSF for storage space. All of the aforementioned rents are on a triple net basis (except for storage rents). The appraisal determined a market occupancy for the overall Chicago central business district office market of 89.0% and 92.3% for Class A office properties in the East Loop submarket.
A-3-46
130 East Randolph Street & 180 North Stetson Avenue Chicago, IL 60601 | Collateral Asset Summary – Loan No. 4 Prudential Plaza | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $50,000,000 59.3% 1.34x 9.0% |
Cash Flow Analysis.
| Cash Flow Analysis | |||||||
| 2013 | 2014 | 2015 | T-12 5/31/2016 | U/W | U/W PSF | ||
| Base Rent | $28,764,554 | $28,473,086 | $30,025,537 | $31,367,457 | $40,224,746 | $17.72 | |
| Rent Steps(1) | 0 | 0 | 0 | 0 | 714,199 | 0.31 | |
| IG Rent Credit | 0 | 0 | 0 | 0 | 232,359 | 0.10 | |
| Value of Vacant Space | 0 | 0 | 0 | 0 | 18,223,967 | 8.03 | |
| Gross Potential Rent | $28,764,554 | $28,473,086 | $30,025,537 | $31,367,457 | $59,395,270 | $26.17 | |
| Total Recoveries | 20,442,385 | 18,888,044 | 20,087,785 | 20,881,007 | 24,208,690 | 10.67 | |
| Total Other Income | 3,318,520 | 2,915,164 | 3,208,355 | 3,430,784 | 3,430,784 | 1.51 | |
| Less: Vacancy(2) | 0 | 0 | 0 | 0 | (18,223,967) | (8.03) | |
| Effective Gross Income | $52,525,460 | $50,276,294 | $53,321,676 | 55,679,248 | 68,810,777 | $30.32 | |
| Total Operating Expenses | 30,482,948 | 28,845,540 | 32,167,828 | 32,297,197 | 31,397,007 | 13.84 | |
| Net Operating Income(3) | $22,042,511 | $21,430,754 | $21,153,848 | 23,382,051 | $37,413,770 | $16.49 | |
| TI/LC | 0 | 0 | 0 | 0 | 2,470,470 | 1.09 | |
| Capital Expenditures | 0 | 0 | 0 | 0 | 572,052 | 0.25 | |
| Net Cash Flow | $22,042,511 | $21,430,754 | $21,153,848 | $23,382,051 | $34,371,248 | $15.15 | |
| (1) | Rent Steps are taken through July 2017. |
| (2) | Vacancy was underwritten at the in-place vacancy of 20.9% compared to the submarket vacancy rate of 15.8%. |
| (3) | The increase in Underwritten NOI is due to (i) $11.0 million attributable to leases that are signed but have not yet commenced, (ii) $0.7 million in step rents taken through July 2017, (iii) $0.2 million in rent credit relating to investment grade tenants on long term leases, (iv) $0.7 million representing the differential between the underwritten management fee cap of $1.0 million against the most recent management fee of $1.66 million, (v) $5.6 million in rent abatements that were effective in the T-12 months ending May 2016, and (vi) less $4.3 million in rents attributable to expiring leases. The remaining difference is approximately $0.09 million and is attributable to rent increases that occurred within the T-12 months ending May 2016 and other miscellaneous differences. |
Property Management. The Prudential Plaza Property is managed by SL PRU Property Manager LLC, a borrower affiliate. The Prudential Plaza Property is sub-managed by Jones Lang LaSalle Americas (Illinois) LP (“Jones Lang LaSalle”). Jones Lang LaSalle is a financial and professional services firm that specializes in commercial real estate services and investment management.
Lockbox / Cash Management. The Prudential Plaza Whole Loan is structured with a hard lockbox and in place cash management. All rents and other payments are required to be deposited directly into a clearing account controlled by the lender. All funds in the clearing account will be transferred on a daily basis into a deposit account controlled by the lender and disbursed in accordance with the Prudential Plaza Loan documents. Provided no Trigger Period (as defined herein) is continuing, excess cash in the deposit account will be disbursed to borrower, or if a new mezzanine lender exists, to mezzanine lender, in accordance with the Prudential Plaza Loan documents.
A “Trigger Period” will commence upon (i) the occurrence of an event of default under the loan documents, (ii) the DSCR being less than 1.15x as of any calendar quarter or (iii) the occurrence of a new mezzanine loan default, and will end if (a) with respect to clause (i) the event of default has been cured, (b) with respect to clause (ii) the DSCR is at least 1.20x for two consecutive calendar quarters and (c) with respect to clause (iii) the receipt by lender of a new mezzanine loan default revocation notice.
Initial Reserves. At origination, the borrower deposited (i) $1,134,682 into a tax reserve account, (ii) $248,278 into an insurance reserve account, (iii) $2,525,657 into a replacement reserve account, (iv) $21,489,422 into a TI/LC reserve account for existing TI/LC obligations due to certain tenants, (v) $35,000,000 into a future leasing reserve account and (vi) $12,911,435 into a rent abatement reserve account.
As of July 2016, the current amounts on deposit are (i) $788,971 in the tax reserve account, (ii) $197,877 in the insurance reserve account, (iii) $1,071,512 in the replacement reserve account, (iv) $6,115,648 in the existing TI/LC reserve account (the “Existing TI/LC Account”), (v) $25,458,542 (the “Future TI/LC Amount”) in the future leasing reserve account (the “Future TI/LC Account”), of which approximately $17,593,908 is earmarked for future TI/LC’s based on recent leases signed and (vi) $5,890,602 in the rent abatement reserve account. The Future TI/LC Amount includes $3,058,133 that was initially included in the Existing TI/LC Account but was determined to be in excess of the amount necessary to pay approved leasing expenses under the then-current leases and was reallocated into the Future TI/LC Account to be available to pay approved leasing expenses for future leases entered into by the borrower.
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130 East Randolph Street & 180 North Stetson Avenue Chicago, IL 60601 | Collateral Asset Summary – Loan No. 4 Prudential Plaza | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $50,000,000 59.3% 1.34x 9.0% |
Ongoing Reserves. On a monthly basis, the borrower is required to deposit (i) $1,134,682 into a tax reserve account, (ii) $82,759 into an insurance reserve account, (iii) $47,671 into a replacement reserve account and (iv) commencing on the payment date in August 2016, $236,236 into a future leasing reserve account until August 2018, on which date the amount will increase to $377,978. Such monthly deposits into the future leasing reserve will no longer be required if (i) 85% of the rentable square footage of the Prudential Plaza Property is leased in the lender’s reasonable determination or (ii) a transfer and assumption of the Prudential Plaza Whole Loan is consummated with a third party in an arm’s length transaction; provided that in either case monthly deposits in an amount equal to $190,686 into the future leasing reserve will be required if the reserve balance drops below $5,000,000, for so long as the future leasing reserve is less than $8,000,000.
Current Mezzanine or Subordinate Indebtedness. As discussed in “The Borrower / Sponsor” herein, there is an existing loan between Wells Fargo Bank, National Association, as Trustee for the Beneficial Owners of N-Star CDO VIII Grantor Trust and BFPRU II, LLC, which was initially structured as a mezzanine loan. This loan was converted to an unsecured loan which has been fully subordinated pursuant to a standstill, intercreditor and subordination agreement, and is not secured by a pledge.
Future Mezzanine or Subordinate Indebtedness. The Prudential Plaza Whole Loan permits an approved mezzanine loan in a maximum amount of $20,000,000 provided, among other things, (i) no event of default or Trigger Period is then continuing, (ii) the future leasing reserve is drawn down to $12.5 million or less, (iii) the mezzanine loan results in a combined debt yield of no less than 9.00%, (iv) the proceeds from the mezzanine loan will be deposited into the mortgage lender’s future leasing reserve, (v) the combined DSCR is not less than 1.40x on an amortizing basis and (vi) the LTV of the combined loans is not more than 64.6%.
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130 East Randolph Street & 180 North Stetson Avenue Chicago, IL 60601 | Collateral Asset Summary – Loan No. 4 Prudential Plaza | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $50,000,000 59.3% 1.34x 9.0% |
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| Various | Collateral Asset Summary – Loan No. 5 U-Haul AREC Portfolio | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $48,500,000 67.4% 1.64x 10.3% |
A-3-50
| Various | Collateral Asset Summary – Loan No. 5 U-Haul AREC Portfolio | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $48,500,000 67.4% 1.64x 10.3% |
| Mortgage Loan Information | |
| Loan Seller: | GACC |
| Loan Purpose: | Recapitalization |
| Sponsor: | AMERCO |
| Borrowers: | U-Haul Co. of Florida 22, LLC; UHIL 22, LLC; AREC 22, LLC |
| Original Balance(1): | $48,500,000 |
| Cut-off Date Balance(1): | $48,500,000 |
| % by Initial UPB: | 6.9% |
| Interest Rate(2): | 3.7200% |
| Payment Date: | 6thof each month |
| First Payment Date: | September 6, 2016 |
| Maturity Date: | August 6, 2036 |
| Anticipated Repayment Date(2): | August 6, 2026 |
| Amortization: | 300 months |
| Additional Debt(1): | $46,000,000Pari Passu Debt |
| Call Protection: | L(24), D(92), O(4) |
| Lockbox / Cash Management: | Soft / Springing |
| Reserves(3) | ||
| Initial | Monthly | |
| Taxes: | $645,544 | Springing |
| Insurance: | $0 | Springing |
| Replacement: | $126,407 | Springing |
| Required Repairs: | $388,906 | NAP |
| Financial Information(4) | ||
| Cut-off Date Balance / Sq. Ft.: | $77 | |
| Balloon Balance / Sq. Ft.(5): | $55 | |
| Cut-off Date LTV: | 67.4% | |
| Balloon LTV(5): | 48.0% | |
| Underwritten NOI DSCR: | 1.68x | |
| Underwritten NCF DSCR: | 1.64x | |
| Underwritten NOI Debt Yield: | 10.3% | |
| Underwritten NCF Debt Yield: | 10.1% | |
| Underwritten NOI Debt Yield at Balloon(5): | 14.5% | |
| Underwritten NCF Debt Yield at Balloon(5): | 14.2% | |
| Property Information | |
| Single Asset / Portfolio(6): | Portfolio of 23 properties |
| Property Type: | Self Storage |
| Collateral: | Fee Simple |
| Location: | Various |
| Year Built / Renovated: | Various |
| Total Sq. Ft.: | 1,223,463 |
| Property Management: | U-Haul Co. of Arizona; U-Haul Co. of Florida; U-Haul Co. of Georgia; U-Haul Co. of Idaho, Inc.; U-Haul Co. of Iowa, Inc.; U-Haul Co. of Maryland, Inc.; U-Haul Co. of Minnesota; U-Haul Co. of Nevada, Inc.; U-Haul Co. of New Jersey, Inc.; U-Haul Co. of South Carolina, Inc. |
| Underwritten NOI: | $9,774,858 |
| Underwritten NCF: | $9,522,044 |
| Appraised Value: | $140,165,000 |
| Appraisal Date: | April – May 2016 |
| Historical NOI(7) | |
| Most Recent NOI: | $9,841,358 (T-12 May 31, 2016) |
| 2015 NOI: | $7,715,462 (December 31, 2015) |
| 2014 NOI: | $4,218,991 (December 31, 2014) |
| 2013 NOI: | $2,308,614 (December 31, 2013) |
| Historical Occupancy(7) | |
| Most Recent Occupancy: | 90.7% (May 31, 2016) |
| 2015 Occupancy: | 84.3% (December 31, 2015) |
| 2014 Occupancy: | 75.5% (December 31, 2014) |
| 2013 Occupancy: | 66.0% (December 31, 2013) |
| (1) | The U-Haul AREC Portfolio Whole Loan is evidenced by twopari passu notes in the aggregate original principal amount of $94.5 million. The controlling Note A-1 with an original principal balance of $48.5 million will be included in the CD 2016-CD1 mortgage trust. The non-controlling Note A-2 with an original principal balance of $46.0 million will not be included in the CD 2016-CD1 mortgage trust and was contributed to the DBJPM 2016-C3 mortgage trust. For additional information on thepari passucompanion loans, see “The Loan” herein. |
| (2) | If the U-Haul AREC Portfolio Whole Loan is not paid in full by the Anticipated Repayment Date, the interest rate will increase to the Adjusted Interest Rate. See “Anticipated Repayment Date” herein. |
| (3) | See “Initial Reserves” and “Ongoing Reserves” herein. |
| (4) | DSCR, LTV, Debt Yield and Balance / Sq. Ft. calculations are based on the aggregate U-Haul AREC Portfolio Whole Loan. |
| (5) | The Balloon Balance / Sq. Ft., Balloon LTV, Underwritten NOI Debt Yield at Balloon and Underwritten NCF Debt Yield at Balloon calculations are based on the Anticipated Repayment Date. |
| (6) | The portfolio consists of 23 properties, including two additional remote properties rolled up with the parent properties in U-Haul N Miami Beach and U-Haul Moving & Storage Of Salisbury. See “The Properties” section herein. |
| (7) | The sponsor only owned eight of the 23 properties prior to 2011. The sponsor acquired two properties in 2011, two properties in 2012, seven properties in 2013 and three properties in 2014. The remote property relating to the U-Haul N Miami Beach property was acquired in 2012 and the remote property relating to U-Haul Moving & Storage Salisbury property was acquired in 2015. The acquisition date of the U-Haul Moving & Storage Of East Brunswick Property was not provided by the sponsor. |
A-3-51
| Various | Collateral Asset Summary – Loan No. 5 U-Haul AREC Portfolio | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $48,500,000 67.4% 1.64x 10.3% |
| Portfolio Summary | ||||||||
| Property Name | Location | Sq. Ft. | Units | Year Built / Renovated | Allocated Loan Amount | Appraised Value | Occupancy(1) | |
| U-Haul N Miami Beach(2) | North Miami Beach, FL | 60,678 | 819 | 1963, 1972, 1985, 2001 / NAP | $8,909,046 | $13,200,000 | 96.0% | |
| U-Haul Moving & Storage At Oso Blanca | Las Vegas, NV | 77,735 | 761 | 2009 / 2013 | $6,681,784 | $9,900,000 | 89.1% | |
| U-Haul Moving & Storage Of Spring Valley | Las Vegas, NV | 60,090 | 695 | 1998 / 2013 | $5,871,871 | $8,700,000 | 95.2% | |
| U-Haul Moving & Storage Of North Brunswick | North Brunswick, NJ | 65,995 | 594 | 1988 / NAP | $5,669,393 | $8,400,000 | 88.8% | |
| U-Haul Moving & Storage Of Marlboro | Englishtown, NJ | 61,420 | 538 | 1988 / NAP | $5,534,407 | $8,200,000 | 90.2% | |
| U-Haul Moving & Storage Of Forestville Rd | District Heights, MD | 37,414 | 427 | 2002 / NAP | $5,466,914 | $8,100,000 | 92.2% | |
| U-Haul Moving & Storage Of Casa Grande | Casa Grande, AZ | 85,998 | 689 | 2008 / NAP | $5,196,943 | $7,700,000 | 81.8% | |
| U-Haul Moving & Storage Of East Brunswick | East Brunswick, NJ | 39,884 | 526 | 1993 / NAP | $4,724,494 | $7,000,000 | 93.8% | |
| U-Haul Coeur D Alene | Coeur D Alene, ID | 67,895 | 663 | 1945, 1970, 2011 / NAP | $4,387,030 | $6,600,000 | 97.6% | |
| U-Haul Moving & Storage At W Lake Mead Blvd | North Las Vegas, NV | 76,475 | 616 | 2005 / 2014 | $4,252,044 | $6,300,000 | 85.3% | |
| U-Haul Moving & Storage Of Little River | Little River, SC | 82,049 | 603 | 1996 / 2005 | $3,982,073 | $5,900,000 | 88.5% | |
| U-Haul Moving & Storage At Hwy 13 & Portland Ave | Burnsville, MN | 47,507 | 393 | 2008 / NAP | $3,759,347 | $5,570,000 | 98.3% | |
| U-Haul Storage Of Cumming | Cumming, GA | 60,475 | 408 | 2007 / 2008 | $3,644,610 | $5,400,000 | 90.6% | |
| U-Haul Moving & Storage Of Haines City | Haines City, FL | 57,390 | 407 | 2007 / NAP | $3,617,612 | $5,360,000 | 86.3% | |
| U-Haul Storage Of Downtown | Jacksonville, FL | 46,773 | 765 | 1925 / 1996 | $3,489,376 | $5,170,000 | 96.4% | |
| U-Haul Moving & Storage Of Salisbury(2) | Salisbury, MD | 66,545 | 649 | 1990, 2002, 2005 / NAP | $3,448,880 | $5,110,000 | 86.4% | |
| U-Haul Center Dade County | Miami, FL | 10,600 | 149 | 1958 / NAP | $3,172,160 | $4,700,000 | 98.6% | |
| U-Haul Moving & Storage Of Historic Ybor City | Tampa, FL | 19,719 | 261 | 1908 / 1976 | $2,402,743 | $3,560,000 | 94.0% | |
| U-Haul Of Stone Mountain | Stone Mountain, GA | 39,640 | 444 | 1988 / 1990 | $2,345,374 | $3,475,000 | 98.7% | |
| U-Haul Moving & Storage Of Cedar Rapids | Cedar Rapids, IA | 60,000 | 487 | 1979 / 2015 | $2,139,521 | $3,170,000 | 97.2% | |
| U-Haul Center North Irby St | Florence, SC | 27,068 | 366 | 1964 / 2012 | $1,957,290 | $2,950,000 | 92.1% | |
| U-Haul Moving And Storage Of West Warner Robins | Warner Robins, GA | 59,025 | 405 | 1994 / 1996-2004 | $1,957,290 | $2,900,000 | 80.4% | |
| U-Haul 36th Street | Miami, FL | 13,088 | 175 | 1965, 1995 / NAP | $1,889,798 | $2,800,000 | 94.1% | |
| Total / Wtd. Avg. | 1,223,463 | 11,840 | $94,500,000 | $140,165,000 | 90.7% | |||
| (1) | Based on rent roll dated May 31, 2016. |
| (2) | U-Haul N Miami Beach and U-Haul Moving & Storage Of Salisbury represent both a parent and remote property. |
The Loan.The U-Haul AREC Portfolio loan (the “U-Haul AREC Portfolio Loan”) is a fixed rate loan secured by the borrowers’ fee simple interest in 23 self storage properties, including two remote properties rolled into each parent property, totaling 1,223,463 sq. ft. or 11,840 units, located across 10 states (the “U-Haul AREC Portfolio Properties”) with an Original Balance and Cut-off Date Balance of $48.5 million. The U-Haul AREC Portfolio Loan is evidenced by the controlling Note A-1, with an original principal balance of $48.5 million, which will be included in the CD 2016-CD1 mortgage trust. The non-controlling Note A-2, with an original principal balance of $46.0 million, is included in the DBJPM 2016-C3 mortgage trust. The controlling Note A-1, together with the U-Haul AREC Portfolio Loan, the “U-Haul AREC Portfolio Whole Loan”, arepari passuin right of payment with each other and have an aggregate original principal balance of $94.5 million.
The relationship between the holders of the U-Haul AREC Portfolio Whole Loan will be governed by a co-lender agreement as described under the “Description of the Mortgage Pool – The Whole Loans – U-Haul AREC Portfolio Whole Loan” in the Prospectus.
| Whole Loan Summary | |||||
| Original Balance | Cut-off Date Balance | Note Holder | Controlling Piece | ||
| A-1 | $48,500,000 | $48,500,000 | CD 2016-CD1 | Yes | |
| A-2 | $46,000,000 | $46,000,000 | DBJPM 2016-C3 | No | |
| Total | $94,500,000 | $94,500,000 | |||
The U-Haul AREC Portfolio Loan will amortize on a 25-year schedule. The U-Haul AREC Portfolio Whole Loan has an anticipated repayment date of August 6, 2026 (the “Anticipated Repayment Date” or “ARD”) and a stated maturity date of August 6, 2036. Prior to the Anticipated Repayment Date, the U-Haul AREC Portfolio Loan accrues interest at a fixed rate of 3.7200%. From and after the Anticipated Repayment Date, the U-Haul AREC Portfolio Loan accrues interest at a fixed rate that is equal to 3.0000% in excess of the greater of (i) 3.7200% and (ii) the 10-year treasury yield as of the Anticipated Repayment Date plus 2.0200% (the “Adjusted Interest Rate”). See “Anticipated Repayment Date” herein. The U-Haul AREC Portfolio Loan proceeds were used to fund upfront reserves of approximately $1.2 million, pay closing costs of approximately $1.7 million and return approximately $91.7 million to the borrowers to recapitalize the U-Haul AREC Portfolio Properties.
The most recent prior financings of the 2269 Northeast 163rd Street property within the U-Haul N Miami Beach property, the U-Haul Moving & Storage Of East Brunswick property, the U-Haul Storage of Downtown property, the U-Haul Center Dade County property, the U-Haul Moving & Storage Of Historic Ybor City property and the U-Haul 36th Street property were included in the LBUBS 2006-C1 securitization. The most recent prior financing for the U-Haul Moving & Storage Of Spring Valley property was included in the LBUBS 2005-C7 securitization. The most recent prior financing for the U-Haul Moving & Storage Of North Brunswick property was included in the GCCFC 2007-GG9 securitization. The most recent prior financing for the U-Haul Moving & Storage Of Marlboro property was included in the BACM 2007-3 securitization. The most recent prior financing for the U-Haul Moving & Storage Of Forestville Rd property
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| Various | Collateral Asset Summary – Loan No. 5 U-Haul AREC Portfolio | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $48,500,000 67.4% 1.64x 10.3% |
was included in the GSMS 2007-GG10 securitization. The most recent prior financing for the 1326 North Salisbury Boulevard property within the U-Haul Moving & Storage Of Salisbury property was included in the MLCFC 2007-9 securitization. The most recent prior financing for the U-Haul Moving & Storage Of Cedar Rapids property was included in the MLCFC 2007-7 securitization. The most recent prior financing for the other U-Haul AREC Portfolio Properties were not included in a previous securitization.
| Sources and Uses | ||||||
| Sources | Proceeds | % of Total | Uses | Proceeds | % of Total | |
| Loan Amount | $94,500,000 | 100.0% | Reserves | $1,160,858 | 1.2% | |
| Closing Costs | $1,656,852 | 1.8% | ||||
| Return of Equity(1) | $91,682,291 | 97.0% | ||||
| Total Sources | $94,500,000 | 100.0% | Total Uses | $94,500,000 | 100.0% | |
| (1) | Prior to the U-Haul AREC Portfolio Whole Loan, the U-Haul AREC Portfolio Properties were unencumbered. |
The Borrowers / Sponsor.The borrowers, U-Haul Co. of Florida 22, LLC, UHIL 22, LLC and AREC 22, LLC, are each a Delaware limited liability company with two independent directors in its organizational structure. The sponsor of the borrowers and the nonrecourse carve-out guarantor is AMERCO, the parent company of U-Haul International, Inc. (“U-Haul”). U-Haul is one of the largest North American operators of self-storage facilities and has been a leader in the self-storage industry since 1974. U-Haul operates storage units ranging in size from 6 sq. ft. to over 1,000 sq. ft. As of March 31, 2016, U-Haul operates nearly 1,280 self-storage locations in North America, with over 536,000 rentable rooms comprising 47.9 million sq. ft. of rentable storage space. U-Haul locations provide customers with a variety of moving and storage supplies including self-storage, packing supplies and truck and trailer rentals.
AMERCO filed for Chapter 11 bankruptcy in 2003 after failing to refinance $866 million of debt. The company emerged from bankruptcy approximately nine months later, and its creditors were paid in full. For the fiscal year ending March 31, 2016, the company had EBIT of $887 million and net earnings of $489 million.
On March 11, 2015, a judgment in the amount of $60.7 million was entered against U-Haul International, Inc., an affiliate of AMERCO, in connection with certain federal trademark infringement and related claims. The case is currently on appeal with the United States Court of Appeals for the Eleventh Circuit. Please refer to the section “Description of the Mortgage Pool—Litigation and Other Considerations”and “—Loan Purpose, Default History, Bankruptcy Issues and Other Proceedings” in the Prospectus.
The Properties.The U-Haul AREC Portfolio Loan is secured by the fee simple interests in 23 cross-collateralized self-storage properties plus an additional two remote properties rolled up within the parent properties, totaling approximately 1,223,463 sq. ft. or 11,840 units. There are approximately 5,136 climate-controlled units and 6,704 non climate-controlled units. The U-Haul AREC Portfolio Properties are located across 10 states including Nevada, Florida, New Jersey, Georgia, South Carolina, Maryland, Arizona, Idaho, Iowa and Minnesota. The U-Haul AREC Portfolio Properties range from 10,600 sq. ft. to 85,998 sq. ft., or 149 units to 819 units. The largest state concentrations by sq. ft. are Nevada, Florida, New Jersey and Georgia which account for 17.5%, 17.0%, 13.7% and 13.0%, respectively. No other state accounts for more than 8.9% of total sq. ft.
| Regional Breakdown | ||||||||
| State | Property Count | Total Sq. Ft. | % of Sq. Ft. | Total Units | % of Units | Occupancy | U/W NCF | % of U/W NCF |
| Nevada | 3 | 214,300 | 17.5% | 2,072 | 17.5% | 89.4% | $1,659,791 | 17.4% |
| Florida | 6 | 208,248 | 17.0% | 2,576 | 21.8% | 93.3% | $2,356,481 | 24.7% |
| New Jersey | 3 | 167,299 | 13.7% | 1,658 | 14.0% | 90.5% | $1,623,356 | 17.0% |
| Georgia | 3 | 159,140 | 13.0% | 1,257 | 10.6% | 88.8% | $830,169 | 8.7% |
| South Carolina | 2 | 109,117 | 8.9% | 969 | 8.2% | 89.4% | $657,426 | 6.9% |
| Maryland | 2 | 103,959 | 8.5% | 1,076 | 9.1% | 88.5% | $927,104 | 9.7% |
| Arizona | 1 | 85,998 | 7.0% | 689 | 5.8% | 81.8% | $391,264 | 4.1% |
| Idaho | 1 | 67,895 | 5.5% | 663 | 5.6% | 97.6% | $495,079 | 5.2% |
| Iowa | 1 | 60,000 | 4.9% | 487 | 4.1% | 97.2% | $254,886 | 2.7% |
| Minnesota | 1 | 47,507 | 3.9% | 393 | 3.3% | 98.3% | $326,488 | 3.4% |
| Total | 23 | 1,223,463 | 100.0% | 11,840 | 100.0% | 90.7% | $9,522,044 | 100.0% |
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| Various | Collateral Asset Summary – Loan No. 5 U-Haul AREC Portfolio | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $48,500,000 67.4% 1.64x 10.3% |
The chart below represents the historical occupancy for the U-Haul AREC Portfolio Properties. Occupancy year-over-year, from 2014 to May 2016, has increased 9.5%, 8.9% and 4.3%, respectively. The sponsor acquired eight of the assets prior to 2011, two in 2011, two in 2012, seven in 2013 and three in 2014. The remote property relating to the U-Haul N Miami Beach property was acquired in 2012 and the remote property relating to U-Haul Moving & Storage Salisbury property was acquired in 2015. The acquisition date of the U-Haul Moving & Storage Of East Brunswick property was not provided by the sponsor. As of May 31, 2016, the U-Haul AREC Portfolio Properties were 90.7% occupied.
| Historical Occupancy | |||||
| Property Name | 2013 Occupancy (Units) | 2014 Occupancy (Units) | 2015 Occupancy (Units) | Most Recent Occupancy (Units)(1) | Most Recent Occupancy (Sq. Ft.)(1) |
| U-Haul Coeur D Alene | 53.3% | 69.4% | 86.0% | 92.8% | 97.6% |
| U-Haul Moving & Storage Of Casa Grande | 55.4% | 71.6% | 78.4% | 85.8% | 81.8% |
| U-Haul Center North Irby St | 44.2% | 65.2% | 68.3% | 80.6% | 92.1% |
| U-Haul Of Stone Mountain | 42.6% | 72.7% | 94.8% | 97.4% | 98.7% |
| U-Haul Moving & Storage Of Historic Ybor City | 91.6% | 92.5% | 93.6% | 95.9% | 94.0% |
| U-Haul 36th Street | 91.8% | 89.2% | 92.8% | 93.1% | 94.1% |
| U-Haul Center Dade County | 97.3% | 97.1% | 96.4% | 96.9% | 98.6% |
| U-Haul N Miami Beach(2) | 85.4% | 94.8% | 94.4% | 89.8% | 96.0% |
| U-Haul Moving & Storage Of Salisbury(2) | 54.7% | 84.9% | 87.6% | 84.8% | 86.4% |
| U-Haul Moving & Storage Of Marlboro | 82.5% | 82.3% | 86.1% | 87.1% | 90.2% |
| U-Haul Moving & Storage Of East Brunswick | 85.6% | 85.3% | 85.4% | 88.3% | 93.8% |
| U-Haul Moving & Storage Of North Brunswick | 79.1% | 74.7% | 85.0% | 89.0% | 88.8% |
| U-Haul Moving & Storage At W Lake Mead Blvd | NAP | 62.7% | 73.7% | 82.0% | 85.3% |
| U-Haul Moving & Storage At Hwy 13 & Portland Ave | 61.7% | 85.9% | 94.5% | 96.8% | 98.3% |
| U-Haul Moving & Storage At Oso Blanca | 50.0% | 55.4% | 74.1% | 82.3% | 89.1% |
| U-Haul Moving And Storage Of West Warner Robins | 70.0% | 70.8% | 72.5% | 76.8% | 80.4% |
| U-Haul Moving & Storage Of Little River | 62.4% | 66.7% | 74.4% | 81.8% | 88.5% |
| U-Haul Moving & Storage Of Spring Valley | 73.0% | 79.3% | 90.9% | 93.5% | 95.2% |
| U-Haul Storage Of Cumming | 37.8% | 56.2% | 79.2% | 88.5% | 90.6% |
| U-Haul Storage Of Downtown | 72.8% | 79.1% | 86.8% | 91.4% | 96.4% |
| U-Haul Moving & Storage Of Cedar Rapids | NAP | 73.2% | 85.9% | 93.0% | 97.2% |
| U-Haul Moving & Storage Of Haines City | 61.8% | 68.4% | 82.3% | 90.6% | 86.3% |
| U-Haul Moving & Storage Of Forestville Rd | NAP | 84.4% | 91.2% | 94.6% | 92.2% |
| Total / Wtd. Avg. | 66.0% | 75.5% | 84.3% | 88.6% | 90.7% |
| (1) | Based on rent roll dated May 31, 2016. |
| (2) | Each of the U-Haul N Miami Beach and U-Haul Moving & Storage Of Salisbury properties include a separate remote property in addition to the identified property. |
Environmental Matters.The Phase I environmental reports dated May 2016 recommended the development and implementation of an asbestos operation and maintenance plans and lead based paint operation and maintenance plans at select properties within the U-Haul AREC Portfolio Properties, all of which are in place. A Phase II environmental assessment was recommended for the U-Haul Center North Irby St property, however a Phase II was not performed because the property is covered by a blanket environmental insurance policy that covers all of the U-Haul AREC properties owned by AMERCO, including the U-Haul AREC Portfolio Properties. The lender was also named as additionally insured on the sponsor’s environmental blanket policy. AMERCO serves as the environmental indemnitor for the U-Haul AREC Portfolio Whole Loan.
The Market.According to the appraisal, in 2015 the US self-storage market encompassed approximately 41,443 self-storage facilities totaling approximately 2.16 billion sq. ft. The customer base for self-storage is broken down into four categories: residential (68.8%), commercial (17.5%), military (7.4%), and students (6.3%). Over the last four years national occupancy has steadily increased from 85.0% in 2012 to 90.2% in 2015. The appraiser’s comparable market rates concluded a weighted average monthly rate of $106.96 per unit, $1.00 PSF and an overall occupancy of 88.8%. The below chart depicts market information compared to the U-Haul AREC Portfolio Properties and local demographics.
A-3-54
| Various | Collateral Asset Summary – Loan No. 5 U-Haul AREC Portfolio | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $48,500,000 67.4% 1.64x 10.3% |
| Market Comparison | ||||||||
| U-Haul AREC Portfolio Properties | Market Comparables(1) | 3-Mile Radius(1) | ||||||
| Property Name | Monthly Rent Per Unit(1) | Monthly Rent PSF(1) |
Occupancy(2) | Monthly Rent Per Unit | Monthly Rent PSF | Occupancy | 2016 Population | Median Household Income |
| U-Haul Coeur D Alene | $82.00 | $0.79 | 97.6% | $82.00 | $0.79 | 94.5% | 48,889 | $47,304 |
| U-Haul Moving & Storage Of Casa Grande | $89.23 | $0.53 | 81.8% | $89.00 | $0.53 | 77.3% | 19,109 | $46,476 |
| U-Haul Center North Irby St | $87.00 | $1.17 | 92.1% | $87.00 | $1.17 | 92.2% | 29,733 | $34,209 |
| U-Haul Of Stone Mountain | $67.00 | $0.75 | 98.7% | $68.00 | $0.75 | 86.0% | 108,576 | $40,479 |
| U-Haul Moving & Storage Of Historic Ybor City | $106.00 | $1.57 | 94.0% | $106.00 | $1.57 | 92.0% | 95,213 | $35,201 |
| U-Haul 36th Street | $161.00 | $2.15 | 94.1% | $161.00 | $2.15 | 93.2% | 259,035 | $24,059 |
| U-Haul Center Dade County | $143.00 | $2.01 | 98.6% | $143.00 | $2.01 | 90.2% | 215,548 | $27,315 |
| U-Haul N Miami Beach | $122.00 | $1.62 | 96.0% | $122.00 | $1.62 | 94.0% | 195,002 | $42,523 |
| U-Haul Moving & Storage Of Salisbury | $100.94 | $0.99 | 86.4% | $99.94 | $0.98 | 76.1% | 47,491 | $38,919 |
| U-Haul Moving & Storage Of Marlboro | $144.00 | $1.15 | 90.2% | $144.00 | $1.15 | 90.2% | 50,993 | $115,754 |
| U-Haul Moving & Storage Of East Brunswick | $123.00 | $1.64 | 93.8% | $123.00 | $1.64 | 90.2% | 84,947 | $79,655 |
| U-Haul Moving & Storage Of North Brunswick | $136.00 | $1.22 | 88.8% | $135.71 | $1.22 | 90.2% | 126,685 | $65,872 |
| U-Haul Moving & Storage At W Lake Mead Blvd | $107.00 | $0.87 | 85.3% | $107.00 | $0.87 | 89.7% | 155,606 | $39,010 |
| U-Haul Moving & Storage At Hwy 13 & Portland Ave | $116.00 | $0.96 | 98.3% | $116.00 | $0.96 | 92.6% | 64,877 | $67,281 |
| U-Haul Moving & Storage At Oso Blanca | $120.00 | $1.11 | 89.1% | $120.00 | $1.11 | 90.2% | 77,385 | $68,904 |
| U-Haul Moving And Storage Of West Warner Robins | $88.00 | $0.61 | 80.4% | $88.00 | $0.61 | 90.7% | 51,353 | $48,019 |
| U-Haul Moving & Storage Of Little River | $125.00 | $0.85 | 88.5% | $124.00 | $0.85 | 90.0% | 18,928 | $43,105 |
| U-Haul Moving & Storage Of Spring Valley | $102.00 | $1.09 | 95.2% | $102.00 | $1.09 | 91.6% | 125,839 | $45,015 |
| U-Haul Storage Of Cumming | $116.00 | $0.75 | 90.6% | $116.00 | $0.75 | 86.0% | 18,866 | $71,289 |
| U-Haul Storage Of Downtown | $59.00 | $0.97 | 96.4% | $59.00 | $0.97 | 90.1% | 71,964 | $27,785 |
| U-Haul Moving & Storage Of Cedar Rapids | $68.33 | $0.56 | 97.2% | $70.97 | $0.58 | 96.8% | 60,912 | $47,421 |
| U-Haul Moving & Storage Of Haines City | $122.00 | $0.85 | 86.3% | $122.00 | $0.85 | 81.6% | 22,656 | $35,644 |
| U-Haul Moving & Storage Of Forestville Rd | $148.00 | $1.69 | 92.2% | $148.00 | $1.69 | 90.1% | 70,152 | $61,829 |
| Wtd. Avg. | $106.95 | $1.00 | 90.7% | $106.96 | $1.00 | 88.8% | ||
| (1) | Source: Appraisals |
| (2) | Occupancy based on rent rolls as of May 31, 2016. |
Cash Flow Analysis.
| Cash Flow Analysis(1) | |||||||||||
| 12/31/2013 | 12/31/2014 | 12/31/2015 | T-12 5/31/2016 | U/W | U/W PSF | ||||||
| Base Rent(2) | $3,150,947 | $6,026,394 | $9,897,425 | $12,172,465 | $12,172,465 | $9.95 | |||||
| Value of Vacant Space | 0 | 0 | 0 | 0 | 3,071,968 | 2.51 | |||||
| Gross Potential Rent | $3,150,947 | $6,026,394 | $9,897,425 | $12,172,465 | $15,244,433 | $12.46 | |||||
| Total Recoveries | 0 | 0 | 0 | 0 | 0 | 0.00 | |||||
| Total Other Income(3) | 837,105 | 970,968 | 1,229,866 | 1,279,319 | 1,279,319 | 1.05 | |||||
| Less: Vacancy | 0 | 0 | 0 | 0 | (3,071,968) | (2.51) | |||||
| Effective Gross Income | $3,988,053 | $6,997,361 | $11,127,291 | $13,451,784 | $13,451,784 | $10.99 | |||||
| Total Operating Expenses | 1,679,438 | 2,778,371 | 3,411,829 | 3,610,425 | 3,676,925 | 3.01 | |||||
| Net Operating Income | $2,308,614 | $4,218,991 | $7,715,462 | $9,841,358 | $9,774,858 | $7.99 | |||||
| Capital Expenditures | 0 | 0 | 0 | 0 | 252,815 | 0.21 | |||||
| Net Cash Flow | $2,308,614 | $4,218,991 | $7,715,462 | $9,841,358 | $9,522,044 | $7.78 | |||||
| (1) | Thesponsor only owned eight of the 23 assets prior to 2011. The sponsor acquired two properties in 2011, two properties in 2012, seven properties in 2013 and three properties in 2014. The remote property relating to the U-Haul N Miami Beach property was acquired in 2012 and the remote property relating to U-Haul Moving & Storage Salisbury property was acquired in 2015. The acquisition date of the U-Haul Moving & Storage Of East Brunswick property was not provided by the sponsor. |
| (2) | U/W Base Rent is based on in-place rent rolls as of May 31, 2016. |
| (3) | Total Other Income consists of U-Move Net Commissions, U-Box Net Commissions and miscellaneous revenue. |
Property Management.The U-Haul AREC Portfolio Properties are managed by 10 separate affiliates of U-Haul International, Inc.
A-3-55
| Various | Collateral Asset Summary – Loan No. 5 U-Haul AREC Portfolio | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $48,500,000 67.4% 1.64x 10.3% |
Lockbox / Cash Management.The U-Haul AREC Portfolio Loan is structured with a soft lockbox and springing cash management. The borrowers and property managers collect rents at the U-Haul AREC Portfolio Properties and are required to deposit such amounts into a lockbox account. During a Cash Sweep Event (as defined below) all amounts in the lockbox account will be transferred into the cash management account, and all excess cash flow is to be held as additional collateral.
A “Cash Sweep Event” will commence upon the earlier of (i) an event of default, (ii) the failure of the borrowers after the end of two consecutive calendar quarters to maintain a debt service coverage ratio of at least 1.15x, (iii) the borrowers failure to provide evidence of payments of real estate taxes or that the properties are insured, (iv) the date on which the property managers become insolvent or the debtor in any bankruptcy action and (v) an Extension Term Trigger Event (as defined below).
A Cash Sweep Event will expire, with regard to clause (i) above, if the cure of the event of default is accepted by the U-Haul AREC Portfolio Loan lender, with regard to clause (ii) above, if the U-Haul AREC Portfolio Whole Loan generates a debt service coverage ratio equal to or greater than 1.15x for four consecutive calendar quarters, with regard to clause (iii) above, if the borrowers provide evidence of payment of taxes or insurance, and with regard to clause (iv) above, if the borrowers enter into a replacement management agreement with a qualified manager in accordance with the terms of the loan agreement. A cash sweep event may be cured no more than a total of five times in the aggregate during the term of the loan.
An “Extension Term Trigger Event” will commence upon the payment date that is three payment dates prior to the Anticipated Repayment Date, if the U-Haul AREC Portfolio Whole Loan has not been repaid in full.
Initial Reserves.At loan origination, the borrowers deposited (i) $645,544 into a tax reserve account, (ii) $126,407 into a replacement reserve account and (iii) $388,906 into a required repairs account, which represents 125% of the estimated costs.
Ongoing Reserves.The borrowers are required to deposit 1/12 of annual real estate taxes upon (i) an event of default, (ii) if the balance of the tax reserve account falls below an amount sufficient to pay six months of taxes or (iii) if the borrowers fail to provide evidence of satisfactory payment of all taxes due. The borrowers are required to deposit 1/12 of the annual insurance premiums upon (i) an event of default, (ii) if an acceptable blanket insurance policy is no longer in place, (iii) if the balance of the insurance reserve account falls below an amount sufficient to pay six months of insurance premiums or (iv) if the borrowers fail to furnish evidence of satisfactory payment of all insurance premiums. On a monthly basis, the borrowers will be required to deposit $21,068 into a replacement reserve account, upon the replacement reserve account balance falling below the replacement reserve cap of $126,407.
Anticipated Repayment Date.The U-Haul AREC Portfolio Whole Loan has an Anticipated Repayment Date of August 6, 2026 and a stated maturity date of August 6, 2036. From and after the Anticipated Repayment Date, the U-Haul AREC Portfolio Loan accrues interest at a fixed rate that is equal to 3.0000% in excess of the greater of (i) 3.7200% and (ii) the 10-year treasury yield as of the Anticipated Repayment Date plus 2.0200% (the “Adjusted Interest Rate”). All excess cash flow after payment of reserves, the interest calculated at the initial interest rate, and the properties’ operating expenses, will be applied to the outstanding principal balance of the U-Haul AREC Portfolio Loan until repaid in full. The additional ARD interest which is not paid current during the post ARD period will accrue and bear interest at the Adjusted Interest Rate.
Current Mezzanine or Subordinate Indebtedness.None.
Future Mezzanine or Subordinate Indebtedness Permitted.None.
Partial Release.None.
After Acquired Adjacent Property.The borrowers may, pursuant to conditions set forth in the loan documents, acquire certain property adjacent to an existing mortgaged property to expand the related mortgaged property, provided among other things, the borrowers provide the lender with a clean environmental report, updated title and survey, evidence that the property is insured in accordance with the loan documents, and evidence that the property is acquired for cash. Any such after acquired adjacent property will be encumbered by the lien of the mortgage on the related existing U-Haul AREC Portfolio Properties.
After Acquired Operating Lease Property.The borrowers may, pursuant to conditions set forth in the loan documents, enter into operating leases with respect to storage facilities that may be acquired by an affiliate of borrowers in the vicinity of an existing U-Haul AREC Portfolio Property, provided among other things, (i) such facility is operated as remote, unstaffed facility related to an existing U-Haul AREC Portfolio Property, (ii) the borrowers deliver a clean environmental report, a current survey, evidence that the property is insured in accordance with the loan documents and (iii) the borrowers execute an operating lease in a form substantially similar to the form included in the loan documents, which lease provides that (a) in the event that the debt service coverage ratio for the U-Haul AREC Portfolio Whole Loan is less than 1.20x, any rent, taxes and insurance due by the borrowers under the operating lease will be abated and (b) if the lender forecloses or accepts a deed-in-lieu of foreclosure on the related property, the related transferee will be required to assume or terminate the lease.
Substitution.None.
A-3-56
| Various | Collateral Asset Summary – Loan No. 5 U-Haul AREC Portfolio | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $48,500,000 67.4% 1.64x 10.3% |
A-3-57
12240 South Beyer Road Birch Run, MI 48415 | Collateral Asset Summary – Loan No. 6 Birch Run Premium Outlets | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $43,000,000 59.4% 2.90x 13.2% |
A-3-58
12240 South Beyer Road Birch Run, MI 48415 | Collateral Asset Summary – Loan No. 6 Birch Run Premium Outlets | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $43,000,000 59.4% 2.90x 13.2% |
| Mortgage Loan Information | |
| Loan Seller: | GACC |
| Loan Purpose: | Refinance |
| Sponsor: | Simon Property Group, L.P. |
| Borrower: | Birch Run Outlets II, L.L.C. |
| Original Balance(1): | $43,000,000 |
| Cut-off Date Balance(1): | $43,000,000 |
| % by Initial UPB: | 6.1% |
| Interest Rate: | 4.2090% |
| Payment Date: | 6thof each month |
| First Payment Date: | March 6, 2016 |
| Maturity Date: | February 6, 2026 |
| Amortization: | Interest Only |
| Additional Debt(1): | $80,000,000Pari Passu Debt |
| Call Protection(2): | L(30), D(83), O(7) |
| Lockbox / Cash Management: | Hard / Springing |
| Reserves(3) | ||
| Initial | Monthly | |
| Taxes: | $0 | Springing |
| Insurance: | $0 | Springing |
| Replacement: | $0 | Springing |
| TI/LC: | $0 | Springing |
| Financial Information(4) | ||
| Cut-off Date Balance / Sq. Ft.: | $181 | |
| Balloon Balance / Sq. Ft.: | $181 | |
| Cut-off Date LTV: | 59.4% | |
| Balloon LTV: | 59.4% | |
| Underwritten NOI DSCR: | 3.10x | |
| Underwritten NCF DSCR: | 2.90x | |
| Underwritten NOI Debt Yield: | 13.2% | |
| Underwritten NCF Debt Yield: | 12.4% | |
| Underwritten NOI Debt Yield at Balloon: | 13.2% | |
| Underwritten NCF Debt Yield at Balloon: | 12.4% | |
| Property Information | |
| Single Asset / Portfolio: | Single Asset |
| Property Type: | Anchored Retail |
| Collateral: | Fee Simple |
| Location: | Birch Run, MI |
| Year Built / Renovated: | 1985 / 1986-1996, 2005, 2013 |
| Total Sq. Ft.: | 680,003 |
| Property Management: | Simon Management Associates, LLC |
| Underwritten NOI: | $16,274,165 |
| Underwritten NCF: | $15,209,802 |
| Appraised Value: | $207,200,000 |
| Appraisal Date: | December 3, 2015 |
| Historical NOI | |
| Most Recent NOI | $16,540,606 (T-12 May 31, 2016) |
| 2015 NOI: | $16,476,418 (December 31, 2015) |
| 2014 NOI: | $15,550,208 (December 31, 2014) |
| 2013 NOI: | $14,802,936 (December 31, 2013) |
| Historical Occupancy | |
| Most Recent Occupancy: | 87.0% (May 31, 2016) |
| 2015 Occupancy: | 90.6% (December 31, 2015) |
| 2014 Occupancy: | 92.0% (December 31, 2014) |
| 2013 Occupancy: | 92.4% (December 31, 2013) |
| (1) | The Birch Run Premium Outlets Whole Loan is evidenced by sixpari passu notes in the aggregate original principal amount of $123.0 million. The non-controlling Notes A-2-A and A-4, with an aggregate original principal balance of $43.0 million will be included in the CD 2016-CD1 mortgage trust. The non-controlling Note A-1-A, with an original principal balance of $20.0 million was included in the COMM 2016-DC2 mortgage trust. The controlling Note A-3 with an original principal balance of $30.0 million, and the remaining non-controlling Notes A-1-B and A-2-B, with an aggregate original principal balance of $30.0 million are each expected to be held by GACC or an affiliate and contributed to a future securitization. For additional information on thepari passu companion loans, see “The Loan” herein. |
| (2) | The lockout period will be at least 30 payment dates beginning with and including the first payment date of March 6, 2016. Defeasance of the full $123.0 million Birch Run Premium Outlets Whole Loan is permitted after the date that is the earlier to occur of (i) two years after the closing date of the securitization that includes the lastpari passunote to be securitized and (ii) March 6, 2019. The assumed lockout period of 30 payments is based on the expected CD 2016-CD1 securitization closing date in August 2016. The actual lockout period may be longer. |
| (3) | See “Initial Reserves” and “Ongoing Reserves” herein. |
| (4) | DSCR, LTV, Debt Yield and Balance / Sq. Ft. calculations are based on the aggregate Birch Run Premium Outlets Whole Loan. |
A-3-59
12240 South Beyer Road Birch Run, MI 48415 | Collateral Asset Summary – Loan No. 6 Birch Run Premium Outlets | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $43,000,000 59.4% 2.90x 13.2% |
| Tenant Summary | ||||||||
| Tenant Mix | Ratings (Fitch/Moody’s/S&P)(1) | Total Sq. Ft. | % of Total Collateral Sq. Ft. | Lease Expiration | Annual UW Base Rent PSF | Total Sales (000s)(2) | Sales PSF(2) | Occupancy Cost(2) |
| Anchor Tenants | ||||||||
| Pottery Barn | NR/NR/NR | 30,000 | 4.4% | 1/31/2023 | $9.17 | $9,361 | $312 | 2.9% |
| V.F. Factory Outlet | NR/A3/A | 23,975 | 3.5% | 12/31/2018 | $22.75 | $4,675 | $195 | 12.6% |
| Old Navy | BB+/Baa2/BB+ | 19,589 | 2.9% | 7/31/2017 | $16.40 | $4,893 | $250 | 11.7% |
| Subtotal / Wtd. Avg. | 73,564 | 10.8% | $15.52 | $18,929 | $257 | 7.6% | ||
| Major Tenants (>10,000 sq. ft.) | ||||||||
| Nike Factory Store | NR/A1/AA- | 12,500 | 1.8% | 1/31/2020 | $28.00 | $11,987 | $959 | 4.0% |
| Levi’s Outlet(3) | BB/Ba2/BB | 12,398 | 1.8% | 1/31/2020 | $0.00 | $1,444 | $116 | 0.0% |
| Polo Ralph Lauren | NR/A2/A | 12,024 | 1.8% | 8/31/2020 | $15.00 | $4,134 | $344 | 5.5% |
| Gap Outlet | BB+/Baa2/BB+ | 11,875 | 1.7% | 5/31/2021 | $23.90 | $3,936 | $331 | 10.4% |
| Lenox | NR/NR/NR | 10,410 | 1.5% | 12/31/2017 | $20.00 | $1,209 | $116 | 17.6% |
| Reebok/Rockport Outlet | NR/NR/NR | 10,316 | 1.5% | 4/30/2018 | $22.94 | $1,759 | $171 | 21.7% |
| Hanesbrands | NR/Ba2/BB | 10,277 | 1.5% | 4/30/2021 | $24.34 | $2,017 | $196 | 19.9% |
| Under Armour | NR/NR/NR | 10,011 | 1.5% | 3/31/2025 | $59.74 | NAP(4) | NAP(4) | NAP(4) |
| Major Tenants Subtotal / Wtd. Avg. | 89,811 | 13.2% | $27.22 | $26,486 | $332 | 8.4% | ||
| In-line <10,000 SF | 380,115 | 55.9% | $27.98 | $117,582 | $344 | 11.4% | ||
| Short Term Lease | 38,255 | 5.6% | $5.02 | $1,287 | $51 | 10.6% | ||
| Food Court | 9,800 | 1.4% | $29.71 | $4,613 | $471 | 8.1% | ||
| Total Occupied Collateral | 591,545 | 87.0% | $24.29 | $168,897 | $319 | 10.5% | ||
| Vacant | 88,458 | 13.0% | ||||||
| Total / Wtd. Avg. | 680,003 | 100.0% | ||||||
| (1) | Certain ratings may be those of the parent company whether or not the parent company guarantees the lease. |
| (2) | Total Sales (000s), Sales PSF and Occupancy Cost are provided by the borrower and represent the trailing 12 months ended March 2016 for tenants that reported sales. |
| (3) | Levi’s Outlet pays percent-in-lieu rent, which is captured within the Total Other Income under “Cash Flow Analysis” below. |
| (4) | Under Armour annual sales are not available because the tenant’s lease start date was March 2015. |
| Lease Rollover Schedule(1) | ||||||||
| Year | # of Leases Expiring | Total Expiring Sq. Ft. | % of Total Sq. Ft. Expiring | Cumulative Sq. Ft. Expiring | Cumulative % of Sq. Ft. Expiring | Annual U/W Base Rent PSF | % U/W Base Rent Rolling | Cumulative % of U/W Base Rent |
| MTM | 6 | 17,828 | 2.6% | 17,828 | 2.6% | $20.63 | 2.6% | 2.6% |
| 2016 | 6 | 26,039 | 3.8% | 43,867 | 6.5% | $19.67 | 3.6% | 6.1% |
| 2017 | 25 | 126,495 | 18.6% | 170,362 | 25.1% | $17.71 | 15.6% | 21.7% |
| 2018 | 14 | 75,589 | 11.1% | 245,951 | 36.2% | $25.89 | 13.6% | 35.3% |
| 2019 | 8 | 21,546 | 3.2% | 267,497 | 39.3% | $31.67 | 4.7% | 40.1% |
| 2020 | 12 | 80,063 | 11.8% | 347,560 | 51.1% | $23.36 | 13.0% | 53.1% |
| 2021 | 16 | 84,921 | 12.5% | 432,481 | 63.6% | $30.08 | 17.8% | 70.9% |
| 2022 | 8 | 43,518 | 6.4% | 475,999 | 70.0% | $25.18 | 7.6% | 78.5% |
| 2023 | 4 | 39,700 | 5.8% | 515,699 | 75.8% | $13.20 | 3.6% | 82.2% |
| 2024 | 5 | 19,005 | 2.8% | 534,704 | 78.6% | $35.34 | 4.7% | 86.8% |
| 2025 | 4 | 24,778 | 3.6% | 559,482 | 82.3% | $43.37 | 7.5% | 94.3% |
| 2026 | 6 | 32,063 | 4.7% | 591,545 | 87.0% | $25.48 | 5.7% | 100.0% |
| Thereafter | 0 | 0 | 0.0% | 591,545 | 87.0% | $0.00 | 0.0% | 100.0% |
| Vacant | NAP | 88,458 | 13.0% | 680,003 | 100.0% | NAP | NAP | |
| Total / Wtd. Avg. | 114 | 680,003 | 100.0% | $24.29 | 100.0% | |||
| (1) | A number of tenants including certain anchor tenants have lease termination options related to co-tenancy provisions, exclusivity provisions and sales thresholds that may become exercisable prior to the originally stated expiration date of the tenant lease and that are not considered in the lease rollover schedule or the site plan. |
A-3-60
12240 South Beyer Road Birch Run, MI 48415 | Collateral Asset Summary – Loan No. 6 Birch Run Premium Outlets | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $43,000,000 59.4% 2.90x 13.2% |
The Loan.The Birch Run Premium Outlets loan (the “Birch Run Premium Outlets Loan”) is a fixed rate loan secured by the borrower’s fee simple interest in a 680,003 sq. ft., outlet center located in Birch Run, Michigan (the “Birch Run Premium Outlets Property”) with an original and cut-off date principal balance of $43.0 million. The Birch Run Premium Outlets Loan is evidenced by the non-controlling Notes A-2-A and A-4 with an aggregate original principal balance of $43.0 million, which will be included in the CD 2016-CD1 mortgage trust. Thepari passu non-controlling Note A-1-A, with an original principal balance of $20.0 million was included in the COMM 2016-DC2 mortgage trust. Thepari passucontrolling Note A-3 with an original principal balance of $30.0 million and the remaining non-controllingpari passu Notes A-1-B and A-2-B, with an aggregate original principal balance of $30.0 million (and, together with the Birch Run Premium Outlets Loan, the “Birch Run Premium Outlets Whole Loan”), will not be included in the trust and are each expected to be held by GACC or an affiliate and contributed to a future securitization.
The relationship between the holders of the Birch Run Premium Outlets Whole Loan will be governed by a co-lender agreement as described under “Description of the Mortgage Pool – The Whole Loans –Birch Run Premium OutletsWhole Loan” in the Prospectus.
| Whole Loan Summary | |||||
| Original Balance | Cut-off Date Balance | Note Holder | Controlling Piece | ||
| A-1-A | $20,000,000 | $20,000,000 | COMM 2016-DC2 | No | |
| A-2-A & A-4 | $43,000,000 | $43,000,000 | CD 2016-CD1 | No | |
| A-1-B, A-2-B & A-3 | $60,000,000 | $60,000,000 | GACC | Yes | |
| Total | $123,000,000 | $123,000,000 | |||
The Birch Run Premium Outlets Whole Loan has a 10-year term and pays interest only for the term of the loan. The Birch Run Premium Outlets Whole Loan accrues interest at a fixed rate equal to 4.2090%. Loan proceedswere used to retire existing debt of approximately $101.0 million, pay closing costs of approximately $0.8 million and return approximately $21.2 million of equity to the sponsor. Based on the “As-is” appraised value of $207.2 million as of December 3, 2015, the cut-off date LTV is 59.4%. The most recent prior financing of the Birch Run Premium Outlets Property was included in the WBCMT 2006-C26, WBCMT 2006-C27 and RREF 2007-1A securitizations.
| Sources and Uses | ||||||
| Sources | Proceeds | % of Total | Uses | Proceeds | % of Total | |
| Loan Amount | $123,000,000 | 100.0% | Loan Payoff | $100,976,785 | 82.1% | |
| Closing Costs | $828,370 | 0.7% | ||||
| Return of Equity | $21,194,846 | 17.2% | ||||
| Total Sources | $123,000,000 | 100.0% | Total Uses | $123,000,000 | 100.0% | |
The Borrower / Sponsor. The borrower is Birch Run Outlets II, L.L.C., a single purpose Delaware limited liability company structured to be bankruptcy-remote, with two independent directors in its organizational structure. The sponsor of the borrower and nonrecourse carve-out guarantor is Simon Properties Group, L.P., which is the operating partnership of Simon Property Group, Inc. (“Simon”). Simon is a publicly traded self-administered and self-managed real estate investment trust (NYSE: SPG) focused on retail property ownership and management. Simon (rated A3/A/NR by Moody’s/S&P/Fitch) is one of the largest publicly traded owner, operator and developer of retail assets in the United States. As of December 31, 2015, Simon operated 209 income-producing properties in the United States, consisting of 108 malls, 71 outlet centers, 14 mills, four lifestyle centers and 12 other retail properties located in 37 states and Puerto Rico. As of December 31, 2015, Simon had approximately $30.7 billion in assets, which is up 3.8% from approximately $29.5 billion in December 31, 2014. Consolidated net income for the full year ended December 31, 2015 was approximately $2.1 billion, which is up 29.5% from approximately $1.7 billion for the full year ended December 31, 2014.
Birch Run Premium Outlets Whole Loan will be recourse to the guarantor pursuant to standard carve-outs, however, the guaranty (which also includes environmental indemnity provisions) provides that the guarantor’s liability may not exceed $24.6 million in the aggregate (20.0% of loan amount), plus all reasonable out-of-pocket costs and expenses (including court costs and reasonable attorneys’ fees) incurred by the lender in the enforcement of the guaranty or the preservation of the lender’s rights thereunder.
The Property. The Birch Run Premium Outlets Property consists of a 680,003 sq. ft. open-air outlet center situated on a 92.4 acre site located within Saginaw County, Michigan and sits in the southwest quadrant of Interstate 75 and Route 54, with direct frontage along I-75. The Birch Run Premium Outlets Property, was developed in 1985, expanded between 1986 and 1996, and renovated in 2005 and 2013. In 2010, the property was acquired by its current sponsor, Simon Property Group, L.P. for approximately $84.3 million ($124 PSF) on an allocated cost basis as a part of its acquisition of Prime Outlets.
A-3-61
12240 South Beyer Road Birch Run, MI 48415 | Collateral Asset Summary – Loan No. 6 Birch Run Premium Outlets | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $43,000,000 59.4% 2.90x 13.2% |
As of May 31, 2016, the Birch Run Premium Outlets Property was 87.0% leased to a broad mix of approximately 114 national and international brand-name retailers including Old Navy, Pottery Barn, V.F. Factory Outlet, Calvin Klein, Brooks Brothers, Nike Factory Store and J. Crew Factory Store. The property’s tenancy has a weighted average original lease term of 10.9 years and weighted average remaining lease term of 3.9 years. The Birch Run Premium Outlets Property features approximately 4,807 surface parking spaces, which equates to a ratio of 7.1 spaces per 1,000 sq. ft.
For the trailing twelve month period ended March 31, 2016, tenants at the Birch Run Premium Outlets Property reported sales and occupancy cost of approximately $331 PSF and 10.2%, respectively, with sales and occupancy cost for in-line tenants with less than 10,000 sq. ft. reported to be $344 PSF and 11.4%, respectively.
Environmental Matters.The Phase I environmental report dated December 11, 2015 recommended no further action at the Birch Run Premium Outlets Property other than to implement an operations and maintenance plan for asbestos, which is currently in place.
The Market. The Birch Run Premium Outlets Property is located within the village of Birch Run in Saginaw County, Michigan. The property is located halfway between the larger cities of Flint and Saginaw and serviced by Exit 144 and 136 along Interstate 75. According to a local business association, Exit 136 is the second busiest Exit on I-75 between Miami, Florida and Sault Ste. Marie, Michigan with over eight million visitors annually. In addition to be being home to Birch Run Premium Outlets Property, the local area also includes Birch Run Expo Center, Dixie Motor Speedway, Baja Acres, Candlelite Bowling, Shiawassee National Wildlife Refuge, Cinema Hollywood, Cass River, Historic Bridgeport Bridge over the Cass River and the Bridgeport Historic Village.
Birch Run’s downtown and the Bavarian Village of Frankenmuth have a distinctive variety of retailers. According to the appraisal, more than two million visitors annually shop Frankenmuth’s Christmas store, Bronner’s CHRISTmas Wonderland, which features 96,000 sq. ft. of holiday lights, decorations and collectibles. The area is home to a number of large antique malls as well, featuring thousands of sq. ft. antiques.
The primary trade area of the Birch Run Premium Outlets Property is an approximate 25-mile radius. Within the 25-mile radius of the Birch Run Premium Outlets Property, the 2015 average income is $55,860 with a population of approximately 647,503. The Birch Run Premium Outlets Property is the only outlet center within a 40-mile radius. Furthermore, the Birch Run Premium Outlets Property is situated along the main transportation route connecting metropolitan Detroit with northern Michigan, a vacation destination for thousands of metro-Detroiters. Additionally, Birch Run Premium Outlets Property has historically benefitted from an above average proportion of Canadian traffic. Birch Run Premium Outlets Property is located approximately 90 minutes from border crossings in Sarnia and Windsor, Ontario. Based on shopper intercept daily at guest services, management estimates Canadian traffic is now approximately 15% of the customer base.
The chart below summarizes the Birch Run Premium Outlets Property’s competitive set.
| Competitive Set(1) | ||||
| Name | Birch Run Premium Outlets Property | Great Lakes Crossing | Genesee Valley Center | Fashion Square Mall |
| Distance from Subject | NAP | 43.0 miles | 16.0 miles | 19.0 miles |
| Property Type | Anchored Retail | Outlet Center/Value Mega-mall | Super-Regional Center/Mall | Regional Center |
| Year Built / Renovated | 1985 / 1986-1996, 2005, 2013 | 1998 | 1970 / 2005 | 1972 / 2002 |
| Occupancy | 87.0%(2) | 99.0% | 99.0% | 98.0% |
| Size (Sq. Ft.) | 680,003(2) | 1,400,000 | 1,365,394 | 865,233 |
| Anchors / Major Tenants | Pottery Barn, V.F. Factory Outlet, Old Navy(2) | Bass Pro Shops, BB & B, Burlington, TJ Maxx | Barnes & Noble, Burlington Coat Factory, JCPenney, Macy’s, Sears | JCPenney, Sears |
| (1) | Source: Appraisal. |
| (2) | Based on the May 31, 2016 rent roll. |
A-3-62
12240 South Beyer Road Birch Run, MI 48415 | Collateral Asset Summary – Loan No. 6 Birch Run Premium Outlets | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $43,000,000 59.4% 2.90x 13.2% |
Cash Flow Analysis.
| Cash Flow Analysis | ||||||||||
| 2013 | 2014 | 2015 | T-12 5/31/2016 | U/W | U/W PSF | |||||
| Base Rent(1) | $13,508,217 | $14,068,055 | $14,968,085 | $15,100,718 | $14,477,405 | $21.29 | ||||
| Step Rents(2) | 0 | 0 | 0 | 0 | 308,551 | $0.45 | ||||
| Value of Vacant Space | 0 | 0 | 0 | 0 | 2,173,712 | $3.20 | ||||
| Gross Potential Rent | $13,508,217 | $14,068,055 | $14,968,085 | $15,100,718 | $16,959,668 | $24.94 | ||||
| Total Recoveries | 4,865,895 | 5,233,909 | 5,533,568 | 5,627,287 | 6,047,075 | $8.89 | ||||
| Total Other Income | 1,213,304 | 1,010,893 | 662,826 | 580,857 | 739,237 | $1.09 | ||||
| Less: Vacancy & Credit Loss(3) | (37,381) | (13,705) | (16,506) | (19,302) | (2,205,500) | ($3.24) | ||||
| Effective Gross Income | $19,550,035 | $20,299,152 | $21,147,973 | $21,289,560 | $21,540,481 | $31.68 | ||||
| Total Operating Expenses | 4,747,099 | 4,748,944 | 4,671,555 | 4,748,954 | 5,266,315 | $7.74 | ||||
| Net Operating Income | $14,802,936 | $15,550,208 | $16,476,418 | $16,540,606 | $16,274,165 | $23.93 | ||||
| TI/LC | 0 | 0 | 0 | 0 | 860,362 | 1.27 | ||||
| Capital Expenditures | 0 | 0 | 0 | 0 | 204,001 | 0.30 | ||||
| Net Cash Flow | $14,802,936 | $15,550,208 | $16,476,418 | $16,540,606 | $15,209,802 | $22.37 | ||||
| (1) | U/W Base Rent is based on the May 31, 2016 rent roll and includes temporary tenant rent of $110,000. |
| (2) | Step Rents are based on the contractual rent increases occurring between May 2016 and July 2017. |
| (3) | U/W Vacancy represents 13.0% of gross potential rent and is based on the in place vacancy rate. |
Property Management. The Birch Run Premium Outlets Property is managed by Simon Management Associates, LLC, a sponsor affiliate.
Lockbox / Cash Management. The Birch Run Premium Outlets Loan is structured with a hard lockbox and springing cash management. The borrower was required to send tenant direction letters to all tenants instructing them to deposit all rents and other payments into the lockbox account controlled by the lender. Provided no Lockbox Event (as defined below) exists, all funds in the lockbox account are swept weekly (or more frequently if required by borrower) to the borrower’s operating account. Upon the occurrence and during the continuance of a Lockbox Event, amounts on deposit in the clearing account are required to be swept to a cash management account established and maintained by the lender, and applied to payment of all required payments and reserves as set forth in the Birch Run Premium Outlets Loan documents.
A “Lockbox Event” will commence upon the occurrence of (i) an event of default, (ii) the bankruptcy of the borrower or the property manager or (iii) the DSCR based on a trailing four quarter basis falling below 1.10x for two consecutive quarters and will end upon (a) with respect to clause (i), such event of default is cured, (b) with respect to clause (ii), if caused by the bankruptcy of the property manager, if the borrower enters into a replacement management agreement with a qualified manager, and (c) with respect to clause (iii), the DSCR based on a trailing four quarter basis is at least 1.10x for two consecutive quarters.
Initial Reserves. None.
Ongoing Reserves. During the continuance of a DSCR Reserve Trigger Event (as defined below) or an event of default, the borrower is required to deposit monthly reserves on each payment date in an amount equal to (i) 1/12 of the estimated annual real estate taxes into a tax reserve account, provided that there is a failure to pay taxes before they are due or the failure to provide evidence that taxes have been paid, (ii) $17,000 into a replacement reserve account, subject to a cap of $408,002 and (iii) $70,875 into the TI/LC reserve account, subject to a cap of $1,701,010. In addition, during an event of default, or if borrower has not provided satisfactory evidence that a reasonably acceptable blanket policy is in place, borrower will be required to deposit 1/12 of the estimated annual insurance premiums into an insurance reserve account.
A “DSCR Reserve Trigger Event” will commence upon the occurrence of the DSCR based on a trailing four quarter basis falling below 1.20x for two consecutive quarters and will end upon the achievement of a DSCR of at least 1.20x for two consecutive quarters, provided no event of default is continuing.
Current Mezzanine or Subordinate Indebtedness. None.
Future Mezzanine or Subordinate Indebtedness Permitted. None.
A-3-63
12240 South Beyer Road Birch Run, MI 48415 | Collateral Asset Summary – Loan No. 6 Birch Run Premium Outlets | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $43,000,000 59.4% 2.90x 13.2% |
A-3-64
12240 South Beyer Road Birch Run, MI 48415 | Collateral Asset Summary – Loan No. 6 Birch Run Premium Outlets | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $43,000,000 59.4% 2.90x 13.2% |
A-3-65
3001 Dallas Parkway Frisco, TX 75034 | Collateral Asset Summary – Loan No. 7 Hall Office Park 16 | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $42,000,000 74.8% 1.41x 8.9% |
A-3-66
3001 Dallas Parkway Frisco, TX 75034 | Collateral Asset Summary – Loan No. 7 Hall Office Park 16 | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $42,000,000 74.8% 1.41x 8.9% |
| Mortgage Loan Information | |
| Loan Seller: | GACC |
| Loan Purpose: | Refinance |
| Sponsor: | Hall Phoenix/Inwood Ltd. |
| Borrower: | Hall 3001 Dallas, LLC |
| Original Balance: | $42,000,000 |
| Cut-off Date Balance: | $42,000,000 |
| % by Initial UPB: | 6.0% |
| Interest Rate: | 4.0800% |
| Payment Date: | 1stof each month |
| First Payment Date: | September 1, 2016 |
| Maturity Date: | August 1, 2026 |
| Amortization: | 360 months |
| Additional Debt: | None |
| Call Protection: | L(24), D(90), O(6) |
| Lockbox / Cash Management: | Hard / Springing |
| Reserves(1) | ||
| Initial | Monthly | |
| Taxes: | $520,882 | $74,442 |
| Insurance: | $0 | Springing |
| Replacement: | $0 | $4,044 |
| TI/LC: | $0 | $32,589 |
| Outstanding TI/LC: | $2,329,231 | NAP |
| Free Rent: | $1,200,786 | NAP |
| Prepaid Rent: | $120,479 | NAP |
| Tax Abatement: | $731,841 | NAP |
| Lease Sweep: | $0 | Springing |
| Financial Information | ||
| Cut-off Date Balance / Sq. Ft.: | $216 | |
| Balloon Balance / Sq. Ft.: | $172 | |
| Cut-off Date LTV(2): | 74.8% | |
| Balloon LTV(2): | 59.6% | |
| Underwritten NOI DSCR: | 1.53x | |
| Underwritten NCF DSCR: | 1.41x | |
| Underwritten NOI Debt Yield: | 8.9% | |
| Underwritten NCF Debt Yield: | 8.2% | |
| Underwritten NOI Debt Yield at Balloon: | 11.1% | |
| Underwritten NCF Debt Yield at Balloon: | 10.3% | |
| Property Information | ||
| Single Asset / Portfolio: | Single Asset | |
| Property Type: | Suburban Office | |
| Collateral: | Fee Simple | |
| Location: | Frisco, TX | |
| Year Built / Renovated: | 2014 / NAP | |
| Total Sq. Ft.: | 194,133 | |
| Property Management: | Hall Financial Group, Ltd. | |
| Underwritten NOI: | $3,719,640 | |
| Underwritten NCF: | $3,436,507 | |
| Appraised Value(2): | $56,130,017 | |
| Appraisal Date: | June 30, 2016 | |
| Historical NOI(3) | ||
| Most Recent NOI: | NAP | |
| 2015 NOI: | NAP | |
| 2014 NOI: | NAP | |
| 2013 NOI: | NAP | |
| Historical Occupancy(3) | ||
| Most Recent Occupancy(4): | 95.1% (July 22, 2016) | |
| 2015 Occupancy: | NAP | |
| 2014 Occupancy: | NAP | |
| 2013 Occupancy: | NAP | |
| (1) | See “Initial Reserves” and “Ongoing Reserves” herein. |
| (2) | The Appraised Value takes into account that the scheduled outstanding tenant improvement, leasing commission, rent reserves, and rent abatement costs are reserved. Based on “As-Is” Appraised Value excluding the upfront reserves, the Hall Office Park 16 Loan has a Cut-Off Date LTV of 72.9%. |
| (3) | Historic NOI and Historic Occupancy figures are not available because the property was built in 2014 and stabilized in 2016. |
| (4) | Most Recent Occupancy includes two tenants not yet in occupancy (combined 50,702 sq. ft., 26.1% of NRA) with all unfunded landlord obligations reserved at loan origination. These include (i) Jamba Juice (25,381 sq. ft., 13.1% NRA) which has an executed lease commencing in October 2016 to relocate its headquarters location to Hall Office Park 16 Property and (ii) Paycor’s expansion space (25,321 sq. ft., 13.0% NRA) which commenced its lease term in June 2016 and the tenant is expected to take occupancy of this space effective August 2016. Excluding the non-occupied space, the Hall Office Park 16 Property is 69.0% occupied. |
A-3-67
3001 Dallas Parkway Frisco, TX 75034 | Collateral Asset Summary – Loan No. 7 Hall Office Park 16 | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $42,000,000 74.8% 1.41x 8.9% |
| Tenant Summary | |||||||
Tenant | Ratings (Fitch/Moody’s/S&P) | Net Rentable Area (Sq. Ft.) | % of Net Rentable Area | U/W Base Rent PSF | % of Total U/W Base Rent | Lease Expiration | |
| Paycor(1) | NR/NR/NR | 37,199 | 19.2% | $31.84 | 21.2% | 9/30/2023 | |
| Jamba Juice(2) | NR/NR/NR | 25,381 | 13.1% | $32.00 | 14.5% | 3/31/2027 | |
| Imagine Communications(3) | NR/NR/NR | 24,896 | 12.8% | $30.00 | 13.3% | 2/14/2022 | |
| Amica Insurance(4) | NR/NR/NR | 24,896 | 12.8% | $28.19 | 12.5% | 3/31/2023 | |
| Workday(5) | NR/NR/NR | 17,167 | 8.8% | $31.00 | 9.5% | 5/31/2021 | |
| Subtotal / Wtd. Avg. | 129,539 | 66.7% | $30.71 | 71.1% | |||
| Remaining Office Tenants(6) | 55,169 | 28.4% | $31.12 | 28.9% | |||
| Occupied Total / Wtd. Avg. | 184,708 | 95.1% | $30.82 | 100.0% | |||
| Vacant | 9,425 | 4.9% | |||||
| Total / Wtd Avg. | 194,133 | 100.0% | |||||
| (1) | Paycor has one, five-year renewal option and no termination options. |
| (2) | Jamba Juice has one, five-year renewal option. In addition, the tenant may terminate its lease effective April 2024 with 12 months’ notice. |
| (3) | Imagine Communications has one, five-year extension option and no termination options. |
| (4) | Amica Insurance has a one-time right to terminate its lease at any time on October 31, 2020, with nine months’ notice. Amica Insurance has two, five-year extension options. |
| (5) | Workday has one, three-year extension option and no termination options. |
| (6) | U/W Base Rent PSF for the Remaining Office Tenants excludes the 3,176 sq. ft. boardroom/tenant lounge/wine storage amenity space. |
| Lease Rollover Schedule(1) | ||||||||
| Year | # of Leases Expiring | Total Expiring Sq. Ft. | % of Total Sq. Ft. Expiring | Cumulative Sq. Ft. Expiring | Cumulative % of Sq. Ft. Expiring | Annual U/W Base Rent PSF | % U/W Base Rent Rolling | Cumulative % of U/W Base Rent |
| MTM | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2016 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2017 | 1 | 2,044 | 1.1% | 2,044 | 1.1% | $32.00 | 1.2% | 1.2% |
| 2018 | 1 | 2,238 | 1.2% | 4,282 | 2.2% | $32.00 | 1.3% | 2.4% |
| 2019 | 2 | 3,898 | 2.0% | 8,180 | 4.2% | $32.00 | 2.2% | 4.7% |
| 2020 | 4 | 9,651 | 5.0% | 17,831 | 9.2% | $30.80 | 5.3% | 10.0% |
| 2021 | 4 | 31,069 | 16.0% | 48,900 | 25.2% | $31.04 | 17.2% | 27.2% |
| 2022 | 2 | 26,483 | 13.6% | 75,383 | 38.8% | $29.28 | 13.9% | 41.1% |
| 2023 | 6 | 74,614 | 38.4% | 149,997 | 77.3% | $30.70 | 40.9% | 82.0% |
| 2024 | 0 | 0 | 0.0% | 149,997 | 77.3% | $0.00 | 0.0% | 82.0% |
| 2025 | 0 | 0 | 0.0% | 149,997 | 77.3% | $0.00 | 0.0% | 82.0% |
| 2026 | 1 | 6,154 | 3.2% | 156,151 | 80.4% | $31.50 | 3.5% | 85.5% |
| Thereafter(2) | 3 | 28,557 | 14.7% | 184,708 | 95.1% | $32.00 | 14.5% | 100.0% |
| Vacant | NAP | 9,425 | 4.9% | 194,133 | 100.0% | NAP | NAP | |
| Total / Wtd. Avg.(2) | 24 | 194,133 | 100.0% | $30.82 | 100.0% | |||
| (1) | Certain tenants have lease termination options that may become exercisable prior to the originally stated expiration date of the tenant lease and that are not considered in the lease rollover schedule. |
| (2) | Thereafter and Total / Wtd. Avg. categories include the 3,176 sq. ft. boardroom/tenant lounge/wine storage amenity space, except for U/W Base Rent, which excludes this space in its denominator. |
A-3-68
3001 Dallas Parkway Frisco, TX 75034 | Collateral Asset Summary – Loan No. 7 Hall Office Park 16 | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $42,000,000 74.8% 1.41x 8.9% |
The Loan. The Hall Office Park 16 loan (the “Hall Office Park 16 Loan”) is a ten-year fixed-rate loan secured by the borrower’s fee simple interest in a newly built Class A office building totaling 194,133 sq. ft. located in the Hall Office Park complex at 3001 Dallas Parkway in Frisco, Texas (the “Hall Office Park 16 Property”). The Hall Office Park 16 Loan has an original principal balance of $42.0 million and amortizes on a 30-year schedule. The Hall Office Park 16 Loan accrues interest at a fixed rate equal to 4.0800%. Loan proceeds were used to retire existing debt of approximately $20.1 million, fund reserves of approximately $4.9 million, pay closing costs of approximately $0.3 million and return approximately $16.7 million of equity to the sponsor. Based on the appraised value of $56.1 million, which takes into account that the scheduled outstanding tenant improvement, leasing commission, rent reserves, and rent abatement costs are reserved, the Cut-off Date LTV is 74.8% and the Balloon LTV is 59.6%. The most recent construction financing of the Hall Office Park 16 Property was not included in a securitization.
| Sources and Uses | ||||||
| Sources | Proceeds | % of Total | Uses | Proceeds | % of Total | |
| Loan Amount | $42,000,000 | 100.0% | Loan Payoff | $20,145,352 | 48.0% | |
| Reserves | 4,903,219 | 11.7% | ||||
| Closing Costs | 255,454 | 0.6% | ||||
| Return of Equity | 16,695,974 | 39.8% | ||||
| Total Sources | $42,000,000 | 100.0% | Total Uses | $42,000,000 | 100.0% | |
The Borrower / Sponsor. The borrower, Hall 3001 Dallas, LLC, is a single purpose Delaware limited liability company structured to be bankruptcy-remote, with two independent directors in its organizational structure. The sponsor of the borrower is Hall Phoenix/Inwood Ltd.
Hall Phoenix/Inwood Ltd. is controlled by Craig Hall, the president of Hall Financial Group, a diversified holdings company located in Dallas, Texas. Founded in 1968, the Hall Financial Group has been involved in the development and creation of several businesses including active operations in commercial real estate development, ownership and management, structured finance lending for real estate and other areas, vineyards and wineries, and oil and gas. Since its founding, Hall Financial Group has owned and operated approximately 100,000 apartment units and more than five million sq. ft. of office space. Hall Financial Group recently completed their newest project in July 2016, KPMG Plaza, an 18-story, 500,000 sq.ft. office building in the Dallas Arts District.
The Property.The Hall Office Park 16 Property is a Class A, LEED Certified, eight-story office building located within the Hall Office Park complex in Frisco, Texas. The property, which totals 194,133 sq. ft. on a 6.5-acre site, is the newest building in the Hall Office Park complex, a 16-building, 162-acre master planned office park built between 1997 and 2014. The Hall Office Park development includes an on-site fitness center, a conference center, a bank, food service, courtesy patrols, a full-time concierge, webcasting and videoconferencing facilities, a service retail center and on-site childcare. Other amenities include on-site car detailing, personal care services, errand-running service, grocery delivery and laundry pickup. The office park is located on the Dallas North Tollway, a primary north/south artery in the region, just north of Highway 121. The location is approximately 25 minutes from the Dallas central business district and approximately 20 minutes from the DFW International Airport.
The Hall Office Park 16 Property was built in 2014 at a cost basis of approximately $49.0 million without preleasing. Within two years of delivery the property was leased to 22 tenants with average lease term of 7.1 years to its occupancy level of 95.1%, as of July 22, 2016. The property features 10 foot ceilings with floor to ceiling glass, a double glass door entrance and Dallas North Tollway frontage and access. Building amenities include a boardroom, tenant lounge with wine storage, a full service deli/coffee shop, outdoor seating and surface and covered executive parking for 630 spaces, which equates to 3.25 spaces per 1,000 square foot of the NRA.
The sponsor entered into tax abatement “Chapter 380 Agreements” with the City of Frisco, Texas providing for a 50% tax abatement of the annual ad valorem taxes applicable to the Hall Office Park 16 Property effective January 1, 2015. The tax abatement continues for the earlier of (i) 10 years or (ii) upon an aggregate amount of $800,000 having been abated. The appraiser projected the expiration of the tax abatement to be in December 2022, when the $800,000 cumulative abated grant is reached. A $600,000 portion of the appraised value is attributed to the Chapter 380 Agreement. GACC underwriting reflects a 15-year, straight-line average of the tax expense, which assumes a tax abatement benefit through year 10 for the Hall Office Park 16 Loan.
Environmental Matters. The Phase I environmental reports dated June 29, 2016 recommended no further action at the Hall Office Park 16 Property.
A-3-69
3001 Dallas Parkway Frisco, TX 75034 | Collateral Asset Summary – Loan No. 7 Hall Office Park 16 | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $42,000,000 74.8% 1.41x 8.9% |
Major Tenants.
Paycor(37,199 sq. ft.; 19.2% of NRA; 21.2% of U/W Base Rent). Paycor offers cloud-based human resource (“HR”) services and software for small and medium-sized companies in the United States. Its platform provides solutions in the areas of recruiting and hiring, HR and benefits administration, payroll and tax compliance, time and attendance tracking, and reporting and analytics. The company’s solutions also include custom reporting, tax filing, 401(k) retirement services and workers compensation, among others. Paycor was founded in 1990 and is headquartered in Cincinnati, Ohio.
Paycor leased 11,878 sq. ft. in February 2015 and expanded in June 2016, leasing an additional 25,321 sq. ft. The tenant is expected to take occupancy of the expanded space in August 2016. Paycor has a rent abatement period from June 2016 until December 2016 for its original space and from June 2016 until February 2017 for its expansion space as well as an additional reduction of rent payment of $12,600 for the month of November 2016 as a one-time payment to offset certain parking charges. The borrower reserved $124,719.00 at origination of the Mortgage Loan with respect to Paycor, Inc.’s original space and $405,136.00 with respect to Paycor, Inc.’s expansion space. The tenant uses the Hall Office Park 16 space as a base to provide HR, payroll and timekeeping services for Dallas based organizations. Upon expiration of the two coterminous leases in September 2023, Paycor has one, five-year renewal option and no termination options.
Jamba Juice Inc.(“Jamba Juice”) (25,381 sq. ft.; 13.1% of NRA; 14.5% of U/W Base Rent). Jamba Juice intends to move its corporate headquarters to the Hall Office Park 16 Property. The company, through its subsidiary, Jamba Juice Company, owns, operates, and franchises Jamba Juice stores. Its restaurants provide specialty food and beverage offerings. The company also licenses its Jamba Juice brand name to sell consumer packaged goods through retail channels. As of December 29, 2015, the company had 893 juice stores in the United States, which included 70 company-owned and operated stores, as well as 748 franchisee-owned and operated stores in the United States; and 75 franchised stores internationally under the Jamba Juice brand. The company was founded in 1990 in Emeryville, California. As of December 29, 2015, Jamba Juice had approximately $69.5 million in assets. Consolidated net income for the full year ended December 29, 2015 was approximately $9.4 million, which is up from approximately $3.6 million loss for the full year ended December 31, 2014.
Jamba Juice entered into a lease for 25,381 sq. ft. in June 2016. The tenant intends to relocate its corporate office headquarters from Emeryville, California to the Hall Office Park 16 Property and intends to employ approximately 100 employees at the site, which will feature a 6,000 sq. ft. test kitchen and store front. Jamba Juice is expected to take occupancy and commence paying rent on October 1, 2016. Jamba Juice is permitted to pay abated rent for the first six months following the date that it commences paying rent, which rent abatement may not extend past March 31, 2017. The borrower reserved $609,144 at origination of the Mortgage Loan with respect to Jamba Juice. Upon expiration in March 2027, Jamba Juice has one, five-year renewal option. In addition, Jamba Juice has the option to terminate its lease effective April 2024 with 12-months’ notice. The termination fee includes four months of rent (at the rate immediately following the termination date) and any unamortized leasing costs.
Imagine Communications(24,896 sq. ft.; 12.8% of NRA; 13.3% of U/W Base Rent). Imagine Communications is headquartered at the Hall Office Park 16 Property and is a market share leader of media software, networking and over-the-air solutions serving 80% of the world’s top media companies and managing approximately $46 billion in annual ad sales. The company enables approximately 25,000 video channels globally including notable clients such as DirectTV, Discovery Chanel and BBC, among others. The company was founded more than 50 years ago and has 30 locations around the world employing approximately 1,100 employees. The tenant’s lease commenced in September 2015 and continues through February 2022. The tenant also has one five-year renewal option.
The Market. TheHall Office Park 16 Property is located within the Dallas Metropolitan Statistical Area (“DAL MSA”), which the U.S. Census Bureau estimated was one of the fastest growing metro areas, with employment growing 4.6% between 2014 and 2015, which is more than twice the national pace and population increasing 2.1% to its current level of 4.7 million as of 2015. According to an industry report, the DAL MSA is expected to expand further in 2016, with growth in total employment well above the national average, with managerial and professional services leading the way on the back of a number of major corporate relocations. Additionally, the high concentration of corporate headquarters, technology businesses, banking, distribution infrastructure and above average population growth are expected to contribute to above average performance over the long term.
The Hall Office Park 16 Property is located in the city of Frisco, an affluent and rapidly growing suburb of Dallas, which from 2000 to 2009 was the fastest growing city in the United States, according to an industry study. As of June 1, 2014, the city had an estimated population of 140,220. Frisco serves as a community for many professionals who work in the DAL MSA. Development within the local market area varies from single-family residential dwellings to multi-family communities, golf courses, sports venues, a regional mall and local retail establishments, most of which were built since 1995. The local market area is approximately 70 percent built out and still within the growth phase of its economic life cycle according to the appraiser.
The City of Frisco is currently undergoing a transformation and has a billion dollars’ worth of new development underway or proposed along the Dallas North Tollway, an area which is being dubbed as the “$5 Billion Mile”. Area developments include four notable projects over approximately 500-acres that are expected to collectively bring over five million sq. ft. of commercial development, including high-end class A office space, 2.0 million sq. ft. of retail and entertainment space, over 600 hotel rooms, and thousands of apartments within
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3001 Dallas Parkway Frisco, TX 75034 | Collateral Asset Summary – Loan No. 7 Hall Office Park 16 | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $42,000,000 74.8% 1.41x 8.9% |
luxury condo towers. Of note is The Star in Frisco, a 91-acre mixed-use development with Dallas Cowboys world headquarters, a 12,000-seat indoor stadium, 1.7 million sq. ft. of commercial development and 480 hotel rooms within two hotels, which is expected to come online in 2016. Frisco further benefits from line-of-site proximity to the new Toyota, Liberty Mutual, and FedEx campuses currently under construction in the city limits of Plano “Legacy West” development, which is expected to bring an additional 12,000 employees and their families to the immediate area. Toyota is making this area its North American headquarters and will relocate up to 4,000 employees to Frisco.
The Hall Office Park 16 Property is located in the Legacy/Frisco submarket which is bound by President George Bush Turnpike (SH 190) to the south, FM 423 to the west, Coit Road to the east and U.S. Highway 380 to the north. The first quarter of 2016 Class A submarket average rent was $34.36 PSF and the Class A submarket direct vacancy rate of 13.4%. In addition, the Class A submarket had 318,732 sq. ft. of positive absorption in first quarter of 2016. The submarket is one of the larger non-CBD submarkets in the Dallas office market and has the second highest rental rate, only behind the Preston Center/Near N Dallas submarket, according to an industry report.
The appraisal identified the six comparable office leases, which range in size from 6,210 sq. ft. to 56,330 sq. ft. located in Class A buildings. The comparable leases exhibit a range in rents from $26.53 to $40.98 PSF, with a weighted average of $32.46 PSF The appraiser concluded a market rent of $32.00 PSF, compared to the $30.47 PSF rents in place as of July 22, 2016.
| Office Lease Comparables(1) | |||||||||
| Property | NRA (SF)(2) | Year Built | Tenant Name(2) | Lease NRA (SF) (2) | Term (Years) (2) | Rental Rate (PSF) (2) | Lease Type | Free Rent (Months) | TI’s (PSF) |
| Hall Office Park 16 Property | 194,133 | 2014 | Various | 194,133 | 7.1 | $30.82 | Modified | 0 to 12 | $0.00 to $45.00 |
| Granite Park V | 306,200 | 2015 | Elevate | 13,167 | 7.0 | $37.50 | Modified | 0 | $45.00 |
| Mansell Overlook 100 | 209,179 | 2002 | Service Now | 7,219 | 7.0 | $34.75 | Modified | 4 | $37.00 |
| Lakeview III at Sanctuary Park | 97,015 | 1998 | USMD | 6,120 | 3.0 | $27.50 | Modified | 0 | $5.00 |
| Mansell Overlook 200 | 147,868 | 1999 | ThyssenKrupp | 25,422 | 3.0 | $26.53 | Modified | 0 | None |
| 600 Northwinds | 142,761 | 2001 | Harness Dickey | 6,891 | 3.0 | $27.50 | Modified | 2 | $9.00 |
| 200 North Point Center East | 340,927 | 2014 | Confidential | 56,330 | 11.0 | $40.98 | Modified | 6 | $50.00 |
| Total / Wtd. Avg. (3) | 1,243,950 | 115,149 | 5.7 | $32.46 | 2 | $29.20 | |||
| (1) | Source: Appraisal |
| (2) | Source: rent roll dated July 22, 2016 for Hall Office Park 16 Property. |
| (3) | Total / Wtd. Avg. excludes the Hall Office Park 16 Property. |
Cash Flow Analysis.
| Cash Flow Analysis | ||
| U/W | U/W PSF | |
| Base Rent(1) | $5,595,588 | $28.82 |
| Step Rents(2) | $70,314 | $0.36 |
| Value of Vacant Space | $301,600 | $1.55 |
| Gross Potential Rent | $5,967,502 | $30.74 |
| Total Recoveries | 377,202 | 1.94 |
| Other Income | 105,317 | 0.54 |
| Less: Vacancy(3) | (516,002) | (2.66) |
| Effective Gross Income | $5,934,019 | $30.57 |
| Total Operating Expenses | 2,214,379 | 11.41 |
| Net Operating Income | $3,719,640 | $19.16 |
| TI/LC | 234,600 | 1.21 |
| Capital Expenditures | 48,533 | 0.25 |
| Net Cash Flow | $3,436,507 | $17.70 |
| (1) | U/W Base Rent is based on the July 22, 2016 rent roll. |
| (2) | Step Rents are based on the contractual rent increases through July 2017. |
| (3) | U/W Vacancy represents a vacancy of 8.0%. The Hall Office Park 16 Property is 95.1% occupied as of July 22, 2016. |
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3001 Dallas Parkway Frisco, TX 75034 | Collateral Asset Summary – Loan No. 7 Hall Office Park 16 | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $42,000,000 74.8% 1.41x 8.9% |
Property Management. The Hall Office Park 16 Property is managed by Hall Financial Group, Ltd., a borrower affiliate.
Lockbox / Cash Management. The Hall Office Park 16 Property is structured with a hard lockbox and springing cash management. At origination, the borrower delivered tenant direction letters requiring all rents to be deposited directly by tenants into a clearing account controlled by the lender. Provided no Trigger Period (as defined below) is continuing, all amounts on deposit in the clearing account are required to be swept daily into the borrower’s operating account. During a Trigger Period, all amounts on deposit in the clearing account are required to be swept daily into a deposit account and applied and disbursed in accordance with the loan documents.
A “Trigger Period” will occur upon (i) an event of default, (ii) the debt service coverage ratio falling below 1.20x as of the last day of any calendar quarter, or (iii) the commencement of a Lease Sweep Period (as defined below). A Trigger Period will continue until such time as (a) with respect to clause (i), the event of default has been cured, (b) with respect to clause (ii), the debt service coverage ratio is at least 1.25x for two consecutive quarters and (c) with respect to clause (iii) such Lease Sweep Period has ended.
A “Lease Sweep Period” will commence upon the earlier of (i) the date that is nine (9) months prior to the earliest stated expiration of a Lease Sweep Lease (as defined below) or nine (9) months prior to the maturity date if the earliest stated expiration of a Lease Sweep Lease occurs within nine (9) months after the maturity date; (ii) the date that the Lease Sweep Lease is surrendered, cancelled or terminated prior to its then current expiration date or receipt by the borrower of notice from any tenant under a Lease Sweep Lease that it intends to surrender, cancel or terminate its lease, (iii) the date that the tenant under the Lease Sweep Lease discontinues its business or give notice that it intends to discontinue its business, (iv) a default under a Lease Sweep Lease beyond any applicable notice and cure period, or (v) a bankruptcy or insolvency proceeding of any tenant under a Lease Sweep Lease.
A “Lease Sweep Lease” is the Paycor lease or any replacement lease or leases which individually comprise greater than 30,000 rentable sq. ft.
Initial Reserves. At origination, the borrower deposited (i) $520,882 into a tax reserve account, (ii) $2,329,231 into an outstanding TI/LC reserve account, (iii) $1,200,786 into a free rent reserve, (iv) $120,479 into a prepaid rent reserve and (v) $731,841 into a tax abatement reserve.
The $2,329,231 outstanding TI/LC reserve is comprised of $1,952,178 for outstanding tenant improvements (“TI”) and $377,053 for outstanding leasing commission (“LC”), which are comprised of (a) $1,142,145 outstanding TI and $195,592 outstanding LC for Jamba Juice, (b) $796,175 outstanding TI and $140,827 outstanding LC for Paycor, (c) $13,858 outstanding TI for Murphy’s Deli, (d) $35,203 outstanding LC for Preferred Imagining and (e) $5,431 outstanding LC for Xcelerate Auto. The outstanding TI reserve associated with the Jamba Juice and the Paycor space will be released to the borrower provided, the borrower provides an executed estoppels executed by the respective tenants.
The $1,200,786 free rent reserve is comprised of (a) $609,144 for nine months of Jamba Juice’s free rent from August 2016 through and including April 2017, (b) $529,855 six months of Paycor’s free rent from August 2016 through and including January 2017, (c) $56,301 for three months of Preferred Imagining free rent from August 2016 through and including October 2016 and (d) $5,486 for one month of buku Modernist Cuisine free rent for August 2016.
The $120,479 prepaid rent reserve is comprised of (a) $67,683 for the seventh month of the Jamba Juice rent, (b) $47,223 for the August 2016 through December 2016 On Hold Media rent and (c) $5,573 for the sixth month of the buku Modernist Cuisine prepaid rent
Ongoing Reserves. The borrower is required to deposit on a monthly basis reserves of (i) 1/12 of the estimated annual real estate taxes, which currently equates to $74,442, into the tax reserve account, (ii) unless an acceptable blanket insurance policy is in place, 1/12 of the estimated insurance premiums into an insurance account, (iii) $4,044 into the replacement reserve account, subject to a cap of $97,056 and (iv) $32,589 into the TI/LC reserve account. The TI/LC reserve account is subject to a cap of $1,000,000. Additionally, during the continuance of a Lease Sweep Period, all excess cash will be transferred into a lease sweep account.
Current Mezzanine or Subordinate Indebtedness. None.
Future Mezzanine or Subordinate Indebtedness Permitted. None.
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3001 Dallas Parkway Frisco, TX 75034 | Collateral Asset Summary – Loan No. 7 Hall Office Park 16 | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $42,000,000 74.8% 1.41x 8.9% |
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3001 Dallas Parkway Frisco, TX 75034 | Collateral Asset Summary – Loan No. 7 Hall Office Park 16 | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $42,000,000 74.8% 1.41x 8.9% |
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555 West Fifth Street; 350 South Figueroa Street Los Angeles, CA 90013; Los Angeles, CA 90071 | Collateral Asset Summary – Loan No. 8 Gas Company Tower & | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $40,000,000 23.6% 5.23x 19.9% |
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555 West Fifth Street; 350 South Figueroa Street Los Angeles, CA 90013; Los Angeles, CA 90071 | Collateral Asset Summary – Loan No. 8 Gas Company Tower & | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $40,000,000 23.6% 5.23x 19.9% |
| Mortgage Loan Information | |
| Loan Seller: | GACC |
| Loan Purpose: | Refinance |
| Sponsor: | Brookfield DTLA Holdings LLC |
| Borrowers: | Maguire Properties-555 W. Fifth, LLC; Maguire Properties - 350 S. Figueroa, LLC |
| Original Balance(2): | $40,000,000 |
| Cut-off Date Balance(2): | $40,000,000 |
| % by Initial UPB: | 5.7% |
| Interest Rate: | 3.4727% |
| Payment Date: | 6thof each month |
| First Payment Date: | September 6, 2016 |
| Maturity Date: | August 6, 2021 |
| Amortization: | Interest Only |
| Additional Debt(2)(3): | $104,000,000Pari Passu Debt; $175,000,000 Subordinate Secured Debt; $131,000,000 Mezzanine Debt |
| Call Protection(4): | L(12), YM1(43), O(5) |
| Lockbox / Cash Management(5): | Hard (Office); Soft (Parking) / Springing |
| Reserves(6) | ||
| Initial | Monthly | |
| Taxes: | $2,822,545 | $564,509 |
| Insurance: | $0 | Springing |
| Replacement: | $71,744 | $35,872 |
| TI/LC: | $21,033,588 | $171,541 |
| Outstanding Free Rent: | $4,478,325 | NAP |
| WeWork Lease: | $1,000,000 | NAP |
| SCGC Lease: | $220,760 | NAP |
| Jams and Latham Lease: | $0 | $14,150 |
| Lease Sweep: | $0 | Springing |
| Financial Information | ||||
| Senior Notes(7) | Whole Loan(8) | Total Debt(9) | ||
| Cut-off Date Balance / Sq. Ft.: | $105 | $232 | $328 | |
| Balloon Balance / Sq. Ft.: | $105 | $232 | $328 | |
| Cut-off Date LTV: | 23.6% | 52.2% | 73.6% | |
| Balloon LTV: | 23.6% | 52.2% | 73.6% | |
| Underwritten NOI DSCR: | 5.66x | 2.55x | 1.44x | |
| Underwritten NCF DSCR: | 5.23x | 2.36x | 1.34x | |
| Underwritten NOI Debt Yield: | 19.9% | 9.0% | 6.4% | |
| Underwritten NCF Debt Yield: | 18.4% | 8.3% | 5.9% | |
| Underwritten NOI Debt Yield at Balloon: | 19.9% | 9.0% | 6.4% | |
| Underwritten NCF Debt Yield at Balloon: | 18.4% | 8.3% | 5.9% | |
| Property Information | |
| Single Asset / Portfolio: | Single Asset |
| Property Type: | CBD Office; Parking Garage |
| Collateral: | Fee Simple |
| Location: | Los Angeles, CA |
| Year Built / Renovated: | 1991 / 2010-2015 |
| Total Sq. Ft.: | 1,372,329 |
| Property Management: | Brookfield Properties Management (CA) Inc. (Office); ABM Onsite Services - West, Inc. (Parking Garage) |
| Underwritten NOI: | $28,671,885 |
| Underwritten NCF: | $26,521,151 |
| Appraised Value: | $611,000,000 |
| Appraisal Date: | June 21, 2016 |
| Historical NOI | |
| Most Recent NOI: | $21,847,155 (T-12 May 31, 2016) |
| 2015 NOI: | $20,834,820 (December 31, 2015) |
| 2014 NOI: | $17,512,942 (December 31, 2014) |
| 2013 NOI: | $22,679,917 (December 31, 2013) |
| Historical Occupancy | |
| Most Recent Occupancy: | 83.0% (June 1, 2016) |
| 2015 Occupancy: | 81.0% (December 31, 2015) |
| 2014 Occupancy: | 80.0% (December 31, 2014) |
| 2013 Occupancy: | 72.1% (December 31, 2013) |
| (1) | Moody’s/Fitch/DBRS provided the above ratings for the Gas Company Tower mortgage loan in the context of its inclusion in the mortgage pool. On a standalone basis, Fitch rated the Gas Company Tower & World Trade Center Parking Garage mortgage loan “A”. |
| (2) | The Original Balance and Cut-off Date Balance of $40.0 million represents the senior non-controlling Note A-1-C which, together with the remainingpari passu Senior Notes with an aggregate original principal balance of $144.0 million and the Junior Notes with an aggregate original principal balance of $175.0 million, comprises the Gas Company Tower Whole Loan with an aggregate original principal balance of $319.0 million. For additional information regarding thepari passu Senior Notes and Junior Notes, see “The Loan” and “Current Mezzanine or Subordinate Indebtedness” herein. |
| (3) | See “Current Mezzanine or Subordinate Indebtedness” herein. |
| (4) | The borrower has the option of prepayment in whole or part subject to the payment of a prepayment fee in an amount equal to the greater of 1.0% of the unpaid principal balance or the yield maintenance amount. The Whole Loan is prepayable in whole or part without payment of any penalty or premium on or after April 6, 2021. |
| (5) | See “Lockbox / Cash Management” herein. |
| (6) | See “Initial Reserves” and “Ongoing Reserves” herein. |
| (7) | DSCR, LTV, Debt Yield and Balance / Sq. Ft. calculations are based on the Senior Notes only, which have an aggregate principal balance of $144.0 million. |
| (8) | DSCR, LTV, Debt Yield and Balance / Sq. Ft. calculations are based on the Gas Company Tower Whole Loan only, which has an aggregate principal balance of $319.0 million, which includes $175.0 million of Junior Notes. |
| (9) | DSCR, LTV, Debt Yield and Balance / Sq. Ft. calculations are based on the Total Debt in the aggregate amount of $450.0 million, which includes a $175.0 million Junior Notes and a $131.0 million mezzanine loan. |
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555 West Fifth Street; 350 South Figueroa Street Los Angeles, CA 90013; Los Angeles, CA 90071 | Collateral Asset Summary – Loan No. 8 Gas Company Tower & | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $40,000,000 23.6% 5.23x 19.9% |
| Tenant Summary | |||||||
Tenant | Ratings (Fitch/Moody’s/S&P)(1) | Net Rentable Area (Sq. Ft.) | % of Net Rentable Area | U/W Base Rent PSF | % of Total U/W Base Rent | Lease Expiration | |
| Southern California Gas Co.(2) | A+/A1/A | 469,078 | 34.2% | $20.79 | 37.6% | Various(3) | |
| Sidley Austin (4) | NR/NR/NR | 164,674 | 12.0% | $23.21 | 14.7% | 12/31/2023 | |
| Deloitte(5) | NR/NR/NR | 112,028 | 8.2% | $23.50 | 10.1% | 1/31/2031 | |
| Latham & Watkins(6) | NR/NR/NR | 97,218 | 7.1% | $21.72 | 8.1% | 12/31/2020 | |
| WeWork(7) | NR/NR/NR | 92,493 | 6.7% | $27.00 | 9.6% | 7/31/2033(8) | |
| Subtotal / Wtd. Avg. | 935,491 | 68.2% | $22.25 | 80.2% | |||
| Other | 204,141 | 14.9% | $25.18 | 19.8% | |||
| Total / Wtd. Avg. Occupied | 1,139,632 | 83.0% | $22.78 | 100.0% | |||
| Vacant | 232,697 | 17.0% | |||||
| Total / Wtd. Avg. | 1,372,329 | 100.0% | |||||
| (1) | Certain ratings are those of the parent company whether or not the parent company guarantees the lease. |
| (2) | Southern California Gas Co. (“SCGC”) has four, 5-year extension options under its main lease for a minimum of six full contiguous floors, starting at either the top or bottom of SCGC’s rented floors upon written notice 12 months prior to the expiration at 95% of fair market rent. SCGC’s termination and contraction options are summarized under “Major Tenants” below. |
| (3) | SCGC is a tenant under three separate leases, the main lease, floor 22-23 lease and floor 28 lease. Pursuant to the main lease, SCGC leases approximately 385,057 sq. ft. with an expiration date of October 31, 2026. Pursuant to the floor 22-23 lease, SCGC leases approximately 56,014 sq. ft. with a lease expiration date of March 31, 2019. Pursuant to the floor 28 lease, SCGC leases approximately 28,007 sq. ft. with a lease expiration date of December 31, 2017. |
| (4) | Sidley Austin has two, 5-year extension options upon written notice at least 12 months prior to the expiration date at 95% of the fair market rent. Sidley Austin has a contraction right effective as of December 31, 2018 with notice by December 31, 2017. Contraction space can be one full floor or all of the tenant’s continuous space on any floor where the tenant leases a portion of the floor and will either be the uppermost or lowermost floor of Sidley Austin’s contiguous floors or any noncontiguous floor. The contraction fee is equal to the sum of (a) unamortized free rent, tenant improvement allowance, early refurbishment allowance, brokerage fees and commissions, and (b) three months of base rent and additional rent/pass through (estimated to be $827,017). |
| (5) | Deloitte has two, 5-year extension options upon written notice at least 12 months prior to the expiration date at fair market rent. Deloitte has a one-time right to contract up to one full floor of either the highest or lowest floor of the Deloitte space. Deloitte must exercise the right on or before November 30, 2021, which contraction becomes effective February 28, 2023. The contraction fee is equal to a sum of the unamortized concessions allocated to or applicable to such contraction space for tenant improvement allowances, leasehold improvements, any free rent and brokerage fees. |
| (6) | Latham & Watkins has one, 5-year extension option upon written notice at least 15 months prior to the expiration date at fair market rent. Latham & Watkins has no termination options. |
| (7) | WeWork has two, 5-year extension options upon written notice at least 18 months prior to the expiration date at fair market rent. WeWork has no termination options. |
| (8) | The WeWork lease expiration date will occur on the last day of the 204th month after the rent commencement date, which is currently scheduled to occur on July 31, 2033, subject to adjustment in accordance with the terms of the WeWork lease. |
| Lease Rollover Schedule(1) | ||||||||
| Year | # of Leases Expiring | Total Expiring Sq. Ft. | % of Total Sq. Ft. Expiring | Cumulative Sq. Ft. Expiring | Cumulative % of Sq. Ft. Expiring | Annual U/W PSF | % U/W Rolling | Cumulative % of U/W Base Rent |
| MTM | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2016 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2017 | 7 | 70,112 | 5.1% | 70,112 | 5.1% | $23.55 | 6.4% | 6.4% |
| 2018 | 4 | 28,779 | 2.1% | 98,891 | 7.2% | $29.59 | 3.3% | 9.6% |
| 2019 | 16 | 127,435 | 9.3% | 226,326 | 16.5% | $24.99 | 12.3% | 21.9% |
| 2020 | 15 | 97,218 | 7.1% | 323,544 | 23.6% | $21.72 | 8.1% | 30.0% |
| 2021 | 4 | 8,954 | 0.7% | 332,498 | 24.2% | $25.56 | 0.9% | 30.9% |
| 2022 | 0 | 0 | 0.0% | 332,498 | 24.2% | $0.00 | 0.0% | 30.9% |
| 2023 | 11 | 171,610 | 12.5% | 504,108 | 36.7% | $23.30 | 15.4% | 46.3% |
| 2024 | 1 | 12,924 | 0.9% | 517,032 | 37.7% | $22.77 | 1.1% | 47.5% |
| 2025 | 2 | 33,022 | 2.4% | 550,054 | 40.1% | $22.77 | 2.9% | 50.4% |
| 2026 | 25 | 385,057 | 28.1% | 935,111 | 68.1% | $20.14 | 29.9% | 80.2% |
| 2027 | 0 | 0 | 0.0% | 935,111 | 68.1% | $0.00 | 0.0% | 80.2% |
| Thereafter | 9 | 204,521 | 14.9% | 1,139,632 | 83.0% | $25.08 | 19.8% | 100.0% |
| Vacant | NAP | 232,697 | 17.0% | 1,372,329 | 100.0% | NAP | 0.0% | 100.0% |
| Total / Wtd. Avg. | 94 | 1,372,329 | 100.0% | $22.78 | 100.0% | |||
| (1) | Certain tenants have lease termination options that may become exercisable prior to the originally stated expiration date of the tenant lease that are not considered in the lease rollover schedule. |
A-3-78
555 West Fifth Street; 350 South Figueroa Street Los Angeles, CA 90013; Los Angeles, CA 90071 | Collateral Asset Summary – Loan No. 8 Gas Company Tower & | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $40,000,000 23.6% 5.23x 19.9% |
The Loan. The Gas Company Tower & World Trade Center Parking Garage loan (the “Gas Company Tower Loan”) is a fixed rate loan secured by the borrowers’ fee simple interests in (i) a 50-story, Class A office and retail building and a 979 stall on-site subterranean parking garage located at 555 West Fifth Street, Los Angeles, California (the “Gas Company Tower”) and (ii) the 1,186 stall World Trade Center Parking Garage located at 350 South Figueroa Street, Los Angeles, California (the “WTC Garage” and, together with Gas Company Tower, the “Mortgaged Properties” or the “Property”) with an original principal balance of $40.0 million. The Gas Company Tower Loan is evidenced by the non-controlling Note A-1-C and is a part of a $319.0 million whole loan that is evidenced by eight promissory notes: six senior notes with an aggregate original principal balance of $144.0 million (the “Senior Notes”) and two junior notes with an original principal balance of $175.0 million (the “Junior Notes” and, together with the Senior Notes, the “Gas Company Tower Whole Loan”). The Gas Company Tower Whole Loan was co-originated by Deutsche Bank AG, New York Branch (an affiliate of GACC) and Barclays Bank PLC (“Barclays”). Only the Gas Company Tower Loan will be included in the CD 2016-CD1 mortgage trust. Four of the Senior Notes with an aggregate original principal balance of $89.0 million along with the Junior Notes are expected to be contributed to the COMM 2016-GCT mortgage trust. One Senior Note with an original principal balance of $15.0 million is expected to be held by Barclays or an affiliate and contributed to one or more future securitizations.
The relationship between the holders of the Senior Notes and the Junior Notes will be governed by a co-lender agreement as described under“Description of the Mortgage Pool– The Whole Loans–Gas Company Tower & World Trade Center Parking Garage Whole Loan” in the Prospectus.
| Whole Loan Summary | |||||
| Note | Original Balance | Cut-off Date Balance | Note Holder | Controlling Piece | |
| A-1-C | $40,000,000 | $40,000,000 | CD 2016-CD1 | No | |
| A-1-S1, A-1-S2, A-1-S3, A-2-S | $89,000,000 | $89,000,000 | COMM 2016-GCT | Yes | |
| B-1, B-2 | $175,000,000 | $175,000,000 | COMM 2016-GCT | Yes | |
| A-2-C | $15,000,000 | $15,000,000 | Barclays | No | |
| Total | $319,000,000 | $319,000,000 | |||
The Gas Company Tower Loan has a 5-year term and pays interest only for the term of the loan. The Gas Company Tower Loan accrues interest at a fixed rate equal to 3.47270% and has a Cut-off Date Balance of $40.0 million. The Gas Company Tower Whole Loan proceeds, in addition to approximately $18.0 million of cash equity from the sponsor, were used to refinance existing debt of $458.0 million, fund approximately $29.6 million in upfront reserves and pay transaction costs of approximately $3.7 million. Based on the appraised value of $611.0 million as of June 21, 2016, the Cut-off Date LTV for the Senior Notes is 23.6%. The most recent prior financing of the Gas Company Tower was included in the JPMCC 2006-LP8 and WBCMT 2006-C28 securitizations.
| Sources and Uses | ||||||
| Sources | Proceeds | % of Total | Uses | Proceeds | % of Total | |
| Mortgage Loan | $319,000,000 | 64.9% | Refinance Existing Debt | $458,000,000 | 93.2% | |
| First Mezzanine Loan | $131,000,000 | 26.7% | Reserves | $29,626,962 | 6.0% | |
| Existing Reserves | $23,319,629 | 4.7% | Closing Costs | $3,657,687 | 0.7% | |
| Sponsor Equity | $17,965,020 | 3.7% | ||||
| Total Sources | $491,284,649 | 100.0% | Total Uses | $491,284,649 | 100.0% | |
The Borrowers / Sponsor. The borrowers, Maguire Properties-555 W. Fifth, LLC and Maguire Properties – 350 S. Figueroa, LLC, are each a single purpose Delaware limited liability company structured to be bankruptcy-remote with two independent directors in its organizational structure. The sponsor of the borrowers and the non-recourse carve-out guarantor is Brookfield DTLA Holdings LLC, which is approximately 47.3% owned and 100.0% controlled by Brookfield Office Properties Inc. and affiliates. The remaining interest in Brookfield DTLA Holdings LLC is owned by two sovereign wealth funds, each of which owns approximately 17.5% of Brookfield DTLA Holdings LLC, and a pension fund which owns the remaining approximately 17.7%.
Brookfield Office Properties Inc. is 100.0% owned by Brookfield Property Partners and Brookfield Asset Management Inc. Brookfield Property Partners is the real estate platform of Brookfield Asset Management. Brookfield Asset Management is a global alternative asset manager with over $240.0 billion of assets-under-management (“AUM”) as of March 31, 2016, concentrated in property, infrastructure, renewable energy and private equity. Founded in 1899, Brookfield Asset Management has 28,000 employees in over 100 offices in 20 different countries as of 2014.
Brookfield Property Partners (“Brookfield”) (NYSE: BPY) is a global commercial property company that owns, operates, and invests in best-in-class office, retail, multifamily, industrial, hotel, self-storage and triple net lease assets. Brookfield’s diversified portfolio includes interests in 428 office and retail properties encompassing approximately 277 million sq. ft., 206 industrial properties totaling over 54 million sq. ft., 39,500 multifamily units across 140 properties, 18,214 hotel rooms spread across 27 assets, over 300 properties of triple net leased automotive dealerships and 31 million sq. ft. of total office and multifamily developments. As of December 31, 2015,
A-3-79
555 West Fifth Street; 350 South Figueroa Street Los Angeles, CA 90013; Los Angeles, CA 90071 | Collateral Asset Summary – Loan No. 8 Gas Company Tower & | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $40,000,000 23.6% 5.23x 19.9% |
Brookfield reported total net operating income across its assets of $2.3 billion, FFO of $710.0 million and net income of $3.8 billion. As of March 31, 2016, Brookfield reported total assets of $66.3 billion.
The Property.The Gas Company Tower, constructed in 1991 and designed by Skidmore, Owings & Merrill, is a 50-story, approximately 1.4 million square foot, LEED Gold certified, Class A, office building with a 979 stall on-site subterranean parking garage located in the Los Angeles, California central business district (“Los Angeles CBD”), within the greater downtown Los Angeles County Market Area. The Gas Company Tower’s net rentable area (“NRA”) consists of approximately 1.3 million sq. ft. of office space, 10,436 sq. ft. of retail space and 44,044 sq. ft. of storage space. In addition, the Gas Company Tower includes 2,165 parking stalls (1.6 stalls per 1,000 NRA) comprised of a 979 stall on-site subterranean parking garage and the 1,186 stall WTC Garage, and offers tenants a complimentary shuttle to and from the WTC Garage. Additional amenities include a full-service cafeteria, Starbucks and a location adjacent to the Pershing Square metro station, which provides commuter rail service to Santa Monica and connectivity to the greater Los Angeles area via the Metro Rail (red/purple lines) and Metro Busway (silver line).
The Gas Company Tower is also located adjacent to Civic Center, the largest government center in the United States outside of Washington D.C. and is in close proximity to several cultural destinations, including the Broad Museum, the Walt Disney Concert Hall and the Museum of Contemporary Art.
In October 2013, the sponsor acquired MPG Office Trust (“MPG”) for approximately $3.2 billion and took control of four office towers totaling approximately 5.0 million sq. ft. As part of the acquisition of MPG, the sponsor acquired the Gas Company Tower for an allocated purchase price of approximately $458.7 million and subsequently invested approximately $41.1 million in base building capital expenditures, tenant improvements and landlord work, leasing commissions, and other leasing costs. Of the approximately $41.1 million, the Gas Company Tower has undergone approximately $4.1 million in capital improvements in an effort to modernize and upgrade building attributes. The sponsor is also currently completing a lobby renovation with a total budget of approximately $8.4 million. The renovation is expected to be completed by the end of 2016.
At the time of acquisition, the Gas Company Tower was approximately 68.0% occupied and the sponsor has since executed approximately 493,000 sq. ft. of leasing (including new leases, renewal leases and expansion leases) to increase the Gas Company Tower to an current occupancy of approximately 83.0% as of June 1, 2016. Moreover, since April 2015, the sponsor has completed 329,294 sq. ft. of major office leasing at a weighted average triple net rent of $24.43 PSF through new leases, expansion and renewals at the Gas Company Tower.
As of June 1, 2016, the Gas Company Tower is approximately 83.0% occupied. The Gas Company Tower’s five largest tenants are SCGC (A+/A1/A by Fitch/Moody’s/S&P, 34.2% of NRA, lease expiration date: Various), Sidley Austin (2016 AMLaw Top 100: #7 ranking, 12.0% of NRA, lease expiration date: 12/31/2023), Deloitte (8.2% of NRA, lease expiration date: 1/31/2031), Latham & Watkins (2016 AMLaw Top 100: #1, 7.1% of NRA, lease expiration date: 12/31/2020), and WeWork (6.7% of NRA, anticipated lease expiration date: 7/31/2033). The top five tenants represent approximately 68.2% of NRA and 80.2% of the underwritten gross rent and have a weighted average remaining term of 9.6 years. In addition, only 23.8% of the NRA expires during the term of the Gas Company Tower Whole Loan. According to industry reports, the Gas Company Tower has averaged approximately 87.0% occupancy over the past 20 years.
Environmental Matters.The Phase I environmental report dated June 28, 2016 recommended no further action at the Gas Company Tower.
Major Tenants.
SCGC (469,078 sq. ft.; 34.2% of NRA; 37.6% of U/W Base Rent; A+/A1/A by Fitch/Moody’s/S&P). SCGC, headquartered in Los Angeles, California is a utility company that provides natural gas distribution services. SCGC is a subsidiary of Sempra Energy (NYSE: SRE), a natural gas utilities holding company in San Diego, California. SCGC is the nation’s largest natural gas distribution utility, serving over 21 million customers in more than 500 communities throughout southern California, including Los Angeles, Orange, and Riverside counties. The Gas Company Tower has served as the corporate headquarters for SCGC since 1991. SCGC executed a 15-year renewal that commenced in November 2011 and has four, five-year renewal options remaining under its main lease.
A-3-80
555 West Fifth Street; 350 South Figueroa Street Los Angeles, CA 90013; Los Angeles, CA 90071 | Collateral Asset Summary – Loan No. 8 Gas Company Tower & | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $40,000,000 23.6% 5.23x 19.9% |
| SCGC Termination and Contraction Options | |||||
| Suite | Sq. Ft. | Option Status | Notice Date | Effective Date | Suite Expiration Date |
| Various(1) | 374,402 | One-time | 5/9/2020 | 11/9/2021 | 10/31/2026 |
| - Suite 270 | 21,852 | Ongoing | 3 Months | Ongoing | 10/31/2026 |
| - Full Floor(2) | Up to 28,007 | One-time | 8/9/2018 | 11/9/2019 | 10/31/2026 |
| - Two Full Floors(3) | Up to 56,014 | One-time | 8/9/2019; 5/9/2019 | 11/9/2020 | 10/31/2026 |
| Various Storage(4) | 10,655 | Ongoing | 30 Days | Ongoing | 10/31/2026 |
| Suite 2200 | 28,007 | Ongoing | 3 Months | Ongoing | 3/31/2019 |
| - Suite 2200 | 12,805 | One-time | 9/30/2016 | 12/31/2016 | 3/31/2019 |
| Suite 2300 | 28,007 | One-time | 9/24/2016, 9/24/2017 | 3/24/2017; 3/24/2018 | 3/31/2019 |
| (1) | Termination right for the entire 374,402 sq. ft. Payment of a termination fee equal to the sum of unamortized TI/LC, and free rent (estimated to be approximately $8.2 million). Applicable to suites 200, 270, 900, 1000, 1100, 1200, 1400, 1500, 1600, 1700, 1800, 1900, 2000, 2100, C011, C023, C027, CC30, GE08. |
| (2) | Applicable to uppermost or lowest full floor. |
| (3) | If SCGC does not exercise the preceding Full Floor option, may exercise up to Two Full Floors consisting of (a) two uppermost full floors or (b) two lowest full floors. Payment of a termination fee equal to the sum of unamortized TI/LC, and free rent. Termination fees are estimated to be (i) $893,844 for one full floor effective 11/9/19, (ii) $766,152 if one full floor effective 11/9/20 and (iii) $1,532,304 if two full floors effective 11/9/20. |
| (4) | Applicable to suites 0650S, GE05, P604, P605, P706, P717. |
Sidley Austin (164,674 sq. ft.; 12.0% of NRA; 14.7% of U/W Base Rent)Sidley Austin, a law firm, focuses on business transactions and litigation, and the firm’s geographic diversity enables it to handle multinational matters. Sidley Austin’s clients are in the agribusiness, energy, financial services, insurance, investment fund, life sciences, and technology sectors. Notable clients include Toys “R” Us, China Horizon Investments, Wanxiang America, UBS, GlaxoSmithKline, and Flextronics International.
Sidley Austin has been a tenant at the Gas Company Tower since 1992 and executed a 15-year renewal that commenced in January 2009. Sidley Austin has two, five-year renewal options remaining. Sidley Austin has a contraction right effective as of December 31, 2018 with notice by December 31, 2017. Contraction space can be one full floor or all of the tenant’s continuous space on any floor where the tenant leases a portion of the floor and will either be the uppermost or lowermost floor of Sidley Austin’s contiguous floors or any noncontiguous floor. The contraction fee is equal to the sum of (a) unamortized free rent, tenant improvement allowance, early refurbishment allowance, brokerage fees and commissions, and (b) three months of base rent and additional rent/pass through (estimated to be $827,017).
Deloitte (112,028 sq. ft.; 8.2% of NRA; 10.1% of U/W Base Rent)Deloitte is a global professional services firm headquartered in New York, New York. Deloitte provides audit, tax, consulting, and financial advisory services and employs over 220,000 professionals worldwide. Deloitte reported revenues of $35.2 billion in 2015 and was named number one in both global consulting and management consulting based on aggregate revenue by Kennedy Consulting Research and Advisory. Additionally, it has the highest market share in consulting worldwide and has been named one of Fortune magazine’s “100 Best Companies to Work For.”
Deloitte took occupancy at the Gas Company Tower in December 2014 and is the first tenant to have their logo affixed to the peak of the building.
The Market.The Mortgaged Properties are located in the Los Angeles central business district (“CBD”), within the greater Los Angeles County market area. The downtown Los Angeles market area consists of five submarkets which contain a total inventory of approximately 34.1 million sq. ft. in 90 buildings. The direct vacancy rate in the downtown Los Angeles market area was 16.8% as of the first quarter of 2016, with a direct weighted average gross rental rate of $37.19 PSF.
The most significant component of the downtown office supply is concentrated in the Los Angeles CBD. This district is bordered by the Harbor Freeway (Interstate 110) on the west, Ninth Street to the south, Second Street on the north, and Hill Street to the east. The Los Angeles CBD comprises approximately 79.4% of the existing inventory in the downtown market, and represents the greatest concentration of office space within the greater Los Angeles area. The downtown Los Angeles market area submarkets are detailed below:
A-3-81
555 West Fifth Street; 350 South Figueroa Street Los Angeles, CA 90013; Los Angeles, CA 90071 | Collateral Asset Summary – Loan No. 8 Gas Company Tower & | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $40,000,000 23.6% 5.23x 19.9% |
| Downtown Los Angeles Market Area Office Market – Q1 2016(1) | ||||||
| CBD/Financial District | South Park | Central City East | Little Tokyo/Chinatown | Central City West | Submarkets Summary | |
| Number of Buildings | 53 | 9 | 7 | 7 | 14 | 90 |
| Inventory (SF) | 27,076,998 | 1,880,137 | 801,448 | 610,213 | 3,726,291 | 34,095,087 |
| Total Space Available (SF) | 4,878,711 | 380,908 | 104,406 | 114,243 | 262,633 | 5,740,901 |
| Direct Space Available (SF) | 4,859,743 | 380,908 | 104,406 | 112,062 | 256,633 | 5,713,752 |
| Direct Vacancy Rate | 17.9% | 20.3% | 13.0% | 18.4% | 6.9% | 16.8% |
| Total Vacancy Rate | 18.0% | 20.3% | 13.0% | 18.7% | 7.0% | 16.8% |
| Direct Gross Rental Rate | $39.30 | $31.49 | $32.72 | $35.30 | $26.05 | $37.19 |
| Direct Net Absorption (SF) | 421,285 | (23,946) | 3,877 | 1,336 | 7,112 | 409,664 |
| (1) | Source: Appraisal. |
The Gas Company Tower primarily competes with other Class A office buildings in the Los Angeles CBD. The appraiser identified 22 competitive properties in the downtown Los Angeles market area totaling approximately 20.5 million sq. ft.
Of the 22 competitive buildings, seven were built in the period between 1989 and 1992 and are the newest Class A major office buildings in the downtown Los Angeles market area. The weighted average direct vacancy for the seven newer vintage assets is approximately 21.7%, compared to approximately 17.3% for the full competitive set. The following chart summarizes the seven properties completed between 1989 and 1992:
| Directly Competitive Buildings(1) | ||||||||
| Property | Office Area (NRA) | Available Sq. Ft. (Direct) | Available Sq. Ft. (Sublease) | Direct Occupancy | Total Occupancy | Direct Asking Rent (Low) | Direct Asking Rent (High) | Lease Type |
| U.S. Bank Tower | 1,432,539 | 358,689 | 10,000 | 70.0% | 74.3% | $42.50 | $46.00 | Gross |
| Two California Plaza | 1,415,445 | 661,333 | 0 | 53.3% | 53.3% | $41.40 | $41.40 | Gross |
| 777 Tower | 1,024,834 | 140,623 | 0 | 86.3% | 86.3% | $23.00 | $28.00 | NNN |
| Figueroa at Wilshire | 1,118,941 | 135,514 | 46,650 | 87.9% | 83.7% | $24.00 | $28.00 | NNN |
| 865 S. Figueroa | 688,016 | 18,229 | 0 | 97.4% | 97.4% | $24.96 | $24.96 | NNN |
| KPMG Center | 590,207 | 48,201 | 3,145 | 91.8% | 91.3% | $28.00 | $28.00 | NNN |
| 801 Tower | 458,570 | 99,498 | 10,000 | 78.3% | 76.1% | $26.00 | $27.00 | NNN |
| Total / Wtd. Avg. | 6,728,552 | 1,462,087 | 69,795 | 78.3% | 77.3% | |||
| (1) | Source: Appraisal. |
The appraiser’s market rent conclusions demonstrate that triple net rents for office space at the Gas Company Tower are approximately 9.0% below market. The following table details the appraiser’s rent conclusions by type and location:
| Office Market Rents | ||||||
| Type | Lease Term | Market Rent PSF(1) | In Place Annual NNN Rent PSF(2) | % Above (Below) Market | Free Rent (months) | TI’s New / Renew |
| Office Floors 2-16 | 7 years | $24.50 | $20.87 | -14.8% | 7.0 | $60 / $30 |
| Office Floors 17-29 | 7 years | $25.00 | $22.31 | -10.8% | 7.0 | $60 / $30 |
| Office Floors 30-50 | 7 years | $26.50 | $25.65 | -3.2% | 7.0 | $60 / $30 |
| Retail | 7 years | $36.00 | $23.91 | -33.6% | 0.0 | $60 / $30 |
| Total / Wtd. Avg. | $25.42 | $23.14(3) | -9.0% | |||
| (1) | Source: Appraisal. |
| (2) | Based on the underwritten rent roll. |
| (3) | Excluding retail and storage space |
A-3-82
555 West Fifth Street; 350 South Figueroa Street Los Angeles, CA 90013; Los Angeles, CA 90071 | Collateral Asset Summary – Loan No. 8 Gas Company Tower & | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $40,000,000 23.6% 5.23x 19.9% |
Cash Flow Analysis.
| Cash Flow Analysis | ||||||||
| 2013 | 2014 | 2015 | T-12 5/31/2016 | Sponsor Year 1 Pro Forma | U/W | U/W PSF | ||
| Total Minimum/Base Rent | $22,246,902 | $19,674,225 | $23,850,390 | $24,922,467 | $27,937,915 | $25,957,481 | $18.91 | |
| Step Rent Credit(1) | 0 | 0 | 0 | 0 | 0 | 700,212 | 0.51 | |
| NPV Rent Credit(2) | 0 | 0 | 0 | 0 | 0 | 685,918 | 0.50 | |
| Value of Vacant Space | 0 | 0 | 0 | 0 | 0 | 9,352,584 | 6.82 | |
| Gross Potential Rent | $22,246,902 | $19,674,225 | $23,850,390 | $24,922,467 | $27,937,915 | $36,696,196 | $26.74 | |
| CAM and Other Recoveries | 12,497,311 | 12,565,419 | 13,182,582 | 13,491,173 | 16,583,831 | 17,771,709 | 12.95 | |
| GCT Gross Parking Revenue | 3,762,731 | 3,893,055 | 4,404,867 | 4,442,471 | 4,882,438 | 4,882,438 | 3.56 | |
| WTC Net Parking Revenue | 1,354,041 | 1,216,303 | 1,153,967 | 1,234,899 | 1,350,430 | 1,350,430 | 0.98 | |
| Miscellaneous Income | 4,250 | 128,861 | 78,697 | 57,518 | 60,192 | 57,518 | 0.04 | |
| Less: Vacancy | 0 | 0 | 0 | 0 | 0 | (9,352,584) | (6.82) | |
| Effective Gross Income | $39,865,235 | $37,477,863 | $42,670,504 | $44,148,529 | $50,814,806 | $51,405,707 | $37.46 | |
| Total Expenses | 17,185,318 | 19,964,921 | 21,835,684 | 22,301,374 | 23,339,499 | 22,733,822 | 16.57 | |
| Net Operating Income | $22,679,917 | $17,512,942 | $20,834,820 | $21,847,155 | $27,475,307 | $28,671,885 | $20.89 | |
| TI/LC | 0 | 0 | 0 | 0 | 9,347,135 | 1,720,268 | 1.25 | |
| Capital Expenditures | 0 | 0 | 0 | 0 | 233,653 | 430,466 | 0.31 | |
| Net Cash Flow | $22,679,917 | $17,512,942 | $20,834,820 | $21,847,155 | $17,894,519 | $26,521,151 | $19.33 | |
| (1) | Step Rent Credit represent contractual rent steps through September 1, 2017. |
| (2) | NPV Rent Credit of contractual rent increases through lease expiration for SCGC, Sidley Austin, Latham & Watkins and Bank Leumi. |
Property Management. The Gas Company Tower is managed by Brookfield Properties Management (CA) Inc., an affiliate of the borrower. The Gas Company Tower’s 979 stall on-site subterranean parking garage and the WTC Garage’s parking operations is managed by ABM Onsite Services – West, Inc., a subsidiary of ABM (NYSE: ABM), a provider of facility solutions with revenues of approximately $4.9 billion and over 100,000 employees across more than 300 offices globally.
Lockbox / Cash Management. With respect to the Gas Company Tower Loan and excluding the 979 stall on-site subterranean parking garage, the Gas Company Tower Whole Loan is structured with a hard lockbox and springing cash management. All rents are required to be directly deposited by the tenants of the Mortgaged Properties into a clearing account controlled by the lender. Funds in the clearing account will be swept daily into the deposit account. In the absence of a Trigger Period (as defined below), the deposit bank is directed by the lender to sweep all amounts in the deposit account to the borrower account controlled by the borrower. During a Trigger Period, funds in the clearing account will be swept daily into a deposit account controlled by the lender and applied and disbursed in accordance with the loan documents. With respect to the WTC Garage and the Gas Company Tower’s 979 stall on-site subterranean parking garage, the Gas Company Tower Whole Loan is structured with a soft lock box and springing cash management. All gross revenue collected by an unaffiliated parking manager of the WTC Garage and the on-site subterranean parking garage, net of such parking manager’s fees and expenses, are required to be deposited monthly into the clearing account controlled by the lender. Funds in the clearing account will be swept daily into the deposit account. In the absence of a Trigger Period, the deposit bank is directed by the lender to sweep all amounts in the deposit account to the borrower account controlled by the borrower. During a Trigger Period, funds in the clearing account will be swept daily into a deposit account controlled by the lender and applied and disbursed in accordance with the loan documents.
A “Trigger Period” will commence upon the occurrence of (i) an event of default, (ii) the commencement of a Low Debt Service Period (as defined below), (iii) the commencement of a Material Tenant Sweep Period (as defined below) or (iv) the commencement of a mezzanine loan default; and will end if, (A) with respect to clause (i), the event of default commencing the Trigger Period has been cured and such cure has been accepted by the lender (and no other event of default is then continuing), (B) with respect to clause (ii), the Low Debt Service Period has ended, (C) with respect to clause (iii) the Material Tenant Sweep Period has ended or (D) with respect to clause (iv), the mezzanine loan default has been cured.
A “Material Tenant Sweep Period” will commence on the first monthly payment date following the occurrence of: (a) May 9, 2020 (unless (x) prior to such date the Material Tenant (as defined below) did not exercise the right to terminate or contract any of its space and the time period to exercise such option has lapsed or (y) the Material Tenant waived in writing its option to cause the earlier expiration, cancellation, termination or contraction of any of the space demised under the Material Tenant Lease (as defined below)); (b) upon the receipt by borrower or the property manager of notice of the early expiration, cancellation, termination and/or contraction of the Material Tenant Lease or a portion of the Material Tenant Lease, which when combined with all other previous contractions, expirations, terminations or cancellations (exclusive of the first 10,655 sq. ft. of storage space terminated, expired, cancelled or contracted) of any or all space for the Material Tenant (as defined below) exceeds the Material Space Amount (as defined below) for
A-3-83
555 West Fifth Street; 350 South Figueroa Street Los Angeles, CA 90013; Los Angeles, CA 90071 | Collateral Asset Summary – Loan No. 8 Gas Company Tower & | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $40,000,000 23.6% 5.23x 19.9% |
such Material Tenant; (c) if the Material Tenant has ceased operating its business (i.e., “goes dark”) at the Mortgaged Properties (or at substantially all of its space at the Mortgaged Properties); (d) if the Material Tenant is in monetary or material non-monetary default under the Material Tenant Lease which has remained uncured for a period of sixty (60) days, or (e) upon a bankruptcy or insolvency proceeding of the Material Tenant. During a Material Tenant Sweep Period, all excess cash flow will be swept into a lender-controlled reserve account to be used for leasing costs and to serve as additional collateral for the loan (the “Lease Sweep Reserve”). A Material Tenant Sweep Period will end upon the earliest of: (A) if as a result of clause (a) above, the Material Tenant (x) did not exercise the right to terminate or contract any of its space and the time period to exercise such option has lapsed, or (y) if the Material Tenant waived the termination or contraction option in writing, (B) if as a result of clause (b) or (c) above, then upon the earlier to occur of (1) the occupancy by one or more replacement tenant(s) of substantially all the space demised under the Material Tenant Lease pursuant to one or more Replacement Leases (as defined below) in order to achieve a DSCR equal to or greater than the applicable Exit DSCR Trigger (defined below) for two consecutive calendar quarters and (2) solely with respect to a Material Tenant Sweep Period that was trigger as a result of clause (b) above and so long as the total sq. ft. of space terminated, expired, cancelled or contracted in the aggregate since closing of the Gas Company Tower Whole Loan is less than 92,366 sq. ft., the deposit of funds into the Lease Sweep Reserve in an amount equal to the product of $75 and the total amount of space terminated, expired, cancelled or contracted by Material Tenant (exclusive of the first 10,655 sq. ft. of storage space terminated, expired, cancelled or contracted), (C) if as a result of clause (d) above, such monetary default or non-monetary default has been cured and no defaults have occurred for three months, and (D) if as a result of clause (e) above, then (1) in the event the Material Tenant Lease is rejected in the applicable bankruptcy or insolvency proceeding, the date on which substantially all of the space demised under the Material Tenant Lease is leased pursuant to one or more Replacement Leases in order to achieve a DSCR equal to or greater than the applicable Exit DSCR Trigger (as defined below) for two consecutive quarters, or (2) the date on which the Material Tenant Lease is assumed, or is assigned by the trustee or debtor-in-possession in a bankruptcy proceeding pursuant to either (a) a final and non-appealable order of the applicable bankruptcy court approving such assumption, or (b) a plan of reorganization which has become effective and, in either case, is not the subject of a stay pending appeal or otherwise.
“Material Tenant” means SCGC.
“Material Tenant Lease” means, collectively, the leases with SCGC.
“Material Space Amount” means 77,866 total sq. ft. in the aggregate for such Material Tenant (exclusive of the first 10,655 sq. ft. of storage space terminated, expired, cancelled or contracted).
“Replacement Lease” means a replacement lease with tenants reasonably acceptable to lender which (i) is written substantially in accordance with the form of lease which is approved by the lender (subject to commercially reasonable changes) or is otherwise in form and substance acceptable to the lender, (ii) has a term for the greater of (A) at least two years beyond August 6, 2021 or (B) at least five years, (iii) for which all landlord obligations that are associated with initial tenant occupancy, including the payment of all tenant improvements and leasing commissions under such lease or leases, have been fulfilled or reserved for in the Lease Sweep Reserve, such tenants are in occupancy and paying full unabated rent or in the lender’s reasonable judgment there are sufficient funds that have been collected in the Lease Sweep Reserve to cover any then-tenant improvements, leasing commissions, remaining free rent periods or rent abatements then outstanding associated with such lease or leases, and (iv) which is otherwise entered into in accordance with the loan documents.
“Exit DSCR Trigger” means a debt service coverage ratio of at least 1.9455x for the Gas Company Tower Whole Loan and a debt service coverage ratio of at least 1.10x for the total debt of the Gas Company Tower Whole Loan and a $131.0 million mezzanine loan (the “Total Debt”).
A “Low Debt Service Period” will commence if, as of the last day of any quarter, (i) the Gas Company Tower Whole Loan DSCR falls below 1.9455x for two consecutive quarters or (ii) the Total Debt DSCR (based on the balance of the Gas Company Tower Whole Loan and the mezzanine loan) falls below 1.10x for two consecutive quarters and will cease to exist if (A) with respect to clause (i), the Whole Loan DSCR is at least 1.9455x for two consecutive quarters or (B) with respect to clause (ii) the Total Debt DSCR (based on the balance of the Gas Company Tower Whole Loan and mezzanine loan) is at least 1.10x for two consecutive quarters.
Initial Reserves. At loan origination, the borrower deposited (i) $20,690,506 into the rollover reserve accountfor outstanding TI/LC’s and $343,082 for future TI/LC’s, (ii) $4,478,325 into the outstanding free rent reserve account for free rent and operating expenses for various tenants, of which $4,160,630 is free rent and operating expenses for SCGC, (iii) $1,000,000 into the WeWork lease reserve to fund rent and operating expenses related to the WeWork lease in the event the WeWork rent commencement date is delayed beyond July 16, 2016, (iv) $2,822,545 into the tax reserve account, (v) $220,760 into the SCGC lease reserve to fund certain reimbursement abatements relating to Proposition 13 of the California Constitution and (vi) $71,744 into the capital expenditure reserve account for future capital expenditures at the mortgaged properties.
A-3-84
555 West Fifth Street; 350 South Figueroa Street Los Angeles, CA 90013; Los Angeles, CA 90071 | Collateral Asset Summary – Loan No. 8 Gas Company Tower & | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $40,000,000 23.6% 5.23x 19.9% |
Ongoing Reserves. On a monthly basis, the borrower is required to deposit monthly reserves of (i) 1/12 of the estimated annual real estate taxes, which currently equates to $564,509, into the tax reserve account (ii) $171,541 into the rollover reserve account, (iii) $35,872 into the capital expenditures reserve account and (iv) $14,150 into the Jams and Latham lease reserve account in order to pay all free rent and operating expense amounts under the Jams Lease and the Latham & Watkins lease. In addition, the borrower is required to deposit 1/12 of the estimated annual insurance premiums into an insurance reserve account if an acceptable blanket insurance policy is no longer in place and at the beginning of each lease year under any lease, the borrower is required to deposit any rent paid more than one month in advance into the prepaid rent reserve account.
Current Mezzanine or Subordinate Indebtedness. The Gas Company Tower Whole Loan includes the Junior Notes with an original principal balance of $175,000,000 that are expected to be contributed to the COMM 2016-GCT transaction. In addition, a $131,000,000 mezzanine loan was funded concurrently with the origination of the Gas Company Tower Whole Loan and thereafter sold to GCT Magnus, LLC. The mezzanine loan is coterminous with the Gas Company Tower Whole Loan and accrues interest at a fixed per annum rate equal to 6.50000%. An intercreditor agreement is in place with respect to the Gas Company Tower Whole Loan and the related mezzanine loan.
Future Mezzanine or Subordinate Indebtedness Permitted. None.
A-3-85
555 West Fifth Street; 350 South Figueroa Street Los Angeles, CA 90013; Los Angeles, CA 90071 | Collateral Asset Summary – Loan No. 8 Gas Company Tower & | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $40,000,000 23.6% 5.23x 19.9% |
A-3-86
555 West Fifth Street; 350 South Figueroa Street Los Angeles, CA 90013; Los Angeles, CA 90071 | Collateral Asset Summary – Loan No. 8 Gas Company Tower & | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $40,000,000 23.6% 5.23x 19.9% |
A-3-87
50 Northern Avenue & 11 Fan Pier Boulevard Boston, MA 02110 | Collateral Asset Summary – Loan No. 9 Vertex Pharmaceuticals HQ | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $30,000,000 35.5% 6.28x 17.9% |
A-3-88
50 Northern Avenue & 11 Fan Pier Boulevard Boston, MA 02110 | Collateral Asset Summary – Loan No. 9 Vertex Pharmaceuticals HQ | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $30,000,000 35.5% 6.28x 17.9% |
| Mortgage Loan Information | |
| Loan Seller: | CGMRC |
| Loan Purpose: | Refinance |
| Sponsor: | Senior Housing Properties Trust |
| Borrower: | SNH Seaport LLC |
| Original Balance(2): | $30,000,000 |
| Cut-off Date Balance(2): | $30,000,000 |
| % by Initial UPB: | 4.3% |
| Interest Rate(3): | 2.79817647% |
| Payment Date: | 6thof each month |
| First Payment Date: | September 6, 2016 |
| Maturity Date: | November 6, 2028 |
| Anticipated Repayment Date(3): | August 6, 2026 |
| Amortization: | Interest only, then ARD |
| Additional Debt(2)(4): | $395,000,000Pari PassuDebt; $195,000,000 Mezzanine Debt |
| Call Protection(5): | L(24), DorYM0.5(89), O(7) |
| Lockbox / Cash Management: | Hard / Springing |
| Reserves(6) | ||
| Initial | Monthly | |
| Taxes: | $0 | Springing |
| Insurance: | $0 | Springing |
| Lease Termination Fund: | $0 | Springing |
| Financial Information | ||||
| Whole Loan(7) | Total Debt(8) | |||
| Cut-off Date Balance / Sq. Ft.: | $375 | $547 | ||
| Balloon Balance / Sq. Ft.: | $375 | $547 | ||
| Cut-off Date LTV: | 35.5% | 51.8% | ||
| Balloon LTV(9): | 35.5% | 51.8% | ||
| Underwritten NOI DSCR: | 6.31x | 3.43x | ||
| Underwritten NCF DSCR: | 6.28x | 3.42x | ||
| Underwritten NOI Debt Yield: | 17.9% | 12.3% | ||
| Underwritten NCF Debt Yield: | 17.8% | 12.2% | ||
| Underwritten NOI Debt Yield at Balloon(9): | 17.9% | 12.3% | ||
| Underwritten NCF Debt Yield at Balloon(9): | 17.8% | 12.2% | ||
| Property Information | |
| Single Asset / Portfolio: | Single Asset |
| Property Type: | CBD Office |
| Collateral: | Fee Simple |
| Location: | Boston, MA |
| Year Built / Renovated: | 2013 / NAP |
| Total Sq. Ft.: | 1,133,723 |
| Property Management: | The RMR Group LLC |
| Underwritten NOI: | $76,062,408 |
| Underwritten NCF: | $75,778,977 |
| Appraised Value: | $1,198,000,000 |
| Appraisal Date: | June 3, 2016 |
| Historical NOI | |
| Most Recent NOI(10): | $70,924,928 (December 31, 2015) |
| 2014 NOI: | $43,928,033 (December 31, 2014) |
| 2013 NOI(12): | NAP |
| 2012 NOI(12): | NAP |
| Historical Occupancy | |
| Most Recent Occupancy(11): | 99.9% (April 30, 2016) |
| 2015 Occupancy(11): | 99.6% (December 31, 2015) |
| 2014 Occupancy(11): | 100.0% (December 31, 2014) |
| 2013 Occupancy(12): | NAP |
| (1) | Moody’s/Fitch/DBRS provided the above ratings for the Vertex Pharmaceuticals HQ Whole Loan in the context of its inclusion in the mortgage pool. On a stand-alone basis, Fitch rated the Vertex Pharmaceuticals HQ Whole Loan “BBB-”. |
| (2) | The Original Balance and Cut-off Date Balance of $30.0 million represent the non-controlling Note A-5 of the $425.0 million Vertex Pharmaceuticals HQ Whole Loan evidenced by tenpari passunotes. The Note A-5 will be included in the CD 2016-CD1 mortgage trust. The controlling Note A-1, with an outstanding principal balance as of the Cut-off Date of $80.0 million, is expected to be included in the WFCM 2016-BNK1 mortgage trust. The non-controlling Notes A-2-1 and A-2-2, with outstanding principal balances as of the Cut-off Date of $40.0 million and $30.0 million, respectively, are expected to be included in the MSCI 2016-UBS11 mortgage trust. The non-controlling Notes A-2-3, A-3 and A-4, with outstanding principal balances as of the Cut-off Date of $10.0 million, $80.0 million and $57.5 million, respectively, are currently held by Morgan Stanley Bank, N.A. and are expected to be contributed to one or more future securitizations. The non-controlling Note A-6-1, with an outstanding principal balance as of the Cut-off Date of $60.0 million, is expected to be included in the CGCMT 2016-C2 mortgage trust. The non-controlling Notes A-6-2 and A-7, with outstanding principal balances as of the Cut-off Date of $15.0 million and $22.5 million, respectively, are currently held by Citigroup Global Markets Realty Corp. and are expected to be contributed to one or more future securitizations. There can be no assurance that any particular Vertex Pharmaceuticals HQ promissory note will not be further split. For additional information on thepari passu companion loans, see “The Loan” herein. |
| (3) | If the Vertex Pharmaceuticals HQ Whole Loan is not paid in full by the Anticipated Repayment Date, the interest rate will increase. For additional information, see “The Loan” herein. |
| (4) | See “Current Mezzanine or Subordinate Indebtedness” herein. |
| (5) | Voluntary prepayment of the Vertex Pharmaceuticals HQ Whole Loan with payment of a prepayment fee equal to the greater of 0.5% or the yield maintenance premium is permitted after August 6, 2018. Voluntary prepayment of the Vertex Pharmaceuticals HQ Whole Loan without payment of any prepayment premium is permitted on or after the due date in February 2026. At any time after the earlier to occur of (i) the second anniversary of the last securitization of any portion of the Vertex Pharmaceuticals HQ Whole Loan and (ii) the date that is 42 months after the origination date, the Vertex Pharmaceuticals HQ Whole Loan may be defeased as more particularly set forth in the Vertex Pharmaceuticals HQ Whole Loan documents. |
| (6) | See “Initial Reserves” and “Ongoing Reserves” herein. |
| (7) | Whole Loan DSCR, LTV, Debt Yield and Balance / Sq. Ft. calculations are based on the Vertex Pharmaceuticals HQ Whole Loan only, which has a principal balance of $425.0 million. |
| (8) | Total Debt DSCR, LTV, Debt Yield and Balance / Sq. Ft. calculations are based on the aggregate total debt, which includes the Vertex Pharmaceuticals HQ Whole Loan and the mezzanine loan with an original principal balance of $195.0 million. |
| (9) | Calculated as of the Anticipated Repayment Date. |
| (10) | The increase in Most Recent NOI over 2014 NOI is due primarily to Vertex not being in full occupancy of and paying for all of its space until the end of 2014. |
| (11) | Includes 7,300 sq. ft. (0.6% of NRA) of unoccupied retail space that is master leased by an affiliate of original developer of the property. |
| (12) | The Vertex Pharmaceuticals HQ Property was constructed in 2013. As such, historical occupancy and NOI prior to 2014 is not available. |
A-3-89
50 Northern Avenue & 11 Fan Pier Boulevard Boston, MA 02110 | Collateral Asset Summary – Loan No. 9 Vertex Pharmaceuticals HQ | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $30,000,000 35.5% 6.28x 17.9% |
| Tenant Summary | |||||||
Tenant | Ratings (Fitch/Moody’s/S&P) | Net Rentable Area (Sq. Ft.) | % of Net Rentable Area | U/W Base Rent PSF | % of Total U/W Base Rent | Lease Expiration | |
| Vertex | NR/NR/NR | 1,082,417 | 95.5% | $67.06 | 96.6% | 12/31/2028(1) | |
| Non-Major Tenants(2) | 49,906 | 4.4% | $51.44 | 3.4% | Various | ||
| Total Occupied Collateral | 1,132,323 | 99.9% | $66.37 | 100.0% | |||
| Vacant | 1,400 | 0.1% | |||||
| Total | 1,133,723 | 100.0% | |||||
| (1) | Vertex has one, ten-year extension option with 20 months’ written notice prior to its lease expiration. Vertex has no termination or contraction options. |
| (2) | Non-Major Tenants are comprised of first floor retail space and include 7,300 sq. ft. (0.6% of NRA) of unoccupied space master leased by an affiliate of the original developer of the property, which represents approximately 0.7% of the Total U/W Base Rent. |
| Lease Rollover Schedule(1) | ||||||||
| Year | # of Leases Expiring | Total Expiring Sq. Ft. | % of Total Sq. Ft. Expiring | Cumulative Sq. Ft. Expiring | Cumulative % of Sq. Ft. Expiring | Annual U/W PSF | % U/W Rolling | Cumulative % of U/W Base Rent |
| MTM | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2016 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2017 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2018 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2019 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2020 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2021 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2022 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2023 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2024 | 2 | 8,793 | 0.8% | 8,793 | 0.8% | $62.38 | 0.7% | 0.7% |
| 2025 | 4 | 14,047 | 1.2% | 22,840 | 2.0% | $50.23 | 0.9% | 1.7% |
| 2026 | 1 | 2,746 | 0.2% | 25,586 | 2.3% | $55.00 | 0.2% | 1.9% |
| Thereafter | 4 | 1,106,737 | 97.6% | 1,132,323 | 99.9% | $66.64 | 98.1% | 100.0% |
| Vacant | NAP | 1,400 | 0.1% | 1,133,723 | 100.0% | NAP | NAP | |
| Total / Wtd. Avg. | 11 | 1,133,723 | 100.0% | $66.37 | 100.0% | |||
| (1) | Certain tenants have lease termination options that may become exercisable prior to the originally stated expiration date of the tenant lease that are not considered in the lease rollover schedule. |
The Loan. The Vertex Pharmaceuticals HQ loan (the “Vertex Pharmaceuticals HQ Loan”) is a fixed rate loan secured by the borrower’s fee simple interest in a 1,133,723 sq. ft. office complex located at 50 Northern Avenue and 11 Fan Pier Boulevard in Boston, Massachusetts (the “Vertex Pharmaceuticals HQ Property”). The Vertex Pharmaceuticals HQ Loan is evidenced by the non-controlling Note A-5, with an Original Balance and Cut-off Date Balance of $30.0 million, of a whole loan that has an aggregate original principal balance of $425.0 million (the “Vertex Pharmaceuticals HQ Whole Loan”) and is comprised of tenpari passu notes. Thepari passu companion loan evidenced by the controlling Note A-1 is expected to be included in the WFCM 2016-BNK1 mortgage trust. Thepari passu companion loans evidenced by the non-controlling Notes A-2-1 and A-2-2, with an aggregate original principal balance of $70.0 million, are currently held by Morgan Stanley Bank, N.A. and are expected to be included in the MSCI 2016-UBS11 mortgage trust. Thepari passucompanion loans evidenced by the non-controlling Notes A-2-3, A-3 and A-4, with an aggregate original principal balance of $147.5 million, are currently held by Morgan Stanley Bank, N.A. and are expected to be contributed to one or more future commercial mortgage securitization transactions. Thepari passucompanion loan evidenced by the non-controlling Note A-6-1, with an original principal balance of $60.0 million, is currently held by Citigroup Global Markets Realty Corp. and is expected to be included in the CGCMT 2016-C2 mortgage trust. Thepari passucompanion loans evidenced by the non-controlling Notes A-6-2 and A-7, with an aggregate original principal balance of $37.5 million, are currently held by Citigroup Global Markets Realty Corp. and are expected to be contributed to one or more future commercial mortgage securitization transactions. There can be no assurance that any particular Vertex Pharmaceuticals HQ promissory note will not be further split.
The relationship between the holders of the notes comprising the Vertex Pharmaceuticals HQ Whole Loan is governed by a co-lender agreement as described under “Description of the Mortgage Pool—The Whole Loans—Vertex Pharmaceuticals Headquarters Whole Loan” in the Prospectus.
A-3-90
50 Northern Avenue & 11 Fan Pier Boulevard Boston, MA 02110 | Collateral Asset Summary – Loan No. 9 Vertex Pharmaceuticals HQ | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $30,000,000 35.5% 6.28x 17.9% |
| Whole Loan Summary | |||||
| Note(1) | Original Balance | Cut-off Date Balance | Note Holder | Controlling Piece | |
| A-1 | $80,000,000 | $80,000,000 | WFCM 2016-BNK1(2) | Yes | |
| A-2-1 | $40,000,000 | $40,000,000 | MSCI 2016-UBS11(3) | No | |
| A-2-2 | $30,000,000 | $30,000,000 | MSCI 2016-UBS11(3) | No | |
| A-2-3 | $10,000,000 | $10,000,000 | MSBNA | No | |
| A-3 | $80,000,000 | $80,000,000 | MSBNA | No | |
| A-4 | $57,500,000 | $57,500,000 | MSBNA | No | |
| A-5 | $30,000,000 | $30,000,000 | CD 2016-CD1(4) | No | |
| A-6-1 | $60,000,000 | $60,000,000 | CGCMT 2016-C2(5) | No | |
| A-6-2 | $15,000,000 | $15,000,000 | CGMRC | No | |
| A-7 | $22,500,000 | $22,500,000 | CGMRC | No | |
| Total Sources | $425,000,000 | $425,000,000 | |||
| (1) | There can be no assurance that any particular Vertex Pharmaceuticals HQ promissory note will not be further split. |
| (2) | The initial note holder of the controlling Note A-1 is Morgan Stanley Bank, N.A. (“MSBNA”). Note A-1 is expected to be contributed to the WFCM 2016-BNK1 mortgage trust prior to the closing date for this securitization transaction. |
| (3) | The initial note holder of the non-controlling Notes A-2-1 and A-2-2 is MSBNA. Notes A-2-1 and A-2-2 are expected to be contributed to the MSCI 2016-UBS11 mortgage trust on the same date as the closing date for this securitization transaction. |
| (4) | The initial note holder of the non-controlling Note A-5 is Citigroup Global Markets Realty Corp. (“CGMRC”). Note A-5 is expected to be contributed to the CD 2016-CD1 mortgage trust. |
| (5) | The initial note holder of the non-controlling Note A-6-1 is CGMRC. Note A-6-1 is expected to be contributed to the CGCMT 2016-C2 mortgage trust after the closing date for this securitization transaction. |
The Vertex Pharmaceuticals HQ Whole Loan has an anticipated repayment date of August 6, 2026 (the “Anticipated Repayment Date”) and a stated maturity date of November 6, 2028. Prior to the Anticipated Repayment Date, the Vertex Pharmaceuticals HQ Whole Loan accrues interest at a fixed rate of 2.79817647% (the “Initial Interest Rate”) and requires payments of interest only. From and after the Anticipated Repayment Date, the Vertex Pharmaceuticals HQ Whole Loan will accrue interest at aper annum rate equal to the sum of (1) the Initial Interest Rate, plus (2) the product of (A) the quotient of (x) the Initial Interest Rate divided by (y) 3.5300%, multiplied by (B) the difference between (x) the Aggregate Extended Interest Rate (as defined below), minus (y) 3.5300% (the “Revised Interest Rate”).
“Aggregate Extended Interest Rate” means the greater of (i) 6.5300% or (ii) the sum of (1) the then effective U.S. swap rate for a swap terminating on the then effective maturity date plus (2) 5.0000%.
All interest, including interest accrued at the excess of the Revised Interest Rate over the Initial Interest Rate, is required to be paid currently on each monthly payment date through the final maturity date of the Vertex Pharmaceuticals HQ Whole Loan. If the Vertex Pharmaceuticals HQ Whole Loan is not repaid in full on or prior to the Anticipated Repayment Date, from and after the occurrence of the Anticipated Repayment Date and provided no event of default under the Vertex Pharmaceuticals HQ Whole Loan has occurred and is continuing, all excess cash flow is required to be applied to repay the principal balance of the Vertex Pharmaceuticals HQ Whole Loan and the Vertex Pharmaceuticals HQ Mezzanine Loan (as defined below) on apro rata basis, based on their respective principal balances. Such excess cash flow is paid only after payment of interest on the Vertex Pharmaceuticals HQ Whole Loan, including interest at the Revised Interest Rate, and (unless there is an event of default under the Vertex Pharmaceuticals HQ Whole Loan) interest on the Vertex Pharmaceuticals HQ Mezzanine Loan at the Mezzanine Revised Interest Rate (as defined below).
The Vertex Pharmaceuticals HQ Whole Loan proceeds and the Vertex Pharmaceuticals HQ Mezzanine Loan proceeds were used to return approximately $616.0 million of equity to the borrower sponsor and pay approximately $4.0 million of closing costs.
| Sources and Uses | ||||||
| Sources | Proceeds | % of Total | Uses | Proceeds | % of Total | |
| Loan amount | $425,000,000 | 68.5% | Return of equity(1) | $616,022,218 | 99.4% | |
| Mezzanine loan | $195,000,000 | 31.5% | Closing costs | $3,977,782 | 0.6% | |
| Total Sources | $620,000,000 | 100.0% | Total Uses | $620,000,000 | 100.0% | |
| (1) | The borrower sponsor, Senior Housing Properties Trust, acquired the Vertex Pharmaceuticals HQ Property in 2014 for a purchase price of $1,125,420,000 in part by using proceeds from its unsecured revolving credit facility. The borrower sponsor has informed the lender that it expects to use proceeds of the Vertex Pharmaceuticals HQ Whole Loan and the Vertex Pharmaceuticals HQ Mezzanine Loan to repay a portion of the outstanding borrowings under the unsecured revolving credit facility and for general business purposes. Following the repayment, there will be approximately $900 million available under the borrower sponsor’s unsecured revolving credit facility. |
The Borrower / Sponsor. The borrower, SNH Seaport LLC, is a single purpose Delaware limited liability company structured to be bankruptcy-remote with two independent directors in its organizational structure. The sponsor of the borrower and non-recourse carve-out guarantor is Senior Housing Properties Trust.
A-3-91
50 Northern Avenue & 11 Fan Pier Boulevard Boston, MA 02110 | Collateral Asset Summary – Loan No. 9 Vertex Pharmaceuticals HQ | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $30,000,000 35.5% 6.28x 17.9% |
Senior Housing Properties Trust, a publicly traded real estate investment trust, owns independent living and assisted living communities, continuing care retirement communities, nursing homes, wellness centers and medical offices, and clinic and biotech laboratory buildings located throughout the United States, and focuses on owning triple net leased properties. As of March 31, 2016, Senior Housing Properties Trust owned 428 properties in 43 states and Washington, D.C.
The Property.The Vertex Pharmaceuticals HQ Property consists of the fee interest in a two-building, 15-story, class A HQ office complex totaling 1,133,723 sq. ft., located in the master-planned Fan Pier mixed use development in the Seaport District of Boston, Massachusetts. The Fan Pier development is a live-work-play development that features over 3.0 million sq. ft. of office, retail, hotel and residential buildings, multiple public parks, restaurants, and access to Boston’s HarborWalk and the Institute of Contemporary Art. The Fan Pier development also features the Fan Pier Marina, a professionally managed, six-acre marina with deep-water access, as well as water taxi access to Logan International Airport. The Vertex Pharmaceuticals HQ Property features floor plates of approximately 40,000 sq. ft. on the lab floors (floors 2-8) and floor plates of approximately 28,000 sq. ft. on the office floors (floors 9-15). The Vertex Pharmaceuticals HQ Property features high end finishes, flexible floor plates that can accommodate full floor or multi-tenant users, state-of-the-art laboratory and research space, floor to ceiling glass exteriors and highly visible exterior signage. Both buildings which comprise the Vertex Pharmaceuticals HQ Property, 11 Fan Pier Boulevard and 50 Northern Avenue, have achieved LEED Gold certification. The two buildings that comprise the Vertex Pharmaceuticals HQ Property are connected via a skybridge between the 5th and 6th floors. Parking at the Vertex Pharmaceuticals HQ Property is provided by a 3-level, 740-space subterranean parking garage, resulting in a parking ratio of 0.65 spaces per 1,000 sq. ft. of net rentable area.
The Vertex Pharmaceuticals HQ Property was constructed in 2013 as a built-to-suit headquarters for Vertex Pharmaceuticals Incorporated (“Vertex Pharmaceuticals” or “Vertex”), which leases 100.0% of the Vertex Pharmaceuticals HQ Property’s office, lab, storage and mechanical space. The borrower sponsor invested approximately $161.6 million ($149.30 PSF) for Vertex Pharmaceuticals’ initial tenant improvement allowance. In addition, Vertex Pharmaceuticals subsequently invested a reported $75.0 million ($69.29 PSF) to convert the lower floors of the towers to lab space. Vertex Pharmaceuticals’ leases run through December 31, 2028, each with one, ten-year extension option at fair market rent remaining. Vertex Pharmaceuticals is focused on developing and commercializing therapies for the treatment of cystic fibrosis and currently has two marketed medicines to treat cystic fibrosis: ORKAMBI and KALYDECO. ORKAMBI was approved by the United States Food and Drug Administration (“FDA”) in July 2015 and the European Commission in November 2015 for the treatment of patients with cystic fibrosis 12 years of age and older. KALYDECO was approved in 2012 by the FDA and European Commission as a treatment for patients with cystic fibrosis six years of age and older. In addition, Vertex Pharmaceuticals has multiple other development programs in the field of cystic fibrosis, as well as other early- and mid-stage development programs in the areas of oncology, pain and neurology.
The Vertex Pharmaceuticals HQ Property features 49,906 sq. ft. of ground floor retail and associated storage space leased to a variety of complementary tenants, including Frank Anthony’s, a gourmet market and specialty grocer, Babbo Enoteca Fp, Llc, an Italian restaurant and pizzeria, B.good, a health-conscious fast-food chain restaurant, Leader Bank, a retail bank branch, Starbucks, and Bright Horizons Children’s Center, a daycare and preschool.
Environmental Matters.The Phase I environmental report dated June 10, 2016 reported that the groundwater beneath the Vertex Pharmaceuticals HQ Property exceeded the United States Environmental Protection Agency National Pollution Discharge Elimination System limits for certain metals (cyanide, antimony, copper, lead, iron, and zinc). There is currently an installed groundwater treatment system designed to manage the condition per EPA guidance and as such, the condition is considered a controlled recognized environmental condition. In the event that the environmental indemnitor does not have a long-term unsecured debt rating of at least “BBB-” by Fitch and S&P and “Baa3” by Moody’s, the borrower is required to obtain an environmental impairment liability insurance policy as described in (and subject to the limitations described in) the Prospectus under “Description of the Mortgage Pool—Environmental Considerations.”
Major Tenant.
Vertex(1,082,417 sq. ft.; 95.5% of NRA; 96.6% of U/W Base Rent) Vertex Pharmaceuticals (NASDAQ: VRTX) is a global biotechnology company that was founded in Cambridge, Massachusetts in 1989. Vertex Pharmaceuticals has leased 95.5% of the net rentable area on a triple-net basis with a 12-year remaining term and one, ten-year renewal option at fair market rent. Vertex Pharmaceuticals has no termination or contraction options.
| Vertex Pharmaceuticals Leased Space(1) | |||||
| Building | Office NRSF | Lab NRSF | Mechanical NRSF | Storage NRSF | Total Vertex Leased NRSF |
| 50 Northern Avenue | 211,685 | 253,800 | 87,752 | 2,868 | 556,105 |
| 11 Fan Pier Boulevard | 217,462 | 222,870 | 76,984 | 8,996 | 526,312 |
| Total | 429,147 | 476,670 | 164,736 | 11,864 | 1,082,417 |
| (1) | Certain of Vertex Pharmaceuticals’ net rentable sq. ft. are approximately 164,736 sq. ft. of mechanical space located on the 8th floor and penthouse areas. According to the appraisal, it is a market standard that lab tenants pay full rent for all mechanical areas. Were the subject converted to a multi-tenant office use in the future, the Vertex Pharmaceuticals HQ Property’s net rentable area would most likely be reduced by the amount of the mechanical areas. Vertex Pharmaceuticals currently pays $62.50 PSF for its office, lab and mechanical space and $25.00 PSF for its storage space. |
A-3-92
50 Northern Avenue & 11 Fan Pier Boulevard Boston, MA 02110 | Collateral Asset Summary – Loan No. 9 Vertex Pharmaceuticals HQ | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $30,000,000 35.5% 6.28x 17.9% |
The Market.According to the appraisal, the Vertex Pharmaceuticals HQ Property is located in the Seaport District of downtown Boston, Massachusetts overlooking Boston Harbor. The Seaport District has benefitted from infrastructure improvements stemming from the completion of Boston’s decades-long “Big Dig” project that concluded in 2007. The Big Dig project converted Interstate 93 from an elevated highway to an underground tunnel through the Boston central business district, and included the construction of the Ted Williams Tunnel which connects Interstate 90 to Logan International Airport under the Seaport District and Boston Harbor. With the conversion of Interstate 93 to an underground tunnel, access from the Boston central business district over the Fort Point Channel to the Seaport District was improved. The Vertex Pharmaceuticals HQ Property benefits from easy access to mass transit, located a block from the Silver Line Courthouse T Station, an approximately 15 minute walk from South Station, and an approximately 10-minute drive from Logan International Airport. Attractions in the Seaport District include the Boston Convention and Exhibition Center, the Seaport Boston Hotel & World Trade Center, the Institute of Contemporary Art/Boston and the Blue Hills Bank Pavilion amphitheater.
The Vertex Pharmaceuticals HQ Property is located in the Seaport office submarket, which contains 8.7 million sq. ft. of office space, and is part of the greater Boston central business district office market, which includes 66.6 million sq. ft. of office space, as of the first quarter of 2016. Recent corporate relocations to the Seaport office submarket include PricewaterhouseCoopers, which executed a 330,000 sq. ft. lease and relocated over 2,500 employees to its recently completed building in Seaport Square; Goodwin Procter LLP, which committed to a large built-to-suit office project totaling 378,000 sq. ft. that will bring over 800 employees to the submarket; and GE, which announced plans to move its corporate headquarters from Connecticut to the Seaport District in Boston and plans to relocate approximately 800 jobs to the area. According to the appraisal, as of the fourth quarter of 2015, the Seaport office submarket exhibited a vacancy rate of 6.4% with asking class A rents of $63.47 PSF on a triple net basis, compared to a vacancy rate of 8.4% and asking class A rents of $58.58 PSF on a triple net basis for the central business district office market as a whole.
The table below summarizes the comparable office leases as determined by the appraisal.
| Summary of Comparable Leases(1) | |||||||
| Property | Tenants | Distance From Subject | Net Rentable Area | Lease Area (SF) | Base Rent | Expense Basis | Lease Term (years) |
| Vertex Pharmaceuticals HQ Property | Vertex | NAP | 1,133,723(2) | 1,082,417(2) | $67.06(2) | NNN | 15.1(2) |
| Pier IV | Confidential | 0.2 miles | 376,555 | 200,000 | $50.00 | NNN | 15.5 |
| 675 West Kendall Street | Alnylam Pharmaceuticals | 2.3 miles | 302,919 | 295,000 | $67.00 | NNN | 15.0 |
| 60 Binney Street | Bluebird Bio | 2.3 miles | 530,478 | 267,278 | $72.50 | NNN | 10.3 |
| 320 Bent Street | Momenta Pharmaceuticals | 2.8 miles | 184,405 | 105,000 | $68.00 | NNN | 10.0 |
| 100-110 Northern Avenue | Goodwin Procter | 0.2 miles | 516,000 | 378,000 | $53.00 | NNN | 16.5 |
| 125 High Street | Wells Fargo | 0.4 miles | 980,347 | 150,816 | $37.00 | NNN | 15.0 |
| 101 Seaport Boulevard | PricewaterhouseCoopers | 0.1 miles | 439,058 | 330,000 | $39.00 | NNN | 15.0 |
| Total / Wtd. Avg.(3): | 3,329,762 | $54.90 | |||||
| (1) | Source: Appraisal. |
| (2) | Source: Rent Roll dated April 30, 2016. |
| (3) | Total / Wtd. Avg. excludes the Vertex Pharmaceuticals HQ Property. |
The table below summarizes comparable property sales as determined by the appraisal.
| Summary of Comparable Sales(1) | |||||||
| Property | Location | Net Rentable Area | Date of Sale | Sales Price PSF | Occupancy | Year Built | |
| Vertex Pharmaceuticals HQ Property | Boston, MA | 1,133,723(2) | NAP | NAP | 99.9%(2) | 2013 | |
| 101 Seaport | Boston, MA | 439,058 | 4/2016 | $1,029 | 92.0% | 2015 | |
| Alexandria Center at Kendall Square | Cambridge, MA | 305,212 | 12/2015 | $890 | 100.0% | 2013 | |
| 640 Memorial Drive | Cambridge, MA | 225,400 | 1/2015 | $783 | 100.0% | 1916 | |
| One Memorial | Cambridge, MA | 352,905 | 2/2014 | $1,148 | 100.0% | 1985 | |
| Total / Wtd. Avg.(3): | 1,322,575 | $987 | |||||
| (1) | Source: Appraisal. |
| (2) | Source: Rent Roll dated April 30, 2016. |
| (3) | Total / Wtd. Avg. excludes the Vertex Pharmaceuticals HQ Property. |
A-3-93
50 Northern Avenue & 11 Fan Pier Boulevard Boston, MA 02110 | Collateral Asset Summary – Loan No. 9 Vertex Pharmaceuticals HQ | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $30,000,000 35.5% 6.28x 17.9% |
Cash Flow Analysis.
| Cash Flow Analysis | ||||
| 2014 | 2015 | U/W | U/W PSF | |
| Base Rent(1) | $ 43,822,419 | $68,315,712 | $75,155,622 | $66.29 |
| Gross Potential Rent | $43,822,419 | $68,315,712 | $75,155,622 | $66.29 |
| Total Recoveries(2) | 8,044,479 | 15,865,672 | 16,894,457 | 14.90 |
| Total Other Income | 2,194,452 | 3,998,740 | 3,710,112 | 3.27 |
| Less: Vacancy(3) | 0 | 0 | (2,336,660) | (2.06) |
| Effective Gross Income | $54,061,350 | $ 88,180,123 | $93,423,532 | $82.40 |
| Total Operating Expenses | 10,133,318 | 17,255,195 | 17,361,124 | 15.31 |
| Net Operating Income | $43,928,033 | $70,924,928 | $76,062,408 | $67.09 |
| TI/LC | 0 | 0 | 0 | 0.00 |
| Capital Expenditures | 0 | 0 | 283,431 | 0.25 |
| Net Cash Flow | $43,928,033 | $70,924,928 | $75,778,977 | $66.84 |
| (1) | U/W Base Rent includes $5,382,425 in straight line rent for all of Vertex Pharmaceuticals’ space and $227,225 in contractual step rents for all retail leases through May 2017. |
| (2) | Total Recoveries include, among other things, reimbursements for real estate taxes. Vertex Pharmaceuticals currently benefits from a tax increment financing program (the “TIF Program”), which expires June 30, 2018. The TIF Program may be revoked or reduced prior to such expiration date if Vertex Pharmaceuticals does not satisfy certain employment expansion obligations. The TIF Program has been estimated to provide a tax savings to Vertex Pharmaceuticals of approximately $9,000,000 from its inception in 2011 to its anticipated expiration date. U/W Net Cash Flow assumes full real estate taxes are due and are fully reimbursed by Vertex Pharmaceuticals. |
| (3) | U/W Vacancy represents 2.4% of gross income. |
Property Management. The Vertex Pharmaceuticals HQ Property is managed by The RMR Group LLC, an affiliate of the borrower.
Lockbox / Cash Management. The Vertex Pharmaceuticals HQ Whole Loan is structured with a hard lockbox and springing cash management. The Vertex Pharmaceuticals HQ Whole Loan documents also require that all rents received by the borrower or the property manager be deposited into the lockbox account within one business day of receipt. Prior to the occurrence of a Cash Management Sweep Period (as defined below), all cash flow is distributed to the borrower. During a Cash Management Sweep Period, all cash flow is swept to a lender-controlled cash management account and applied as provided in the Vertex Pharmaceuticals HQ Whole Loan documents.
A “Cash Management Sweep Period” means a period:
(a) commencing upon an event of default under the Vertex Pharmaceuticals HQ Whole Loan documents and ending at such time as such event of default has been cured in accordance with such loan documents, or otherwise to the lender’s satisfaction;
(b) commencing upon an event of default under the Vertex Pharmaceuticals HQ Mezzanine Loan and ending at such time as such event of default has been cured in accordance with the Vertex Pharmaceuticals HQ Mezzanine Loan documents, or otherwise to the mezzanine lender’s satisfaction;
(c) commencing upon a Vertex Lease Event (as defined below) and ending at such time as (i) no monetary or material non-monetary defaults or breaches by Vertex Pharmaceuticals exist under the Vertex Pharmaceuticals lease, or (ii) the borrower enters into one or more replacement leases with tenants reasonably approved by the lender, which new leases result in a combined debt yield on the Vertex Pharmaceuticals HQ Whole Loan and the Vertex Pharmaceuticals HQ Mezzanine Loan (the “Vertex Combined Debt Yield”) of at least 10% for two consecutive calendar quarters (a “Vertex Re-Leasing Event”) tested as of the end of each calendar quarter;
(d) commencing when, as of the last day of any calendar quarter from and after a Vertex Re-Leasing Event, the Vertex Combined Debt Yield is less than 8.5%, until such time as the Vertex Combined Debt Yield is at least 8.5% for two consecutive calendar quarters; or
(e) from and after the occurrence of the Anticipated Repayment Date with respect to the Vertex Pharmaceuticals HQ Whole Loan.
A “Vertex Lease Event” means any monetary or material non-monetary default or breach by Vertex Pharmaceuticals under the lease between the borrower and Vertex Pharmaceuticals (as the same may be amended, modified, supplemented, extended, replaced and/or restated from time to time in accordance with the Vertex Pharmaceuticals HQ Whole Loan documents) beyond any applicable notice and cure periods contained in such lease.
Initial Reserves. At origination, no upfront reserves were required with respect to the Vertex Pharmaceuticals HQ Loan.
A-3-94
50 Northern Avenue & 11 Fan Pier Boulevard Boston, MA 02110 | Collateral Asset Summary – Loan No. 9 Vertex Pharmaceuticals HQ | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $30,000,000 35.5% 6.28x 17.9% |
Ongoing Reserves. During the continuance of a Cash Management Sweep Period, the borrower is required to deposit on each monthly payment date (i) an amount equal to one-twelfth of the taxes the lender estimates will be payable in the next 12 months and (ii) an amount equal to one-twelfth of the insurance premiums the lender estimates will be payable in the next 12 months; provided that the requirement to deposit insurance premiums will be suspended if the borrower provides satisfactory evidence to the lender that the insurance coverage required by the Vertex Pharmaceuticals HQ Whole Loan documents is being provided under acceptable blanket insurance policies and the insurance premiums for such policies have been prepaid for not less than one year in advance (or for policies delivered at loan origination, such shorter period as such policies are in effect).
During the continuance of a Cash Management Sweep Period, all excess cash flow, after payment of interest on the Vertex Pharmaceuticals HQ Whole Loan and, unless there is an event of default under the Vertex Pharmaceuticals HQ Whole Loan, interest on the Vertex Pharmaceuticals HQ Mezzanine Loan (including interest at the Mezzanine Revised Interest Rate), is required to be deposited into and held in a cash trap subaccount (the “Cash Trap Funds”); provided, that during a Cash Management Sweep Period resulting solely from the occurrence of a Vertex Lease Event, all Cash Trap Funds in excess of $75.0 million are required to be released to the borrower. In addition, during a Cash Management Sweep Period (a) in the event that borrower receives a fee, payment or other compensation from any tenant relating to or in exchange for the termination of such tenant’s lease, the borrower is required to deposit such lease termination fee (the “Lease Termination Fund”) with the lender and (b) resulting solely from the occurrence of a Vertex Lease Event, the borrower may obtain a release of the Cash Trap Funds upon delivery to the lender of either (i) a letter of credit meeting the requirements of the Vertex Pharmaceuticals HQ Whole Loan documents, or (ii) in the event that the guarantor, Senior Housing Properties Trust, possesses a long-term unsecured debt rating of at least “BBB-” by Fitch and S&P and “Baa3” by Moody’s, an additional guaranty, in each case, in an amount equal to the portion of the Cash Trap Funds requested to be released; provided that the right to provide an additional guaranty is conditioned upon the borrower delivering a new non-consolidation opinion and such other legal opinions as may be reasonably requested by the lender in connection with the additional guaranty. Following the Anticipated Repayment Date, provided no event of default is continuing under the Vertex Pharmaceuticals HQ Whole Loan, Cash Trap Funds are required to be applied to prepay the principal of the Vertex Pharmaceuticals HQ Whole Loan and the Vertex Pharmaceuticals HQ Mezzanine Loan, pro rata, based on their respective outstanding principal balances.
Current Mezzanine or Subordinate Indebtedness. Morgan Stanley Mortgage Capital Holdings LLC and Citigroup Global Markets Realty Corp. have made a $195.0 million mezzanine loan (the “Vertex Pharmaceuticals HQ Mezzanine Loan”) to SNH Mez LLC, the sole member of the borrower under the Vertex Pharmaceuticals HQ Whole Loan.
The Vertex Pharmaceuticals HQ Mezzanine Loan has the same Anticipated Repayment Date and stated maturity date as the Vertex Pharmaceuticals HQ Whole Loan. The Vertex Pharmaceuticals HQ Mezzanine Loan accrues interest at an interest rate of 5.1250%per annum (the “Mezzanine Initial Interest Rate”) prior to the Anticipated Repayment Date, accrues interest based on the same formula as the Vertex Pharmaceuticals HQ Whole Loan on and after its Anticipated Repayment Date (except based on the Mezzanine Initial Interest Rate rather than the Initial Interest Rate) (the “Mezzanine Revised Interest Rate”), payable currently, and requires payments of interest only until its Anticipated Repayment Date. On or after the Anticipated Repayment Date, the Vertex Pharmaceuticals HQ Mezzanine Loan is entitled to itspro rata share of Cash Trap Funds as described above under “Ongoing Reserves”.
Future Mezzanine or Subordinate Indebtedness Permitted. None.
A-3-95
50 Northern Avenue & 11 Fan Pier Boulevard Boston, MA 02110 | Collateral Asset Summary – Loan No. 9 Vertex Pharmaceuticals HQ | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $30,000,000 35.5% 6.28x 17.9% |
A-3-96
50 Northern Avenue & 11 Fan Pier Boulevard Boston, MA 02110 | Collateral Asset Summary – Loan No. 9 Vertex Pharmaceuticals HQ | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI��Debt Yield: | $30,000,000 35.5% 6.28x 17.9% |
A-3-97
60 East 55th Street New York, NY 10022 | Collateral Asset Summary – Loan No. 10 60 East 55th Street | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $25,000,000 45.5% 1.40x 8.9% |
A-3-98
60 East 55th Street New York, NY 10022 | Collateral Asset Summary – Loan No. 10 60 East 55th Street | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $25,000,000 45.5% 1.40x 8.9% |
| Mortgage Loan Information | |
| Loan Seller: | CGMRC |
| Loan Purpose: | Refinance |
| Sponsor: | Aby Rosen; Michael Fuchs |
| Borrower: | R&F 55th Street Commercial Owner LLC |
| Original Balance: | $25,000,000 |
| Cut-off Date Balance: | $25,000,000 |
| % by Initial UPB: | 3.6% |
| Interest Rate: | 4.2700% |
| Payment Date: | 6thof each month |
| First Payment Date: | September 6, 2016 |
| Maturity Date: | August 6, 2026 |
| Amortization: | 360 months |
| Additional Debt: | None |
| Call Protection: | L(24), D(92), O(4) |
| Lockbox / Cash Management: | Hard / In Place |
| Reserves(1) | ||
| Initial | Monthly | |
| Taxes: | $128,086 | $64,043 |
| Insurance: | $0 | Springing |
| Replacement: | $0 | $615 |
| Sweetgreen Lease Commencement Holdback: | $1,545,000 | NAP |
| Free Rent Reserve: | $257,500 | NAP |
| Unfunded Tenant Obligations: | $250,000 | NAP |
| Condominium Common Charge Fund: | $12,455 | NAP |
| Financial Information | ||
| Cut-off Date Balance / Sq. Ft.: | $677 | |
| Balloon Balance / Sq. Ft.: | $543 | |
| Cut-off Date LTV: | 45.5% | |
| Balloon LTV: | 36.5% | |
| Underwritten NOI DSCR: | 1.50x | |
| Underwritten NCF DSCR: | 1.40x | |
| Underwritten NOI Debt Yield: | 8.9% | |
| Underwritten NCF Debt Yield: | 8.3% | |
| Underwritten NOI Debt Yield at Balloon: | 11.0% | |
| Underwritten NCF Debt Yield at Balloon: | 10.4% | |
| Property Information | |
| Single Asset / Portfolio: | Single Asset |
| Property Type: | Office / Retail |
| Collateral: | Fee Simple |
| Location: | New York, NY |
| Year Built / Renovated: | 2005 / NAP |
| Total Sq. Ft.: | 36,928 |
| Property Management: | RFR Realty LLC |
| Underwritten NOI: | $2,212,883 |
| Underwritten NCF: | $2,075,403 |
| Appraised Value: | $55,000,000 |
| Appraisal Date: | June 1, 2016 |
| Historical NOI | |
| Most Recent NOI: | $1,968,999 (T-12 June 30, 2016) |
| 2015 NOI: | $1,697,084 (December 31, 2015) |
| 2014 NOI: | $1,674,687 (December 31, 2014) |
| 2013 NOI: | $1,984,311 (December 31, 2013) |
| Historical Occupancy | |
| Most Recent Occupancy(2): | 100.0% (June 23, 2016) |
| 2015 Occupancy: | 100.0% (December 31, 2015) |
| 2014 Occupancy: | 100.0% (December 31, 2014) |
| 2013 Occupancy: | 100.0% (December 31, 2013) |
| (1) | See “Initial Reserves” and “Ongoing Reserves” herein. |
| (2) | Most Recent Occupancy includes the tenant Sweetgreen (4,589 sq. ft., 12.4% of NRA), which had a lease commencement date deemed to be July 25, 2016. See “Major Tenants” herein. |
A-3-99
60 East 55th Street New York, NY 10022 | Collateral Asset Summary – Loan No. 10 60 East 55th Street | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $25,000,000 45.5% 1.40x 8.9% |
| Tenant Summary | |||||||
Tenant | Ratings (Fitch/Moody’s/S&P) | Net Rentable Area (Sq. Ft.) | % of Net Rentable Area | U/W Base Rent PSF | % of Total U/W Base Rent | Lease Expiration | |
| The Core Club | NR/NR/NR | 32,339 | 87.6% | $65.52 | 80.4% | 6/30/2026(1) | |
| Sweetgreen | NR/NR/NR | 4,589 | 12.4% | $112.22 | 19.6% | 1/31/2029(2) | |
| Total Occupied Collateral | 36,928 | 100.0% | $71.32 | 100.0% | |||
| Vacant | 0 | 0.0% | |||||
| Total | 36,928 | 100.0% | |||||
| (1) | The Core Club has two, five-year extension options with 18 months’ written notice prior to its lease expiration. The Core Club has no termination options. |
| (2) | Sweetgreen has one, five-year extension option with 12 months’ written notice prior to its lease expiration. |
| Lease Rollover Schedule(1) | ||||||||
| Year | # of Leases Expiring | Total Expiring Sq. Ft. | % of Total Sq. Ft. Expiring | Cumulative Sq. Ft. Expiring | Cumulative % of Sq. Ft. Expiring | Annual U/W PSF | % U/W Rolling | Cumulative % of U/W Base Rent |
| MTM | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2016 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2017 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2018 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2019 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2020 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2021 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2022 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2023 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2024 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2025 | 0 | 0 | 0.0% | 0 | 0.0% | $0.00 | 0.0% | 0.0% |
| 2026 | 1 | 32,339 | 87.6% | 32,339 | 87.6% | $65.52 | 80.4% | 80.4% |
| Thereafter | 1 | 4,589 | 12.4% | 36,928 | 100.0% | $112.22 | 19.6% | 100.0% |
| Vacant | NAP | 0 | 0.0% | 36,928 | 100.0% | NAP | NAP | |
| Total / Wtd. Avg. | 2 | 36,928 | 100.0% | $71.32 | 100.0% | |||
| (1) | Certain tenants have lease termination options that may become exercisable prior to the originally stated expiration date of the tenant lease and that are not considered in the lease rollover schedule. |
The Loan. The 60 East 55th Street loan (the “60 East 55th Street Loan”) is a fixed rate loan secured by the borrower’s fee simple interest in a 36,928 sq. ft. mixed use property consisting of four commercial condominium units and located at 60 East 55th Street in New York, New York (the “60 East 55th Street Property”), with an original principal balance and cut-off date balance of $25.0 million. The 60 East 55th Street Loan has a 10-year term and amortizes on a 30-year schedule. The 60 East 55th Street Loan accrues interest at a fixed rate of 4.2700%. The 60 East 55th Street Loan proceeds were used to retire existing debt on the 60 East 55th Street Property of approximately $6.5 million, fund upfront reserves of approximately $2.2 million, pay closing costs of approximately $1.1 million and return approximately $15.3 million in equity to the borrower sponsor. Based on the appraised value of $55.0 million as of June 1, 2016, the Cut-Off Date LTV is 45.5%. The most recent prior financing of the 60 East 55th Street Property was not included in a securitization.
| Sources and Uses | ||||||
| Sources | Proceeds | % of Total | Uses | Proceeds | % of Total | |
| Loan Amount | $25,000,000 | 99.7% | Loan Payoff | $6,540,271 | 26.1% | |
| Other Sources | $75,000 | 0.3% | Reserves | $2,193,041 | 8.7% | |
| Closing Costs | $1,068,409 | 4.3% | ||||
| Return of Equity | $15,273,278 | 60.9% | ||||
| Total Sources | $25,075,000 | 100.0% | Total Uses | $25,075,000 | 100.0% | |
A-3-100
60 East 55th Street New York, NY 10022 | Collateral Asset Summary – Loan No. 10 60 East 55th Street | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $25,000,000 45.5% 1.40x 8.9% |
The Borrower / Sponsor. The borrower, R&F 55th Street Commercial Owner LLC, a single purpose Delaware limited liability company structured to be bankruptcy-remote, has one independent director in its organizational structure. The sponsors of the borrowers and non-recourse carve-out guarantors are Aby Rosen and Michael Fuchs, joint and severally.
Aby Rosen and Michael Fuchs are principals of RFR Holding LLC (“RFR”). RFR is a fully integrated real estate investment firm based in New York City with a core focus on select urban markets in the United States and Germany. The company was founded in early 1991 by Aby Rosen and Michael Fuchs. Some of RFR’s major holdings include 160 Fifth Avenue, 375 Park Avenue, 390 Park Avenue, 17 State Street, 757 Third Avenue, 275 Madison Avenue, 980 Madison Avenue, the Paramount Hotel, the Gramercy Park Hotel, the W South Beach, 90 Fifth Avenue, 190 Bowery, the Dumbo Heights Brooklyn Portfolio, the Stamford Plaza Portfolio, 530 Park Avenue, and the Miracle Mile Shops.
The Property. The 60 East 55th Street Property is located in the Midtown East neighborhood of Manhattan. The 60 East 55thStreet Property consists of four commercial condominiums located within the cellar, grade, and 2nd through 6thfloors of a 41-story mixed use Class A office building developed by the borrower sponsor in 2003. The residential units within the 7th through 41st floors are not part of the collateral. The floor plates in the building range from 4,383 to 8,078 sq. ft. with one passenger elevator servicing the building. The 60 East 55th Street Property is currently 100.0% leased to 1 office tenant and 1 retail tenant. The 60 East 55thStreet Property contains The Core Club, a private club on a portion of the cellar, ground floor, and 2ndthrough 6th floors. The remainder of the 60 East 55th Street Property is located on the grade and cellar level.
The Core Club space is 32,339 sq. ft. and contains an 86-seat restaurant with a 15-seat private dining room, bar, lounge, and terrace, a fitness center, a library, private conference rooms and a skin care spa. The retail space leased to Sweetgreen is 4,589 sq. ft. with 2,439 sq. ft. on the grade level and 2,150 sq. ft. on the cellar level and fronts along East 55th Street.
Environmental Matters.The Phase I environmental report dated June 6, 2016 recommended no further action at the 60 East 55th Street Property.
Major Tenants.
The Core Club(32,339 sq. ft.; 87.6% of NRA; 80.4% of U/W Base Rent) is a private, members only organization that provides access to experiences, services, insights, culture, entertainment and community. The Core Club’s community is a diverse, self-selecting group hailing from a wide range of industries. The Core Club has approximately 1,400 members and requires a $50,000 initiation fee to join and an annual fee of $15,000. The club has reported average annual EBITDA of over $1.1 million over the past 4 years. The tenant The Core Club occupies its space as a physical culture establishment, which requires a special permit issued by the New York Board of Standards and Appeals. See “BSA Approval” herein.
The Core Club has been in occupancy since 2004 and has recently executed a new ten-year lease. The lease has two, five-year extension options with 18 months’ written notice prior to its lease expiration. The Core Club has no termination options.
Sweetgreen(4,589 sq. ft.; 12.4% of NRA; 19.6% of U/W Base Rent) is a healthy, seasonal, fast-casual dining concept with 40 locations throughout the East Coast and California. Founded in 2007, Sweetgreen has raised over $75 million in funding and is well-known for its effective uses of sustainable products and technology. The company is currently private and has no publicly rated debt.
Sweetgreen executed a long term lease with one, five-year extension option with 12 months’ written notice prior to its lease expiration.
The Market.The 60 East 55th Street Property is located on the south side of East 55th Street between Madison and Park Avenues in the Plaza District neighborhood of Midtown Manhattan. The Plaza District derives its name from the landmark Plaza Hotel, situated in the northern part of the district at the intersection of 5th Avenue and Central Park South. The district is considered to be bounded by 47th Street to the south, 65th Street to the north, Avenue of the Americas to the west, and Lexington Avenue to the east. The Plaza District is surrounded by Lenox Hill and Central Park to the north, Turtle Bay and Murray Hill to the east, Midtown South to the south, and the Theater and Garment Districts to the west. Transportation within the neighborhood is primarily via public bus or subway. Madison Avenue is a major thoroughfare for several bus routes including the northbound 1, 2, 3, 4, and Q 32 lines, as well as numerous express bus routes to outer lying boroughs.
According to the appraisal, the 60 East 55th Street Property is located within the Madison/Fifth Avenue office submarket of Midtown Manhattan which contains 24.2 million sq. ft. of office space. The overall vacancy rate in the Madison/Fifth Avenue submarket was 13.3% at the end of the first quarter of 2016 which is primarily due to the 31.7% vacancy at the Solow Building. The overall weighted average asking rent during the first quarter of 2016 was $78.42 PSF.
According to the appraisal, recent retail leases in competitive buildings have rental rates ranging from $135.00 PSF to $420.00 PSF The appraisal concluded to a $175.00 PSF rental rate on the grade level space and $40.00 PSF on the cellar level space for a blended rental rate of $111.75 PSF for the retail space at the 60 East 55th Street Property.
The table below summarizes the comparable office leases as determined by the appraisal.
A-3-101
60 East 55th Street New York, NY 10022 | Collateral Asset Summary – Loan No. 10 60 East 55th Street | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $25,000,000 45.5% 1.40x 8.9% |
| Summary of Comparable Leases(1) | |||||||
| Property | Tenants | Net Rentable Area (Sq. Ft.) | Tenant Size (Sq. Ft.) | Base Rent PSF | Expense Basis | TI’s PSF | Lease Term (years) |
| 60 East 55th Street Property | The Core Club(2) | 36,928(2) | 32,339(2) | $65.52(2) | Gross | $50.00 | 10(2) |
| 711 Fifth Avenue | SunTrust Bank | 270,243 | 22,832 | $70.50 | Gross | $60.00 | 8 |
| 880 Fifth Avenue | Activity LLC | 158,000 | 9,400 | $79.00 | Gross | $75.00 | 10 |
| 650 Fifth Avenue | Security Identity LLC | 327,570 | 10,793 | $70.00 | Gross | $110.00 | 10 |
| 437 Madison Avenue | HT Capital Advisors | 712,117 | 4,092 | $80.00 | Gross | $0.00 | 5 |
| 600 Fifth Avenue | Savoy Bank | 350,000 | 8,009 | $72.00 | Gross | $55.00 | 10 |
| 527 Madison Avenue | CCS Fundraising | 196,446 | 12,550 | $68.00 | Gross | $90.00 | 13 |
| 70 East 55th Street | Traust Sollus | 142,023 | 5,835 | $65.50 | Gross | $15.00 | 7 |
| 590 Fifth Avenue | Proco Global | 80,211 | 5,060 | $65.00 | Gross | $50.00 | 10 |
| 654 Madison Avenue | LCA Capital | 130,000 | 4,277 | $80.00 | Gross | $50.00 | 7 |
| 579 Fifth Avenue | Hollis Park | 133,047 | 7,620 | $71.00 | Gross | $50.00 | 10 |
| Total / Wtd. Avg.(3): | 2,499,657 | $71.40 | |||||
| (1) | Source: Appraisal. |
| (2) | Source: Rent Roll dated June 23, 2016. |
| (3) | Total / Wtd. Avg. excludes the 60 East 55th Street Property. |
The table below summarizes comparable property sales as determined by the appraisal.
| Summary of Comparable Sales(1) | |||||||
| Property | Location | Net Rentable Area | Date of Sale | Sales Price PSF | Occupancy | Year Built/ Renovated | |
| 60 East 55th Street Property | New York, NY | 36,928(2) | NAP | NAP | 100.0%(2) | 2005/NAP | |
| 430 West 15th Street | New York, NY | 97,959 | 2/2016 | $1,091.16 | 100.0% | 1950/2015 | |
| 670 Broadway | New York, NY | 76,160 | 11/2015 | $1,470.59 | 78.0% | 1893/2015 | |
| 437 West 16th Street | New York, NY | 24,101 | 6/2015 | $1,842.25 | 100.0% | 1920/2009 | |
| 5 East 59th Street | New York, NY | 46.074 | 6/2015 | $1,975.08 | 45.0% | 1960/1984 | |
| 224 West 57th Street | New York, NY | 169,489 | 5/2015 | $1,280.32 | 99.0% | 1909/2010 | |
| 200 Lafayette Street | New York, NY | 83,775 | 5/2015 | $1,492.09 | 100.0% | 1908/2012 | |
| 837 Washington Street | New York, NY | 63,131 | 2/2015 | $3,010.12 | 100.0% | 2014/NAP | |
| Total / Wtd. Avg.(3): | 514,661 | $1,545.50 | |||||
| (1) | Source: Appraisal. |
| (2) | Source: Rent Roll dated June 23, 2016. |
| (3) | Total / Wtd. Avg. excludes the 60 East 55th Street Property. |
A-3-102
60 East 55th Street New York, NY 10022 | Collateral Asset Summary – Loan No. 10 60 East 55th Street | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $25,000,000 45.5% 1.40x 8.9% |
Cash Flow Analysis.
| Cash Flow Analysis | ||||||
| 2013 | 2014 | 2015 | T-12 6/30/2016 | U/W | U/W PSF | |
| Base Rent | $1,808,039 | $1,862,280 | $1,918,148 | $2,143,148 | $2,633,834 | $71.32 |
| Gross Potential Rent | $1,808,039 | $1,862,280 | $1,918,148 | $2,143,148 | $2,633,834 | $71.32 |
| Total Recoveries | 836,434 | 561,516 | 667,245 | 666,685 | 821,062 | 22.23 |
| Total Other Income | 0 | 0 | 0 | 0 | 0 | 0.00 |
| Less: Vacancy(1) | 0 | 0 | 0 | 0 | (172,745) | (4.68) |
| Effective Gross Income | $2,644,473 | $2,423,796 | $2,585,393 | $2,809,833 | $3,282,152 | $88.88 |
| Total Operating Expenses | 660,162 | 749,109 | 888,310 | 840,834 | 1,069,269 | 28.96 |
| Net Operating Income | $1,984,311 | $1,674,687 | $1,697,084 | $1,968,999 | $2,212,883 | $59.92 |
| TI/LC | 0 | 0 | 0 | 0 | 130,094 | 3.52 |
| Capital Expenditures | 0 | 0 | 0 | 0 | 7,386 | 0.25 |
| Net Cash Flow | $1,984,311 | $1,674,687 | $1,697,084 | $1,968,999 | $2,075,403 | $56.20 |
| (1) | U/W Vacancy represents 5.0% of gross income, which represents submarket vacancy. |
Property Management. The 60 East 55th Street Property is managed by RFR Realty LLC. RFR Realty LLC, a borrower affiliated entity, is headquartered in New York City and responsible for all activities and services related to the operation of RFR’s portfolio of commercial properties and development projects.
Lockbox / Cash Management. The 60 East 55th Street Loan is structured with a hard lockbox and in-place cash management. On the origination date, the borrower was required to deliver tenant direction letters instructing such tenants to deliver rents directly into the clearing account. Funds in the clearing account will be transferred on a daily basis to a cash management account controlled by the lender. All funds in the cash management account will be applied by the lender to payments of debt service, required reserves, and other items required under the 60 East 55th Street Loan documents, and during the continuance of a Trigger Period (as defined below) remaining cash flow will be held by the lender as additional collateral for the 60 East 55th Street Loan.
A “Trigger Period” means a period commencing upon the earliest of (i) the occurrence of an event of default under the 60 East 55th Street Loan documents, (ii) the debt service coverage ratio being less than 1.15x, and (iii) the occurrence of a Major Tenant Trigger Period (as defined below), and expiring upon (x) with regard to any Trigger Period commenced in connection with clause (i) above, the cure (if applicable) of such event of default, (y) with regard to any Trigger Period commenced in connection with clause (ii) above, the date that the debt service coverage ratio is equal to or greater than 1.15x for one calendar quarter, and (z) with regard to any Trigger Period commenced in connection with clause (iii) above, a Major Tenant Trigger Period ceasing to exist.
A “Major Tenant Trigger Period” means a period: (a) commencing upon the first to occur of (i) a Major Tenant (as defined below) being in major non-monetary default or default as a result of such Major Tenant’s failure to pay under the Major Tenant lease beyond the applicable notice or cure period, (ii) a Major Tenant failing to be in actual, physical possession of its space, failing to be open to the public for business during customary hours and/or “going dark” in its space, (iii) a Major Tenant giving notice that it is terminating its lease for all or any portion of its space, (iv) any termination, cancellation or failure to be in full force and effect of any Major Tenant lease, (v) any bankruptcy or similar insolvency of any Major Tenant, and (vi) a Major Tenant failing to extend or renew its lease on or prior to the date which is the earlier to occur of (A) two years prior to the expiration of the term of the Major Tenant lease and (B) the last day of the renewal or extension notice period set forth in the Major Tenant lease and (b) expiring upon the first to occur of the lender’s receipt of reasonably acceptable evidence of the cure of the applicable event giving rise to the Major Tenant Trigger Period or such circumstances ceasing to exist.
A “Major Tenant” means The Core Club tenant, together with its respective affiliates providing credit support or a guaranty in connection with such lease or replacement tenant going forward.
Initial Reserves. At origination, the borrower deposited (i) $128,086 into a tax reserve account, (ii) $1,545,000 into a lease commencement reserve, which represented three years of Sweetgreen’s rent (provided, that such funds were released to the borrower following the borrower’s satisfaction of certain conditions, including that the lender is in receipt of an executed commencement date agreement between the borrower and Sweetgreen confirming among other things that the lease commencement date is deemed to be July 25, 2016), (iii) $257,500 into a free rent reserve representing free rent for the first six months of Sweetgreen’s lease term, (iv) $250,000 into an unfunded tenant obligations reserve with respect to the Sweetgreen lease, and (v) $12,455 into a condominium common charge fund.
Ongoing Reserves. On a monthly basis, the borrower is required to deposit (i) 1/12 of the estimated annual real estate taxes, which currently equates to $64,043, into a tax reserve account and (ii) $615 into a replacement reserve account. In addition, if an acceptable blanket insurance policy is no longer in place, the borrower is required to deposit 1/12 of the annual insurance premiums into an insurance reserve account.
A-3-103
60 East 55th Street New York, NY 10022 | Collateral Asset Summary – Loan No. 10 60 East 55th Street | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $25,000,000 45.5% 1.40x 8.9% |
BSA Approval.The Core Club is required to have a special permit (the “BSA Approval”), with respect to certain of its operations being a gym and spa facility, issued by the New York City Board of Standards and Appeals (the “BSA”). The BSA Approval is necessary in order for The Core Club to continue certain of its intended uses as a physical culture establishment. The BSA Approval was obtained but, as of the origination date, has expired. The borrower is required to cause The Core Club to file (i) an application together with all documents required by the BSA for an extension of the term of the BSA Approval pursuant to the BSA’s special order calendar, and (ii) a waiver together with all documents required by the BSA on account that the BSA Approval has expired (the “BSA Application”) within the timeframe required by the BSA to renew and extend the term of the BSA Approval. The borrower is also required to pursue the BSA Application to completion and cooperate in every way with The Core Club, the BSA and with all requirements of the BSA Application (x) in order to cause the BSA to provide one or more renewals of the BSA Approval, and (y) as necessary for the BSA Approval to be renewed and in effect for the term of the 60 East 55th Street Loan.
Current Mezzanine or Subordinate Indebtedness. None.
Future Mezzanine or Subordinate Indebtedness Permitted. None.
A-3-104
60 East 55th Street New York, NY 10022 | Collateral Asset Summary – Loan No. 10 60 East 55th Street | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $25,000,000 45.5% 1.40x 8.9% |
A-3-105
2886 Airport Drive Columbus, OH 43219 | Collateral Asset Summary – Loan No. 11 Embassy Suites Columbus | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $23,000,000 67.8% 1.95x 14.4% |
| Mortgage Loan Information | |
| Loan Seller: | GACC |
| Loan Purpose: | Refinance |
| Sponsors: | Jeffrey A. Coopersmith; Michael Levin; Benjamin J. Horn; Jeffrey A. Coopersmith, Trustee of the Jeffrey A. Coopersmith 7/27/2015 Amended and Restated Revocable Trust |
| Borrower: | Airport Core Hotel LLC |
| Original Balance: | $23,000,000 |
| Cut-off Date Balance: | $23,000,000 |
| % by Initial UPB: | 3.3% |
| Interest Rate: | 5.0500% |
| Payment Date: | 6thof each month |
| First Payment Date: | February 6, 2016 |
| Maturity Date: | January 6, 2026 |
| Amortization: | Interest-only for first 24 months; 360 months thereafter |
| Additional Debt: | None |
| Call Protection: | L(31), D(85), O(4) |
| Lockbox / Cash Management(1): | Springing Hard / Springing |
| Reserves | ||
| Initial | Monthly | |
| Taxes: | $69,725 | $34,862 |
| Insurance: | $71,930 | $5,994 |
| FF&E: | $0 | $32,344 |
| Financial Information | ||
| Cut-off Date Balance /Room: | $116,162 | |
| Balloon Balance / Room: | $100,630 | |
| Cut-off Date LTV: | 67.8% | |
| Balloon LTV: | 58.8% | |
| Underwritten NOI DSCR(2): | 2.22x | |
| Underwritten NCF DSCR(2): | 1.95x | |
| Underwritten NOI Debt Yield: | 14.4% | |
| Underwritten NCF Debt Yield: | 12.6% | |
| Property Information | ||||
| Single Asset / Portfolio: | Single Asset | |||
| Property Type: | Full Service Hospitality | |||
| Collateral: | Fee Simple | |||
| Location: | Columbus, OH | |||
| Year Built / Renovated: | 2009 / 2013 | |||
| Total Rooms: | 198 | |||
| Property Management: | Schulte Hospitality Group, Inc. | |||
| Underwritten NOI: | $3,308,437 | |||
| Underwritten NCF: | $2,899,733 | |||
| Appraised Value: | $33,900,000 | |||
| Appraisal Date: | October 27, 2015 | |||
| Historical NOI | ||||
| Most Recent NOI: | $3,335,366 (T-12 May 31,2016) | |||
| 2015 NOI: | $3,399,514 (December 31, 2015) | |||
| 2014 NOI: | $2,054,928 (December 31, 2014 | |||
| 2013 NOI: | $1,935,017 (December 31, 2013) | |||
| Historical Occupancy / ADR / RevPAR | ||||
| Most Recent Occupancy: | 79.4% / $133.92 / $106.32 (May 31, 2016) | |||
| 2015 Occupancy: | 78.5% / $132.67 / $104.08 (December 31, 2015) | |||
| 2014 Occupancy: | 74.2% / $127.44 / $94.60 (December 31, 2014) | |||
| 2013 Occupancy: | 69.1% / $129.15 / $89.18 (December 31, 2013) | |||
| (1) | A hard lockbox with cash management will be triggered upon an event of default, if the DSCR is less than 1.15x, or upon the early termination or early cancellation of the franchise agreement. |
| (2) | Based on amortizing debt service payments. Based on the current interest only payments, the Underwritten NOI DSCR and Underwritten NCF DSCR are 2.81x and 2.46x, respectively. |
TRANSACTION HIGHLIGHTS |
| ■ | Property.The Embassy Suites Columbus property is a seven-story, 198-room full service hotel located in Columbus, Ohio. Constructed in 2009 and most recently renovated in 2013, the property features a restaurant, lounge area, indoor pool, fitness center, business center and 8,517 sq. ft. of meeting and banquet space. The property is one of six AAA four diamond rated hotels in the Columbus, Ohio market and one of five across the entire Embassy Suites chain. |
| ■ | Location.The Embassy Suites Columbus property is located across I-670 from the entrance of the Port of Columbus Airport, which served 6,796,214 passengers in 2015, which is up 6.9% when compared to 2014. It is situated approximately six miles northwest of downtown Columbus and the Greater Columbus Convention Center and 10 miles east of The Ohio State University. |
| ■ | Performance. According to an industry report, the Embassy Suites Columbus property is in line with or outperforming the competitive set. As of May 2016, Embassy Suites Columbus exhibited May 2016 trailing 12-month occupancy, ADR and RevPAR of 79.4%, $133.92, and $106.32, respectively, resulting in occupancy, ADR and RevPAR penetration rates of 108.9%, 86.3% and 94.0%, respectively. |
| ■ | Management Company. The Embassy Suites Columbus property is managed by Schulte Hospitality Group, Inc. Schulte Hospitality Group, Inc. is a fully-integrated development and management company headquartered in Louisville, Kentucky. Currently the company operates 67 hotels throughout 25 states across the Midwest, Mid-Atlantic and Southwest United States. |
A-3-106
450 Northwest 257thWay Troutdale, OR 97060 | Collateral Asset Summary – Loan No. 12 Columbia Gorge Premium Outlets | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $21,350,000 72.4% 2.08x 13.3% |
| Mortgage Loan Information | |
| Loan Seller: | GACC |
| Loan Purpose: | Acquisition |
| Sponsor: | Francis Greenburger |
| Borrowers(1): | Austell Columbia Gorge Equities LLC; TEI Diversified Columbia Gorge LLC; TEI Columbia Gorge Investors LLC |
| Original Balance: | $21,350,000 |
| Cut-off Date Balance: | $21,350,000 |
| % by Initial UPB: | 3.0% |
| Interest Rate: | 4.5200% |
| Payment Date: | 6thof each month |
| First Payment Date: | March 6, 2016 |
| Maturity Date: | February 6, 2026 |
| Amortization: | Interest only for first 36 months, 360 months thereafter |
| Additional Debt: | None |
| Call Protection: | L(30), D(86), O(4) |
| Lockbox / Cash Management(2): | Springing Hard / Springing |
| Reserves | ||
| Initial | Monthly | |
| Taxes: | $130,941 | $32,735 |
| Insurance(3): | $0 | Springing |
| Replacement: | $0 | $3,422 |
| TI/LC(4): | $85,000 | $15,000 |
| Required Repairs: | $209,375 | NAP |
| Vans Outlet Reserve(5): | $275,000 | NAP |
| Financial Information | ||
| Cut-off Date Balance / Sq. Ft.: | $130 | |
| Balloon Balance / Sq. Ft.: | $114 | |
| Cut-off Date LTV: | 72.4% | |
| Balloon LTV: | 63.4% | |
| Underwritten NOI DSCR(6): | 2.18x | |
| Underwritten NCF DSCR(6): | 2.08x | |
| Underwritten NOI Debt Yield: | 13.3% | |
| Underwritten NCF Debt Yield: | 12.7% | |
| Property Information | |
| Single Asset / Portfolio: | Single Asset |
| Property Type: | Anchored Retail |
| Collateral: | Fee Simple |
| Location: | Troutdale, OR |
| Year Built / Renovated: | 1991, 1994 / NAP |
| Total Sq. Ft.: | 164,227 |
| Property Management: | The Woodmont Company |
| Underwritten NOI: | $2,840,491 |
| Underwritten NCF: | $2,703,777 |
| Appraised Value: | $29,500,000 |
| Appraisal Date: | December 4, 2015 |
| Historical NOI | |
| Most Recent NOI: | $3,154,653 (December 31, 2015) |
| 2014 NOI: | $2,790,100 (December 31, 2014) |
| 2013 NOI: | $2,819,199 (December 31, 2013) |
| 2012 NOI: | NAV |
| Historical Occupancy | |
| Most Recent Occupancy: | 87.5% (March 1, 2016) |
| 2015 Occupancy: | 91.4% (December 31, 2015) |
| 2014 Occupancy: | 89.0% (December 31, 2014) |
| 2013 Occupancy: | 89.6% (December 31, 2013) |
| (1) | The borrowers own the property as tenants-in-common. |
| (2) | A hard lockbox and in place cash management will be triggered upon (i) an event of default, (ii) bankruptcy or insolvency of the borrower or property manager or (iii) the DSCR falling below 1.40x. |
| (3) | If an acceptable blanket policy is no longer in place, the borrower is required to make monthly deposits of 1/12 of the estimated annual insurance premiums into an insurance reserve. |
| (4) | TI/LC reserves are subject to a cap of $250,000 through January 6, 2018 and $360,000 thereafter; provided that, if after January 6, 2023, (i) the property has a debt yield of at least 10.5%, (ii) at least 90% of the leasable area is leased by tenants in occupancy and paying full unabated rent (or the lender has reserved any abated rent amounts), and (iii) the DSCR is at least 1.45x, then the TI/LC cap may be reduced to $250,000. |
| (5) | The borrower deposited $275,000 at origination into the Vans Outlet reserve related to such tenant’s lease renewal. The tenant has renewed its lease and the reserve amount has been released to borrower. |
| (6) | Based on amortizing debt service payments. Based on the current interest only payments, Underwritten NOI DSCR and Underwritten NCF DSCR are 2.90x and 2.76x, respectively. |
TRANSACTION HIGHLIGHTS |
| ■ | Property / Location.The Columbia Gorge Premium Outlets property is a 164,227 sq. ft. outlet center located in Troutdale, Oregon, 15 miles from the Portland central business district. The Columbia Gorge Premium Outlets property was built in 1991 and consists of two single story buildings on 14 acres with 836 parking spaces, which equates to a parking ratio of 5.09 per 1,000 sq. ft. The Columbia Gorge Premium Outlets property is located adjacent to I-84, which provides access to downtown Portland and the Portland International Airport. Additionally, the Portland-Troutdale Airport is located directly across I-84 from the Columbia Gorge Premium Outlets property. The ingress to Columbia River Gorge, a national scenic area with approximately 2 million visitors annually, is located to the east of the property. According to an industry report, daily traffic counts at the ingress of the property and I-84 are as high as 22,800 and 35,000, respectively. |
| ■ | Tenancy. The Columbia Gorge Premium Outlets property is 87.5% leased to 35 tenants including national retailers such as Gap Outlet (5.6% of NRA, 9.7% of U/W Base Rent), Eddie Bauer (3.8% of NRA, 7.3% of U/W Base Rent) and Levi’s/Dockers (3.7% of NRA, 5.4% of U/W Base Rent). Occupancy at the Columbia Gorge Premium Outlets property has averaged 92.3% over the past five years, and Gap, Adidas, Vans and Eddie Bauer each recently renewed their leases at the property. TTM September 2015 sales at the property for tenants in occupancy are $295 PSF, with an occupancy cost of 10.0%. |
| ■ | Sponsorship / Management. The sponsor of the borrowers and the nonrecourse carve-out guarantor is Francis Greenburger, the founder of Time Equities, Inc. (“TEI”). TEI was founded in 1966 and has been in the real estate investment, development, and asset and property management business for 50 years. TEI currently owns over 21 million sq. ft. of residential, industrial, office, retail and hotel properties and is in various stages of development and predevelopment of constructing approximately 1.7 million sq. ft. of various property types. TEI has over 4.0 million sq. ft. of retail space across approximately 726 properties of various types and locations. TEI hired The Woodmont Company (“Woodmont”) to manage the Columbia Gorge Premium Outlets property. Woodmont has 8.4 million sq. ft. of mall space under management and an additional 1.5 million sq. ft. of outlet mall space. Total retail space under management by Woodmont is 18.7 million sq. ft. |
A-3-107
510 Lewelling Boulevard San Leandro, CA 94579 | Collateral Asset Summary – Loan No. 13 Hilton Garden Inn San Leandro | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $20,275,000 59.1% 1.99x 13.8% |
| Mortgage Loan Information | |
| Loan Seller: | CGMRC |
| Loan Purpose: | Acquisition |
| Sponsors: | Sheenal Patel and Vamsikrishna Bonthala |
| Borrower: | Seal San Leandro, LLC |
| Original Balance: | $20,275,000 |
| Cut-off Date Balance: | $20,275,000 |
| % by Initial UPB: | 2.9% |
| Interest Rate: | 4.7500% |
| Payment Date: | 6thof each month |
| First Payment Date: | August 6, 2016 |
| Maturity Date: | July 6, 2026 |
| Amortization: | Interest Only for first 24 months; 360 months thereafter |
| Additional Debt: | None |
| Call Protection: | L(25), D(91), O(4) |
| Lockbox / Cash Management(1): | Hard / Springing |
| Reserves | ||
| Initial | Monthly | |
| Taxes: | $101,451 | $14,493 |
| Insurance: | $53,914 | $5,990 |
| FF&E: | $0 | Various(2) |
| PIP Reserve: | $4,183,856 | Springing(3) |
| Financial Information | ||
| Cut-off Date Balance / Room: | $170,378 | |
| Balloon Balance / Room: | $146,490 | |
| Cut-off Date LTV(4): | 59.1% | |
| Balloon LTV(4): | 50.8% | |
| Underwritten NOI DSCR(5): | 2.20x | |
| Underwritten NCF DSCR(5): | 1.99x | |
| Underwritten NOI Debt Yield: | 13.8% | |
| Underwritten NCF Debt Yield: | 12.4% | |
| (1) | In-place cash management will be triggered (i) upon an event of default, (ii) if the DSCR falls below 1.35x during any calendar quarter, (iii) upon any default or termination of the franchise agreement, (iv) upon commencement of a material action in which the manager is a debtor or (v) if the franchise agreement is not renewed 12 months before expiration. |
| Property Information | |
| Single Asset / Portfolio: | Single Asset |
| Property Type: | Full Service Hospitality |
| Collateral: | Fee Simple |
| Location: | San Leandro, CA |
| Year Built / Renovated: | 2002 / NAP |
| Total Rooms: | 119 |
| Property Management: | NVN Seal San Leandro LLC |
| Underwritten NOI: | $2,789,334 |
| Underwritten NCF: | $2,519,394 |
| “As-is” Appraised Value(4): | $28,500,000 |
| “As-is” Appraisal Date: | April 27, 2016 |
| “As Stabilized” Appraised Value(4): | $34,300,000 |
| “As Stabilized” Appraisal Date: | April 27, 2017 |
| Historical NOI | |
| Most Recent NOI: | $3,142,962 (T-12 April 30, 2016) |
| 2015 NOI: | $2,756,055 (December 31, 2015) |
| 2014 NOI: | $2,020,927 (December 31, 2014) |
| 2013 NOI: | $1,520,259 (December 31, 2013) |
| Historical Occupancy / ADR / RevPAR | |
| Most Recent Occupancy: | 87.6% / $167.17 / $146.44 (April 30, 2016) |
| 2015 Occupancy: | 88.1% / $160.45 / $141.30 (December 31, 2015) |
| 2014 Occupancy: | 86.4% / $139.00 / $120.06 (December 31, 2014) |
| 2013 Occupancy: | 82.2% / $127.62 / $104.89 (December 31, 2013) |
| (2) | The monthly FF&E reserve will be the greater of (i) an amount equal to 1/12th of 2.0% of the prior year’s gross revenues through and including June 6, 2017, 1/12th of 3.0% of the prior year’s gross revenues beginning July 6, 2017 through and including June 6, 2018, and 1/12th of 4.0% of the prior year’s gross revenues beginning July 6, 2018 and continuing thereafter or (ii) any amount required under the franchise agreement for FF&E work. |
| (3) | If a new PIP is required, the borrower is required to deposit the difference between 110% of the new PIP amount and the amount on deposit in the PIP reserve. |
| (4) | The Cut-off Date LTV and Balloon LTV are based on the “As Stabilized” Appraised Value, which assumes completion of the property improvement plan. The Cut-off Date LTV and Balloon LTV based on “As-is” Appraised Value are 71.1% and 61.2%, respectively. |
| (5) | Based on amortizing debt service payments. Based on the current interest only payments, the Underwritten NOI DSCR and Underwritten NCF DSCR are 2.86x and 2.58x, respectively. |
TRANSACTION HIGHLIGHTS |
| ■ | Property/Amenities.Hilton Garden Inn San Leandro is a 119-room, full-service hotel located in San Leandro, California. The hotel was constructed in 2002 and consists of four stories. Amenities at the hotel include 1,116 sq. ft. of meeting space, a 24-hour business center, an indoor pool, a whirlpool, a fitness center, and a restaurant that serves breakfast, dinner and room service. As of April 30, 2016, Hilton Garden Inn San Leandro had an ADR and RevPAR of $167.17 and $146.44, respectively. |
| ■ | Capital Expenditures. Upon acquisition, the hotel will be undergoing an approximate $3.8 million change-of-ownership property improvement plan (“PIP”) and 110% of the cost was escrowed upfront. A 15-year franchise agreement with Hilton Worldwide Holdings, Inc. was executed at origination. All PIP repairs are expected to be completed within 12 months of the acquisition with guestroom television replacements to be completed within 24 months. |
| ■ | Location/Market. Hilton Garden Inn San Leandro is located in the East Bay area off of Highway 880 and 238, approximately two miles inland from the Bay. The hotel is six miles south of Oakland International Airport, 15 miles south of Oakland’s CBD, and 24 miles from San Francisco’s CBD. Local tourist attractions include Jack London Square, a mixed use development with shopping and entertainment, the Oakland Coliseum, which is home to the Oakland A’s and Oakland Raiders and Oracle Arena, home to the Golden State Warriors. Hilton Garden Inn San Leandro has achieved a greater than 100.0% RevPAR penetration since 2010. Based on T-12 March 2016 figures, the hotel’s penetration with respect to occupancy, ADR, and RevPAR were 104.5%, 103.0%, and 107.7%, respectively. |
| ■ | Sponsorship. Sheenal Patel and Vamsikrishna Bonthala are principals of Arbor Lodging Partners. Based in Chicago, Arbor Lodging Partners is a national debt and equity investor in the hospitality industry. With joint venture capital partners, Arbor Lodging Partners acquires hotel properties and loans secured by hotel properties and manages hotel operations for assets in its portfolio and in third party portfolios. Arbor Lodging Partners’ portfolio includes equity investments in 14 hotels, 11 debt investments in 10 hotels and one office property. |
A-3-108
9638 FM 1960 Bypass West Humble, TX 77338 | Collateral Asset Summary – Loan No. 14 Deerbrook Commons | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $17,000,000 69.4% 1.54x 10.4% |
| Mortgage Loan Information | |
| Loan Seller: | GACC |
| Loan Purpose: | Refinance |
| Sponsor: | Steven Yari |
| Borrower: | Deerbrook Commons, Ltd. |
| Original Balance: | $17,000,000 |
| Cut-off Date Balance: | $17,000,000 |
| % by Initial UPB: | 2.4% |
| Interest Rate: | 4.2900% |
| Payment Date: | 6thof each month |
| First Payment Date: | November 6, 2015 |
| Maturity Date: | October 6, 2025 |
| Amortization: | Interest only for first 36 months, 360 months thereafter |
| Additional Debt: | None |
| Call Protection: | L(34), D(82), O(4) |
| Lockbox / Cash Management(1): | Hard / Springing |
| Reserves | ||
| Initial | Monthly | |
| Taxes: | $281,855 | $31,317 |
| Insurance(2): | $0 | Springing |
| Replacement: | $0 | $3,011 |
| TI/LC(3): | $150,000 | $15,414 |
| Financial Information | ||
| Cut-off Date Balance / Sq. Ft.: | $94 | |
| Balloon Balance / Sq. Ft.: | $82 | |
| Cut-off Date LTV: | 69.4% | |
| Balloon LTV: | 60.5% | |
| Underwritten NOI DSCR(4): | 1.75x | |
| Underwritten NCF DSCR(4): | 1.54x | |
| Underwritten NOI Debt Yield: | 10.4% | |
| Underwritten NCF Debt Yield: | 9.2% | |
| Property Information | |
| Single Asset / Portfolio: | Single Asset |
| Property Type: | Anchored Retail |
| Collateral: | Fee Simple |
| Location: | Humble, TX |
| Year Built / Renovated: | 1984 / NAP |
| Total Sq. Ft.: | 180,631 |
| Property Management: | Stockdale Management LLC |
| Underwritten NOI: | $1,769,305 |
| Underwritten NCF: | $1,555,627 |
| Appraised Value: | $24,490,000 |
| Appraisal Date: | July 19, 2016 |
| Historical NOI | |
| Most Recent NOI: | $2,138,121 (T-12 June 30, 2016) |
| 2015 NOI: | $1,737,806 (December 31, 2015) |
| 2014 NOI: | $1,609,472 (December 31, 2014) |
| 2013 NOI: | $1,540,555 (December 31, 2013) |
| Historical Occupancy | |
| Most Recent Occupancy(5)(6): | 66.1% (July 28, 2016) |
| 2015 Occupancy: | 63.7% (December 31, 2015) |
| 2014 Occupancy: | 64.5% (December 31, 2014) |
| 2013 Occupancy: | 65.7% (December 31, 2013) |
| (1) | In-place cash management will be triggered (i) upon an event of default or (ii) if the DSCR falls below 1.25x during any calendar quarter until such time the DSCR is at least 1.30x for two calendar quarters. |
| (2) | If an acceptable blanket policy is no longer in place, the borrower is required to deposit 1/12 of the estimated annual insurance premiums into an insurance reserve on a monthly basis. |
| (3) | The TI/LC reserve is subject to a cap of $250,000. |
| (4) | Based on amortizing debt service payments. Based on the current interest only payments, Underwritten NOI DSCR and Underwritten NCF DSCR are 2.39x and 2.10x, respectively. |
| (5) | Most Recent Occupancy does not include Spirit Halloween, which is currently occupying 29,500 sq. ft. of net rentable area pursuant to a lease that expires on November 16, 2016. The lender did not include any related income in its underwriting. Total occupancy as of July 28, 2016, including Spirit Halloween, is 82.5%. Spirit Halloween has executed temporary seasonal leases at the Deerbrook Commons property each year from 2010 through 2014. |
| (6) | Most Recent Occupancy includes Deerbrook Beauty Supply, which recently executed a lease and is expected to take occupancy in August 2016. |
TRANSACTION HIGHLIGHTS |
| ■ | Property.TheDeerbrook Commons property is located in Humble, Texas approximately 25 miles northeast of Houston. The property was constructed in 1984 and consists of three large in-line buildings and two out-parcel buildings totaling 193,746 sq. ft. The Deerbrook Commons property is leased to a diverse mix of 24 national, regional and local retailers. National tenants include Movie Tavern, Olive Garden, State Farm, DaVita Dialysis and El Pollo Loco. Movie Tavern is an in-theater dining concept with 24 locations across 9 states and anchors the Deerbrook Commons property. The Deerbrook Commons property is located within Humble’s primary retail corridor, along Highway 59 and FM 1960, one of Humble’s primary thoroughfares. The neighborhood’s retail focal point is Deerbrook Mall which is located adjacent to the northeast side of the property. Deerbrook Mall is Houston’s fourth largest mall with a gross leasable area of approximately 1.2 million sq. ft. |
| ■ | Market. Deerbrook Commons is located in the Northeast Submarket within the greater Houston Area retail market. The Houston area retail market consists of approximately 365.9 million sq. ft. of existing supply and features an average occupancy of 95.0% and average asking rent of $15.77 PSF as of the second quarter of 2016. The Houston market area has maintained stable occupancy over the past two years and moderately increasing rental rates over the same time period. The Northeast Submarket area features slightly higher occupancy levels than the greater market area at 96.6% as of the second quarter of 2016 and asking rents of $14.95 PSF. The Northeast Submarket also featured positive absorption of 298,352 sq. ft. in the second quarter of 2016. The immediate area surrounding the property is characterized by a moderately dense population and primarily residential and retail uses. The population and average household income within a 5-mile radius of the property were 119,397 and $76,946, respectively. |
| ■ | Sponsor.The sponsor of the borrower and the non-recourse carve-out guarantor is Steven Yari, co-founder of Stockdale Capital Partners and the predecessor family office, Triyar Companies. Steven Yari has been involved in the development, acquisition and asset management of real estate activities for nearly 30 years. He has established a diversified portfolio encompassing high-rise commercial and residential buildings, industrial business centers, enclosed shopping malls, retail centers, hotels and single family housing tracts representing nearly $500 million in total transaction value for a family portfolio of over $1.25 billion in asset value. |
A-3-109
401 South State Street & 418 South Wabash Street Chicago, IL 60605 | Collateral Asset Summary – Loan No. 15 401 South State Street | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $15,742,454 62.4% 1.59x 11.5% |
| Mortgage Loan Information | |
| Loan Seller: | CGMRC |
| Loan Purpose: | Acquisition |
| Sponsor: | Steven A. Cuculich, Sr. |
| Borrower: | 401 S. State Street Owner, LLC |
| Original Balance(1): | $15,760,000 |
| Cut-off Date Balance(1): | $15,742,454 |
| % by Initial UPB: | 2.2% |
| Interest Rate: | 4.8000% |
| Payment Date: | 6thof each month |
| First Payment Date: | August 6, 2016 |
| Maturity Date: | July 6, 2026 |
| Amortization: | 360 months |
| Additional Debt(1)(2): | $31,964,374Pari PassuDebt $7,830,000 Mezzanine Debt |
| Call Protection: | L(25), YM1(91), O(4) |
| Lockbox / Cash Management: | Hard / In Place |
| Reserves | ||
| Initial | Monthly | |
| Taxes: | $987,754 | $164,626 |
| Insurance: | $28,255 | $14,128 |
| Replacement: | $2,850,000 | $10,210 |
| Financial Information | ||||
| Whole Loan(3) | Total Debt(4) | |||
| Cut-off Date Balance / Sq. Ft.: | $98 | $114 | ||
| Balloon Balance / Sq. Ft.: | $80 | $96 | ||
| Cut-off Date LTV: | 62.4% | 72.6% | ||
| Balloon LTV: | 51.0% | 61.2% | ||
| Underwritten NOI DSCR: | 1.82x | 1.38x | ||
| Underwritten NCF DSCR: | 1.59x | 1.21x | ||
| Underwritten NOI Debt Yield: | 11.5% | 9.9% | ||
| Underwritten NCF Debt Yield: | 10.0% | 8.6% | ||
| Property Information | |
| Single Asset / Portfolio: | Single Asset |
| Property Type: | CBD Office |
| Collateral: | Fee Simple |
| Location: | Chicago, IL |
| Year Built / Renovated: | 1892, 1983 / 2012, 2014 |
| Total Sq. Ft.: | 487,022 |
| Property Management: | Anvan/Midwest Realty Management Co. |
| Underwritten NOI: | $5,481,387 |
| Underwritten NCF: | $4,777,954 |
| Appraised Value: | $76,500,000 |
| Appraisal Date: | May 18, 2016 |
| Historical NOI | |
| Most Recent NOI: | $5,065,763 (T-12 April 30, 2016) |
| 2015 NOI: | $5,027,710 (December 31, 2015) |
| 2014 NOI: | $5,112,169 (December 31, 2014) |
| 2013 NOI: | $5,151,195 (December 31, 2013) |
| Historical Occupancy | |
| Most Recent Occupancy: | 76.5% (June 10, 2016) |
| 2015 Occupancy: | 76.5% (December 31, 2015) |
| 2014 Occupancy: | 76.5% (December 31, 2014) |
| 2013 Occupancy: | 76.5% (December 31, 2013) |
| (1) | The 401 South State Street Whole Loan is evidenced by twopari passu notes in the aggregate original principal amount of $47.76 million. The non-controlling Note A-2, with an Original Balance of $15.76 million and a Cut-off Date Balance of approximately $15.74 million, will be included in the CD 2016-CD1 mortgage trust. The controlling Note A-1, with an original principal balance of $32.0 million and a cut-off date balance of approximately $31.96 million has been contributed to the CGCMT 2016-P4 mortgage trust. |
| (2) | The related mezzanine loan may be increased to a maximum principal balance of $9.83 million based on certain conditions being satisfied under the related mezzanine loan documents. |
| (3) | Whole Loan DSCR, LTV, Debt Yield and Balance / Sq. Ft. calculations are based on the 401 South State Street Whole Loan only, which has a principal balance of $47.76 million, and excluding the related mezzanine loan. |
| (4) | Total Debt DSCR, LTV, Debt Yield and Balance / Sq. Ft. calculations are based on the aggregate total debt of $55.59 million, which includes the 401 South State Street Whole Loan and the related mezzanine loan with an original principal balance of $7.83 million. |
TRANSACTION HIGHLIGHTS |
| ■ | Property. The 401 South State Street property, located in Chicago, Illinois, consists of a 479,522 sq. ft., 8-story office building (the “Robert Morris Center”) occupying a full block on State Street betweenEast Van Buren Street and East Congress Parkway and a 7,500 sq. ft. one-story commercial building (the “Willow Creek Church”) located on 418 South Wabash Avenue. The buildings are located on two non-contiguous parcels, divided by a public alleyway and connected via a private, underground, maintenance tunnel. Total occupancy at the 401 South State Street property was 76.5% as of June 10, 2016. |
| ■ | Market. The 401 South State Street property has frontage along Congress Parkway and State Street and is in the southernmost portion of The Loop, which contains the main concentrations of office and commercial space in the CBD. The 401 South State Street property is part of the East Loop submarket which consists of 22.9 million sq. ft. of office space, comprising 17.9% of the overall downtown market. Industries within the East Loop are primarily financial services firms, government, law firms, and professional service firms. According to the appraisal, the direct vacancy rate in the submarket is 13.5% as of the first quarter of 2016. According to the eight rental comparables compiled by the appraisal, the quoted rental rates range from $25.00 to $35.00 PSF. |
| ■ | Sponsorship.The guarantor of the non-recourse carve-outs under the 401 South State Street Whole Loan is Steven A. Cuculich, Sr. Steven A. Cuculich, Sr. has over 25 years of experience managing, operating and redeveloping real estate. His real estate experience includes ownership and management of commercial, residential and industrial properties, with a particular focus in the Chicago, Atlanta and Tampa markets. |
A-3-110
1424 Sycamore Drive Augusta, GA 30909 | Collateral Asset Summary – Loan No. 16 Oxford Glen Apartments | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $15,482,942 69.1% 1.50x 10.4% |
| Mortgage Loan Information | |
| Loan Seller: | GACC |
| Loan Purpose: | Refinance |
| Sponsor: | Craig Stansberry |
| Borrower: | OG Property Holdings, LLC |
| Original Balance: | $15,500,000 |
| Cut-off Date Balance: | $15,482,942 |
| % by Initial UPB: | 2.2% |
| Interest Rate: | 4.8500% |
| Payment Date: | 6thof each month |
| First Payment Date: | August 6, 2016 |
| Maturity Date: | July 6, 2026 |
| Amortization: | 360 months |
| Additional Debt: | None |
| Call Protection: | L(25), D(91), O(4) |
| Lockbox / Cash Management(1): | Springing Soft / Springing |
| Reserves | ||
| Initial | Monthly | |
| Taxes: | $78,881 | $9,860 |
| Insurance(2): | $25,302 | Springing |
| Replacement: | $953,637 | $12,400 |
| Required Repairs: | $46,363 | NAP |
| Financial Information | ||
| Cut-off Date Balance / Unit: | $31,216 | |
| Balloon Balance / Unit: | $25,565 | |
| Cut-off Date LTV: | 69.1% | |
| Balloon LTV: | 56.6% | |
| Underwritten NOI DSCR: | 1.64x | |
| Underwritten NCF DSCR: | 1.50x | |
| Underwritten NOI Debt Yield: | 10.4% | |
| Underwritten NCF Debt Yield: | 9.5% | |
| Property Information | |
| Single Asset / Portfolio: | Single Asset |
| Property Type: | Garden Multifamily |
| Collateral: | Fee Simple |
| Location: | Augusta, GA |
| Year Built / Renovated: | 1949, 1969 / 2005-2006 |
| Total Units(3): | 496 |
| Property Management: | Stansberry Management, LLC |
| Underwritten NOI: | $1,605,703 |
| Underwritten NCF: | $1,473,271 |
| Appraised Value: | $22,400,000 |
| Appraised Date: | May 19, 2016 |
| Historical NOI | |
| Most Recent NOI: | $2,011,247 (T-12 April 30, 2016) |
| 2015 NOI: | $2,002,185 (December 31, 2015) |
| 2014 NOI: | $1,891,607 (December 31, 2014) |
| 2013 NOI: | $1,777,156 (December 31, 2012) |
| Historical Occupancy | |
| Most Recent Occupancy: | 93.3% (April 30, 2016) |
| 2015 Occupancy: | 95.5% (December 31, 2015) |
| 2014 Occupancy: | 93.0% (December 31, 2014) |
| 2013 Occupancy: | 85.0% (December 31, 2013) |
| (1) | A soft lockbox and in place cash management will be triggered (i) upon an event of default, (ii) a bankruptcy or insolvency of the sponsor or property manager or (iii) if the DSCR falls below 1.15x until such time that the DSCR is at least 1.20x for two consecutive calendar quarters. |
| (2) | If an acceptable blanket insurance policy is no longer in place, the borrower is required to deposit 1/12 of the annual insurance premiums into the insurance reserve account on a monthly basis. |
| (3) | In February 2016, 12 units at the Oxford Glen Apartments were damaged by fire. The sponsor is in the process of renovating the units and is expected to complete the work and bring the units back online by September 2016. |
TRANSACTION HIGHLIGHTS |
| ■ | Property.TheOxford Glen Apartments property is a 496-unit multifamily property located approximately five miles west of the Augusta, Georgia central business district. The Oxford Glen Apartments consists of three adjoining complexes (Oxford Glen, Fox Den and Alpine Villas) containing 94 one and three-story buildings, all of which are collateral for the loan and are operated as one property by the sponsor. The unit mix consists of 1BD/1BA and 2BD/2BA apartments with an average size of 885 sq. ft. All units feature exterior pad-mounted condenser/compressor units with forced air furnaces and electric heat, water heaters, and appliances. The Oxford Glen Apartments property includes washers and dryers in the units and the Fox Den complex has washer/dryer connections available. The landlord pays all water, sewer, and trash costs for the property with the tenants responsible for their electricity, cable and telephone. |
| ■ | Capital Improvements.The sponsor purchased the Oxford Glen Apartments property in 2003 and subsequently spent approximately $8.0 million ($16,129 per unit) on rehabilitation. From 2006-2016, the sponsor spent an additional $644,000 ($1,298 per unit) on capital improvements including $350,000 within the last two years on new roofs and air handlers. At closing, the borrower funded a $953,637 ($1,923 per unit) replacement reserve to be used to upgrade unit appliances, air conditioning units, and flooring, fix the parking lot, sidewalks, and breezeways, and to update the front office. |
| ■ | Market / Location.TheOxford Glen Apartments property is located approximately five miles west of the Augusta, Georgia central business district near the Augusta University Forest Hills Campus and the intersection of I-20 and I-520. Fort Gordon, one of the region’s largest economic drivers and Augusta National Golf Club, home of The Masters golf tournament, are both located less than 15 minutes from the property. Healthcare is also an important economic driver for the area and Oxford Glen Apartments is conveniently located near the Doctors Hospital, a 350-bed full-service facility, the Charlie Norwood VA Medical Center, and Trinity Hospital of Augusta. According to the appraiser, the 2016 population / median household income within a 1, 3 and 5 mile radius are 8,659 / $34,233, 56,485 / $41,703 and 155,836 / $42,011, respectively. The appraiser concluded average market rents between $511 per unit and $662 per unit, compared with the average in place rent at the property of $493 per unit. According to the appraiser, the Augusta apartment market had a vacancy rate of 6.8% as of the first quarter of 2016. |
A-3-111
Various Various, NY Various | Collateral Asset Summary – Loan No. 17 NY Rite Aid Portfolio | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $11,950,830 72.0% 1.35x 8.8% |
| Mortgage Loan Information | |
| Loan Seller: | CGMRC |
| Loan Purpose: | Acquisition |
| Sponsors: | Yerachmeal Jacobson; Marc Jacobowitz |
| Borrower: | NY Pharmacy Partners LLC |
| Original Balance: | $11,950,830 |
| Cut-off Date Balance: | $11,950,830 |
| % by Initial UPB: | 1.7% |
| Interest Rate: | 4.6500% |
| Payment Date: | 6thof each month |
| First Payment Date: | August 6, 2016 |
| Maturity Date: | July 6, 2026 |
| Amortization: | Interest only for first 24 months; 360 months thereafter |
| Additional Debt: | None |
| Call Protection: | L(25), D(92), O(3) |
| Lockbox / Cash Management(1): | Hard / Springing |
| Reserves | ||
| Initial | Monthly | |
| Taxes: | $126,317 | $18,045 |
| Insurance(2): | $1,837 | Springing |
| Replacement: | $0 | $873 |
| Financial Information | ||
| Cut-off Date Balance / Sq. Ft.: | $263 | |
| Balloon Balance / Sq. Ft.: | $225 | |
| Cut-off Date LTV: | 72.0% | |
| Balloon LTV: | 61.7% | |
| Underwritten NOI DSCR(3): | 1.42x | |
| Underwritten NCF DSCR(3): | 1.35x | |
| Underwritten NOI Debt Yield: | 8.8% | |
| Underwritten NCF Debt Yield: | 8.4% | |
| Property Information | |
| Single Asset / Portfolio: | Portfolio of four properties |
| Property Type: | Single Tenant Retail |
| Collateral: | Fee Simple |
| Location: | Various, NY |
| Year Built / Renovated: | Various / NAP |
| Total Sq. Ft.: | 45,462 |
| Property Management: | Bluejay Management, LLC |
| Underwritten NOI: | $1,051,858 |
| Underwritten NCF: | $1,001,009 |
| Appraised Value: | $16,600,000 |
| Appraisal Date: | Various |
| Historical NOI(4) | |
| Most Recent NOI: | NAV |
| 2015 NOI: | NAV |
| 2014 NOI: | NAV |
| Historical Occupancy | |
| Most Recent Occupancy: | 100.0% (August 6, 2016) |
| 2015 Occupancy: | 100.0% (December 31, 2015) |
| 2014 Occupancy: | 100.0% (December 31, 2014) |
| (1) | In place cash management will be triggered upon the earliest of (i) the occurrence and continuance of an event of default, (ii) the DSCR being less than 1.20x, until such time that the DSCR is at least 1.25x for two consecutive calendar quarters, (iii) any tenant at the NY Rite Aid Portfolio being in default under its lease, failing to be in actual, physical possession of its space, failing to be open to the public and/or going dark, giving notice that it is terminating its lease, or failing to provide written notice to the borrower of renewal of its lease under conditions described in the NY Rite Aid Portfolio loan documents and (iv) the monthly payment date occurring in April 2025. |
| (2) | The borrower will be required to deposit an amount equal to 1/12 of the annual insurance premiums into the insurance reserve if an acceptable blanket policy is no longer in place. |
| (3) | Based on amortizing debt service payments. Based on the current interest only payments, Underwritten NOI DSCR and Underwritten NCF DSCR are 1.87x and 1.78x, respectively. |
| (4) | Historical operating statements were not available due to the recent acquisition of the properties within the NY Rite Aid Portfolio. |
TRANSACTION HIGHLIGHTS |
| ■ | Property. The NY Rite Aid Portfolio properties consist of four single-tenant retail properties located throughout the Buffalo, New York and Rochester, New York metro areas. The NY Rite Aid Portfolio properties were built between 1999 and 2001 and range from 10,908 sq. ft. to 12,738 sq. ft. in net rentable area. Rite Aid, a Fortune 500 drugstore chain headquartered in East Pennsboro Township, Pennsylvania, has been a tenant at each property for more than 10 years, and all of the retail properties are leased long term on a triple- or double-net basis to Rite Aid until various dates in 2026 with three or four, five-year lease extension options. The NY Rite Aid Portfolio weighted average store sales are $630 per sq. ft. with a weighted average occupancy cost of 3.9%. |
| ■ | Market. The NY Rite Aid Portfolio properties are located in four different submarkets. According to the appraisals, comparable properties built between 2014 and 2016, ranging in size from 11,945 sq. ft. to 14,820 sq. ft., have average adjusted asking rents ranging from $20.59 to $32.43 PSF. All of the competitive properties are 100.0% occupied by single tenant pharmacy retailers including Walgreens, CVS, and Rite Aid. |
| ■ | Sponsorship.The sponsors and non-recourse carve-out guarantors are Marc Jacobowitz and Yerachmeal Jacobson who are co-founders of Bluejay Management, LLC (“Bluejay Management”). Bluejay Management is a privately owned real estate investment management firm based in New York that specializes in the acquisition, financing and management of commercial real estate properties throughout the United States. Founded in 2003 and headquartered in Lawrence, New York, the company is also comprised of Bluejay Capital. To date, Bluejay Management has owned and managed nearly two million sq. ft. of property totaling over $300 million in values including a major development in Brooklyn, and over one million sq. ft. of shopping center space. |
A-3-112
4405 Honoapiilani Highway Lahaina, HI 96761 | Collateral Asset Summary – Loan No. 18 Kahana Retail | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $11,900,000 69.2% 1.34x 8.7% |
| Mortgage Loan Information | |
| Loan Seller: | GACC |
| Loan Purpose: | Refinance |
| Sponsor: | National Credit Tenant Investments, LLC |
| Borrower: | Kahana Retail LLC |
| Original Balance: | $11,900,000 |
| Cut-off Date Balance: | $11,900,000 |
| % by Initial UPB: | 1.7% |
| Interest Rate: | 4.6900% |
| Payment Date: | 6thof each month |
| First Payment Date: | February 6, 2016 |
| Maturity Date: | January 6, 2026 |
| Amortization: | Interest only for first 12 months, 360 months thereafter |
| Additional Debt(1): | Future Mezzanine Debt Permitted |
| Call Protection: | L(31), D(85), O(4) |
| Lockbox / Cash Management(2): | Springing Hard / Springing |
| Reserves | ||
| Initial | Monthly | |
| Taxes: | $69,108 | $10,125 |
| Insurance(3): | $0 | Springing |
| Replacement(4): | $0 | $540 |
| TI/LC(5): | $377,320 | $3,401 |
| Required Repairs: | $5,225 | NAP |
| Lease Sweep(6): | $0 | Springing |
| Condo Assessment: | $0 | 1/12 of condo assessments |
| Rent Concession(7): | $0 | Springing |
| Financial Information | ||
| Cut-off Date Balance / Sq. Ft.: | $367 | |
| Balloon Balance / Sq. Ft.: | $307 | |
| Cut-off Date LTV: | 69.2% | |
| Balloon LTV: | 57.9% | |
| Underwritten NOI DSCR(8): | 1.40x | |
| Underwritten NCF DSCR(8): | 1.34x | |
| Underwritten NOI Debt Yield: | 8.7% | |
| Underwritten NCF Debt Yield: | 8.3% | |
| (1) | Mezzanine debt is permitted provided, among other conditions, after giving effect to such mezzanine loan (i) a combined LTV of less than or equal to 75.0%, (ii) a combined DSCR greater than or equal to 1.25x and (iii) a combined debt yield of no less than 7.5%. |
| Property Information | |
| Single Asset / Portfolio: | Single Asset |
| Property Type: | Shadow Anchored Retail |
| Collateral: | Fee Simple |
| Location: | Lahaina, HI |
| Year Built / Renovated: | 1990 / NAP |
| Total Sq. Ft.: | 32,408 |
| Property Management: | Evolution West Management Services, LLC |
| Underwritten NOI: | $1,037,251 |
| Underwritten NCF: | $989,884 |
| Appraised Value: | $17,200,000 |
| Appraisal Date: | November 1, 2015 |
| Historical NOI | |
| Most Recent NOI: | $981,152 (T-12 May 31, 2016) |
| 2015 NOI: | $981,415 (December 31, 2015) |
| 2014 NOI: | $267,432 (December 31, 2014) |
| 2013 NOI: | $324,316 (December 31, 2013) |
| Historical Occupancy | |
| Most Recent Occupancy: | 82.0% (April 30, 2016) |
| 2015 Occupancy: | 82.0% (December 31, 2015) |
| 2014 Occupancy: | 54.0% (December 31, 2014) |
| 2013 Occupancy: | 52.0% (December 31, 2013) |
| (2) | A hard lockbox and in-place cash management will be triggered (i) upon an event of default, (ii) if the DSCR falls below 1.15x during any calendar quarter, (iii) upon any approved mezzanine loan or (iv) upon the commencement of a Lease Sweep Period (as defined below). |
| (3) | If an acceptable blanket policy is no longer in place, the borrower is required to deposit 1/12 of the estimated annual insurance premiums into an insurance reserve on a monthly basis. |
| (4) | The replacement reserve is subject to a cap of $19,446. |
| (5) | The TI/LC reserve is subject to a cap of $122,446. |
| (6) | During a Lease Sweep Period (as defined below), all excess cash will be deposited into the lease sweep account. A “Lease Sweep Period” will commence upon (i) the date that is nine months prior to the earliest stated expiration of a Lease Sweep Lease (as defined below), (ii) the date that the Lease Sweep Lease is surrendered, cancelled or terminated prior to its then current expiration date or receipt by the borrower of notice from any tenant under a Lease Sweep Lease that it intends to surrender, cancel or terminate its lease, (iii) the date that the tenant under the Lease Sweep Lease discontinues its business or gives notice that it intends to discontinue its business, (iv) a default under a Lease Sweep Lease beyond any applicable notice and cure period or (v) a bankruptcy or insolvency proceeding of any tenant under a Lease Sweep Lease. A “Lease Sweep Lease” is (i) FMC Kahana, (ii) Amakua Holdings, Inc. or (iii) Bob’s Maui Dive Shop, Inc. |
| (7) | In the event the borrower permits any rent concessions, the loan documents require the borrower to deposit such rent concession amounts with lender into the rent concession reserve. |
| (8) | Based on amortizing debt service payments. Based on the current interest only payments, Underwritten NOI DSCR and Underwritten NCF DSCR are 1.83x and 1.75x, respectively. |
TRANSACTION HIGHLIGHTS |
| ■ | Property.The Kahana Retail property is a 32,408 sq. ft. Class A/B shadow anchored retail center located in Lahaina, Hawaii. The Kahana Retail property was built in 1990, and consists of a three- story building on 3.95 acres with 358 parking space, which equates to a parking ratio of 6.09 per 1,000 sq. ft. The Kahana Retail property is the fee simple portion of a 58,774 sq. ft. retail center shadow anchored by the grocer, Whale’s General Store. |
| ■ | Location/Market. The Kahana Retail property is located approximately 0.2 miles east of the Pacific Ocean within the Kahana district in Maui. The property provides approximately 545 feet of frontage along Honoapiilani Highway with an average of 20,297 vehicles passing by the property each day. Within a market which benefits from tourism, the property is surrounded by major resort hotels with a total of over 4,200 rooms with numerous condominium and single family residence projects in the area. According to the appraiser, as of the third quarter of 2015, total vacancy within the Maui County retail market and West Maui County retail submarket was 3.6% and 5.7%, respectively, benefitting from the limited barriers to entry. |
| ■ | Tenancy. As of April 30, 2016, the Kahana Retail property is 82.0% leased to six tenants including two credit tenants accounting for 34.6% of NRA and 45.6% of U/W Base Rent: FMC Kahana “Fresenius Medical” (28.4% of NRA, 37.7% of U/W Base Rent, rated BB+/Ba1/BBB- by Fitch/Moody’s/S&P) and First Hawaiian Bank, a subsidiary of BNP Paribas (6.1% of NRA, 7.9% of U/W Base Rent, A1/A by Moody’s/S&P). The current tenants at the Kahana Retail property have been at the property for a weighted average of approximately 11.7 years. |
| ■ | Sponsorship. The sponsor of the borrower and the nonrecourse carve-out guarantor is National Credit Tenant Investments, LLC, 99.9% owned by David Lee, the CEO and founder of ValueRock Realty Partners. ValueRock Realty Partners is a retail and mixed-use real estate investment and operating company with industry veterans each with 20 to 30 years of experience investing, operating and acquiring individual properties and portfolios. The ValueRock Realty Partners team has been involved with over $30 billion of transactions. |
A-3-113
465 Columbus Avenue Valhalla, NY 10595 | Collateral Asset Summary – Loan No. 19 465 Columbus Ave | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $11,500,000 65.7% 1.39x 10.7% |
| Mortgage Loan Information | |
| Loan Seller: | GACC |
| Loan Purpose: | Refinance |
| Sponsors: | Capstone Realty Group Holdings, LLC; KABR Real Estate Investment Partners II, LLC |
| Borrower: | CK 465 Building, LLC |
| Original Balance: | $11,500,000 |
| Cut-off Date Balance: | $11,500,000 |
| % by Initial UPB: | 1.6% |
| Interest Rate: | 4.5000% |
| Payment Date: | 6thof each month |
| First Payment Date: | September 6, 2016 |
| Maturity Date: | August 6, 2026 |
| Amortization: | 360 months |
| Additional Debt: | None |
| Call Protection(1): | L(24), D(91), O(5) |
| Lockbox / Cash Management(2): | Hard / Springing |
| Reserves | ||
| Initial | Monthly | |
| Taxes: | $125,400 | $31,350 |
| Insurance: | $12,564 | $2,513 |
| Replacement: | $0 | $2,049 |
| TI/LC: | $0 | $10,244 |
| Remaining Parking/LED Conversion: | $80,000 | NAP |
| Lease Sweep(3): | $0 | Springing |
| Financial Information | ||
| Cut-off Date Balance / Sq. Ft.: | $117 | |
| Balloon Balance / Sq. Ft.: | $95 | |
| Cut-off Date LTV: | 65.7% | |
| Balloon LTV: | 53.1% | |
| Underwritten NOI DSCR: | 1.75x | |
| Underwritten NCF DSCR: | 1.39x | |
| Underwritten NOI Debt Yield: | 10.7% | |
| Underwritten NCF Debt Yield: | 8.5% | |
| (1) | On any date after the expiration of the lockout period, the borrower may obtain the release of an unimproved release parcel, as described in Schedule VII in the loan agreement, provided that, among other things: (i) the release parcel is a legally subdivided parcel from the property and is a separate tax lot from the property; (ii) the conveyance of the release parcel does not adversely affect the use or operation of, or access to or from, the portion of the property and |
| Property Information | |
| Single Asset / Portfolio: | Single Asset |
| Property Type: | Suburban Office |
| Collateral: | Fee Simple |
| Location: | Valhalla, NY |
| Year Built / Renovated: | 1986 / 2015 |
| Total Sq. Ft.: | 98,344 |
| Property Management: | Rapad Real Estate Management, LLC |
| Underwritten NOI: | $1,226,921 |
| Underwritten NCF: | $972,328 |
| Appraised Value: | $17,500,000 |
| Appraisal Date: | May 20, 2016 |
| Historical NOI(4) | |
| Most Recent NOI: | $788,074 (T-12 April 30, 2016) |
| 2015 NOI: | $761,798 (December 31, 2015) |
| 2014 NOI: | $552,514 (December 31, 2014) |
| 2013 NOI: | $471,036 (December 31, 2013) |
| Historical Occupancy(4) | |
| Most Recent Occupancy: | 98.2% (June 30, 2016) |
| 2015 Occupancy: | 95.0% (December 31, 2015) |
| 2014 Occupancy: | 80.0% (December 31, 2014) |
| 2013 Occupancy: | 60.0% (December 31, 2013) |
| (iii) the LTV of the remaining property, after release of the release parcel, is greater than 125% of the unpaid principal balance of the 465 Columbus Ave loan. |
| (2) | In place cash management will be triggered (i) upon an event of default, (ii) if the DSCR falls below 1.15x until such time that the DSCR is at least 1.20x for two consecutive calendar quarters or (iii) during a Lease Sweep Period. A “Lease Sweep Period” will commence upon (i) the earlier of (a) the date that is 12 months prior to the earliest stated expiration of a Lease Sweep Lease (as defined below), or (b) the date the Lease Sweep Lease is required under its lease to give notice of its exercise of a renewal option, (ii) the earlier or (a) the date by which the Lease Sweep Lease is required to give notice of its exercise of a termination option, (b) the date that Lease Sweep Lease is surrendered, cancelled or terminated prior to its then current expiration date or (c) receipt by the borrower of notice from any tenant under a Lease Sweep Lease that it intends to surrender, cancel or terminate its lease, (iii) the date that the tenant under the Lease Sweep Lease discontinues its business at 35.0% or more of its space under the Lease Sweep Lease or gives notice that it intends to discontinue its business at 35.0% or more of its space under the Lease Sweep Lease at the property unless such tenant is “investment grade”, (iv) a default under a Lease Sweep Lease beyond any applicable notice and cure period, (v) a bankruptcy or insolvency proceeding of any tenant under a Lease Sweep Lease or (vi) on August 6, 2025 if less than 24 months remain on the term of a Lease Sweep Lease from and after August 6, 2026 until the earliest stated expiration of a Lease Sweep Lease. A “Lease Sweep Lease” is (i) the NYC Department of Environmental Protection lease or (ii) any replacement lease or leases which collectively cover a majority of the Lease Sweep Lease space. |
| (3) | On each monthly payment date during a Lease Sweep Period, the borrower is required to deposit all excess cash into a lease sweep account. |
| (4) | The increases in Historical NOI and Occupancy from 2013 to 2014 and from 2014 to 2015 reflect the stabilization of the property by the current sponsor since acquisition in 2012. |
TRANSACTION HIGHLIGHTS |
| ■ | Property. The 465 Columbus Ave property is a three-story, Class A office building totaling 98,344 sq. ft. that is located in Valhalla, New York. The property was built in 1986 and renovated and retenanted between 2013 and 2016. The current owner purchased the property in March 2012 and has invested more than $3.3 million ($33.71 PSF) since acquisition in tenant improvements, leasing commissions and capital improvements at the property. The capital improvements include common area renovations, upgrades to the building signage, a complete re-painting, installation of LED lighting and a new security system. The office spaces at the property are finished and furnished with open space cubicles and perimeter private offices and conference rooms. The building sits atop an 87-stall covered parking area and contains 228 additional surface parking spaces, which equates to a parking ratio of 3.2 spaces per 1000 sq. ft. |
| ■ | Market. The 465 Columbus Ave property is located in Valhalla, New York within the North Submarket of Westchester County. Westchester County is considered to be a part of the New York City Metropolitan Area and is located just north of the Bronx. Westchester County is served by a vast network of highways, including four interstate highways, I-87, I-287, I-95 and I-84 and six major parkways that run throughout the region. Household income in Westchester County reflects a middle to upper-middle income area with a median household income of $85,630 in 2016. In addition, Westchester County’s unemployment rate was 4.4% as of February 2016, below the national and New York state average. The North submarket features a vacancy rate of 24.1% and asking rents of $27.95 PSF as of the first quarter of 2016. In addition, there was 68,273 sq. ft. of leasing activity in the submarket, the second highest in the overall Westchester office market. |
| ■ | Sponsor.Capstone Realty Group Holdings (“Capstone”) is a private equity investor and fund manager, founded in 1998, that acquires retail shopping centers, office buildings, hotels and distressed loans. Since founding, Capstone has acquired over 25 real estate deals, comprising over 4.0 million sq. ft. and $600 million of total capitalization. Capstone primarily invests in the New York metropolitan area and Upstate New York but also has investments in Ohio and Pennsylvania. The KABR Group (“KABR”) is a private equity real estate firm responsible for the investment, management, and development of commercial real estate. KABR was founded by Kenneth Pasternak, Laurence Rappaport, and Adam Altman in 2008 and has evolved into a multi-strategy firm that effectively invests across the following themes: value-added, opportunistic, distressed debt, special situations, and development. As of the first quarter of 2016, KABR has raised and deployed, on a fully-discretionary basis, over $143 million, 50% of which has been contributed by the principals of KABR. KABR has managed the purchase of 79 assets, the sale of 30 assets, and the participation in 45 joint ventures. More specifically, KABR has acquired over 2 million sq. ft. of development rights in Jersey City, 3.5 million sq. ft. of office and industrial space, and 3,800 multifamily units. |
A-3-114
5820, 5830, 5860 Clarion Street 5802-5854 Vickery Street Cumming, GA 30040
| Collateral Asset Summary – Loan No. 20 Shoppes at Vickery Village | Cut-off Date Balance: Cut-off Date LTV: U/W NCF DSCR: U/W NOI Debt Yield: | $10,675,464 69.1% 1.35x 9.3% |
| Mortgage Loan Information | |
| Loan Seller: | CGMRC |
| Loan Purpose: | Acquisition |
| Sponsor: | Russell G. Scaramella |
| Borrower: | Vickery Village Community, LLC |
| Original Balance: | $10,687,500 |
| Cut-off Date Balance: | $10,675,464 |
| % by Initial UPB: | 1.5% |
| Interest Rate: | 4.7500% |
| Payment Date: | 6thof each month |
| First Payment Date: | August 6, 2016 |
| Maturity Date: | July 6, 2026 |
| Amortization: | 360 months |
| Additional Debt: | None |
| Call Protection(1): | L(25), YM1(91), O(4) |
| Lockbox / Cash Management(2): | Hard / Springing |
| Reserves | ||
| Initial | Monthly | |
| Taxes: | $86,157 | $7,180 |
| Insurance: | $5,923 | $2,961 |
| TI/LC(3): | $0 | $8,356 |
| Replacement: | $0 | $1,501 |
| Required Repairs: | $22,813 | NAP |
| Unfunded Obligations Reserve(4): | $10,500 | NAP |
| Financial Information | ||
| Cut-off Date Balance / Sq. Ft.: | $137 | |
| Balloon Balance / Sq. Ft.: | $112 | |
| Cut-off Date LTV: | 69.1% | |
| Balloon LTV: | 56.4% | |
| Underwritten NOI DSCR: | 1.49x | |
| Underwritten NCF DSCR: | 1.35x | |
| Underwritten NOI Debt Yield: | 9.3% | |
| Underwritten NCF Debt Yield: | 8.5% | |
| Property Information | |
| Single Asset / Portfolio: | Single Asset |
| Property Type: | Office/Retail |
| Collateral: | Fee Simple |
| Location: | Cumming, GA |
| Year Built / Renovated: | 2006 / NAP |
| Total Sq. Ft.: | 77,733 |
| Property Management: | Avison Young - Property Management (USA), LLC |
| Underwritten NOI: | $996,836 |
| Underwritten NCF: | $903,490 |
| Appraised Value: | $15,450,000 |
| Appraisal Date: | April 25, 2016 |
| Historical NOI | |
| Most Recent NOI: | $1,011,455 (T-12 March 31, 2016) |
| 2015 NOI: | $926,138 (December 31, 2015) |
| 2014 NOI: | NAV |
| 2013 NOI: | NAV |
| Historical Occupancy | |
| Most Recent Occupancy: | 93.2% (April 30, 2016) |
| 2015 Occupancy: | 95.0% (December 31, 2015) |
| 2014 Occupancy: | NAV |
| 2013 Occupancy: | NAV |
| (1) | The borrower may transfer an outparcel at the Shoppes at Vickery Village property to a third party and obtain the release of such outparcel provided that, among other things: (i) the borrower delivers to the lender a written request for the release not less than sixty days prior to the desired release, accompanied by a processing fee of $5,000, (ii) no trigger period (as defined under the related loan documents) has occurred and is continuing as of the date of the requested release, (iii) the borrower delivers a rating agency confirmation and (iv) if the loan-to-value ratio of the remaining property exceeds 125% after the release, the borrower pays down the principal balance of the Shoppes at Vickery Village loan by a qualified amount. |
| (2) | Cash management will be triggered upon the earliest to occur of (i) an event of default and (ii) the DSCR being less than 1.15x. |
| (3) | The TI/LC reserve is capped at $150,000. |
| (4) | The Unfunded Obligations Reserve is for Sydney’s Pizza ($7,500) and Florim Solution ($3,000). |
TRANSACTION HIGHLIGHTS |
| ■ | Property.TheShoppes at Vickery Village property is a 77,733 sq. ft. mixed use property located in Cumming, Georgia. The Shoppes at Vickery Village property was built in 2006 and consists of 62,244 sq. ft. of retail space and 15,489 sq. ft. of office space in eleven buildings (eight retail buildings and three, two-story office buildings) situated on 12.5 acres. The Shoppes at Vickery Village property is located in the heart of a master-planned development known as Vickery Village, approximately 30 miles north/northeast of the Atlanta CBD. The office portion of the Shoppes at Vickery Village property includes two condominiums, one of which the borrower owns 1 of 6 units and the other of which the borrower owns all 12 units. |
| ■ | Tenancy. As of April 30, 2016, the Shoppes at Vickery Village property is 93.2% leased and occupied by 29 tenants. The largest tenants at the Shoppes at Vickery Village property include The ReThink Group, Cinco Mexican Cantina and Tanner’s Vickery. The ReThink Group (15.3% of NRA) has commenced paying rent for its retail space (5.1% of NRA) but is not yet opened for business. |
| ■ | Location/Market. The Shoppes at Vickery Village property is located at 5802-5854 Vickery Street and 5820, 5830 and 5860 Clarion Street, Cumming, Georgia in west central Forsyth County. The Shoppes at Vickery Village property is located in the Atlanta MSA. Land uses within the subject neighborhood consist mainly of newer single family residential subdivision developments, but the neighborhood also has rural residential and agricultural uses. Rental rates at the competitive retail properties ranged from $13.00 PSF to $19.00 PSF, with an average of $15.50 PSF. The Georgia retail submarket reported a first quarter of 2016 vacancy rate of 7.0%. The average occupancy rate for the comparable retail set is 81.8%. |
| ■ | Sponsorship. The borrower, Vickery Village Community, LLC, a Delaware limited liability company, is managed by Russell G. Scaramella. Since 2000, Mr. Scaramella has developed, acquired, owned, and operated residential and commercial real estate assets valued at over $400 million. Mr. Scaramella grew a downstream oil business from one store to over $1.2 billion in annual revenue over a 9.5 year period. In 2009, he acquired 50% of the Atlanta BP downstream market and 100% of the Orlando market in 2010 and employed approximately 800 employees in 3 states. Currently, Mr. Scaramella owns over 30 fee properties in Atlanta and Phoenix. |
A-3-115
[THIS PAGE INTENTIONALLY LEFT BLANK]
ANNEX B
FORM OF REPORT TO CERTIFICATEHOLDERS
| B-1 |
[THIS PAGE INTENTIONALLY LEFT BLANK]
 | Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| DISTRIBUTION DATE STATEMENT | ||||||||
| Table of Contents | ||||||||
| STATEMENT SECTIONS | PAGE(s) | |||||||
| Certificate Distribution Detail | 2 | |||||||
| Certificate Factor Detail | 3 | |||||||
| Reconciliation Detail | 4 | |||||||
| Other Required Information | 5 | |||||||
| Cash Reconciliation Detail | 6 | |||||||
| Current Mortgage Loan and Property Stratification Tables | 7-9 | |||||||
| Mortgage Loan Detail | 10 | |||||||
| NOI Detail | 11 | |||||||
| Principal Prepayment Detail | 12 | |||||||
| Historical Detail | 13 | |||||||
| Delinquency Loan Detail | 14 | |||||||
| Specially Serviced Loan Detail | 15-16 | |||||||
| Advance Summary | 17 | |||||||
| Modified Loan Detail | 18 | |||||||
| Historical Liquidated Loan Detail | 19 | |||||||
| Historical Bond / Collateral Loss Reconciliation Detail | 20 | |||||||
| Interest Shortfall Reconciliation Detail | 21-22 | |||||||
| Defeased Loan Detail | 23 | |||||||
| Supplemental Reporting | 24 | |||||||
| Depositor | Master Servicer | Special Servicer | Operating Advisor/ Asset Representations Reviewer | |||||||||||||
Deutsche Mortgage & Asset | Midland Loan Services, a Division of PNC Bank, | Rialto Capital Advisors, LLC 790 NW 107th Avenue | Park Bridge Lender Services LLC 600 Third Avenue | |||||||||||||
| 60 Wall Street | 10851 Mastin Street, Suite 300 | 4th Floor | 40th Floor | |||||||||||||
| New York, NY 10005 | Overland Park, KS 66210 | Miami, FL 33172 | New York, NY 10016 | |||||||||||||
| Contact: | Contact: | |||||||||||||||
| Helaine M. Kaplan | Contact: Heather Wagner | Niral.shah@rialtocapital.com | Contact: David Rodgers | |||||||||||||
| Phone Number: (212) 250-5270 | Phone: (913) 253-9396 | Phone Number: | Phone Number: (212) 230-9025 | |||||||||||||
| This report is compiled by Wells Fargo Bank, N.A. from information provided by third parties. Wells Fargo Bank, N.A. has not independently confirmed the accuracy of the information. | ||||||||||||||||
| Please visitwww.ctslink.com for additional information and special notices. In addition, certificateholders may register online for email notification when special notices are posted. For information or assistance please call 866-846-4526. | ||||||||||||||||
| Page 1 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Certificate Distribution Detail | ||||||||||||||||||||||||||
| Class | CUSIP | Pass-Through Rate | Original Balance | Beginning Balance | Principal Distribution | Interest Distribution | Prepayment Premium | Realized Loss/ Additional Trust Fund Expenses | Total Distribution | Ending Balance | Current Subordination Level (1) | |||||||||||||||
| A-1 | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| A-2 | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| A-SB | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| A-3 | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| A-4 | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| A-M | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| B | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| C | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| D | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| E | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| F | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| G | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| V | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| R | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| Totals | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||
| Class | CUSIP | Pass-Through Rate | Original Notional Amount | Beginning Notional Amount | Interest Distribution | Prepayment Premium | Total Distribution | Ending Notional Amount | ||||||||||||||||||
| X-A | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||
| X-B | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||
| X-C | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||
| X-D | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||
| X-E | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||
| X-F | 0.000000% | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||
(1) Calculated by taking (A) the sum of the ending certificate balance of all classes less (B) the sum of (i) the ending balance of the designated class and (ii) the ending certificate balance of all classes which are not subordinate to the designated class and dividing the result by (A).
| ||||||||||||||||||||||||||
| Page 2 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Certificate Factor Detail | |||||||||
| Class | CUSIP | Beginning | Principal | Interest | Prepayment | Realized Loss/ | Ending | ||
| A-1 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| A-2 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| A-SB | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| A-3 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| A-4 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| A-M | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| B | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| C | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| D | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| E | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| F | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| G | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| V | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| R | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||
| Class | CUSIP | Beginning Notional Amount | Interest Distribution | Prepayment Premium | Ending Notional Amount | ||||
| X-A | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||||
| X-B | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||||
| X-C | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||||
| X-D | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||||
| X-E | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||||
| X-F | 0.00000000 | 0.00000000 | 0.00000000 | 0.00000000 | |||||
| Page 3 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Reconciliation Detail | ||||||||||||||||||||||
| Principal Reconciliation | ||||||||||||||||||||||
| Stated Beginning Principal Balance | Unpaid Beginning Principal Balance | Scheduled Principal | Unscheduled Principal | Principal Adjustments | Realized Loss | Stated Ending Principal Balance | Unpaid Ending Principal Balance | Current Principal Distribution Amount | ||||||||||||||
| Total | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||
| Certificate Interest Reconciliation | |||||||||||||||||||||||||
| Class | Accrual Dates | Accrual Days | Accrued Certificate Interest | Net Aggregate Prepayment Interest Shortfall | Distributable Certificate Interest | Distributable Certificate Interest Adjustment | WAC CAP Shortfall | Additional Trust Fund Expenses | Interest Distribution | Remaining Unpaid Distributable Certificate Interest | |||||||||||||||
| A-1 | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| A-2 | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| A-SB | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| A-3 | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| A-4 | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| X-A | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| A-M | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| X-B | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| X-C | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| X-D | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| X-E | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| X-F | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| B | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| C | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| D | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| E | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| F | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| G | 0 | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| Totals | 0 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||
| Page 4 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Other Required Information | |||||||||||||||||||
| Available Distribution Amount (1) | 0.00 | ||||||||||||||||||
| Controlling Class Information | Appraisal Reduction Amount | ||||||||||||||||||
| Controlling Class: | |||||||||||||||||||
| Effective as of: mm/dd/yyyy | Loan Number | Appraisal | Cumulative | Most Recent | |||||||||||||||
| Reduction | ASER | App. Red. | |||||||||||||||||
| Effected | Amount | Date | |||||||||||||||||
| Total | |||||||||||||||||||
(1) The Available Distribution Amount includes any Prepayment Premiums. | |||||||||||||||||||
| Page 5 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Cash Reconciliation Detail | ||||||||
| Total Funds Collected | Total Funds Distributed | |||||||
| Interest: | Fees: | |||||||
| Interest paid or advanced | 0.00 | Master Servicing Fee - Midland Loan Services | 0.00 | |||||
| Interest reductions due to Non-Recoverability Determinations | 0.00 | Trustee Fee - Wells Fargo Bank, N.A. | 0.00 | |||||
| Interest Adjustments | 0.00 | Certificate Administration Fee - Wells Fargo Bank, N.A. | 0.00 | |||||
| Deferred Interest | 0.00 | CREFC® Intellectual Property Royalty License Fee | 0.00 | |||||
| Net Prepayment Interest Shortfall | 0.00 | Operating Advisor Fee - Park Bridge Lender Services LLC | 0.00 | |||||
| Net Prepayment Interest Excess | 0.00 | Asset Representations Reviewer Fee - Park Bridge Lender | 0.00 | |||||
| Extension Interest | 0.00 | Services LLC | ||||||
| Interest Reserve Withdrawal | 0.00 | Total Fees | 0.00 | |||||
| Total Interest Collected | 0.00 | Additional Trust Fund Expenses: | ||||||
| Reimbursement for Interest on Advances | 0.00 | |||||||
| ASER Amount | 0.00 | |||||||
| Principal: | Special Servicing Fee | 0.00 | ||||||
| Scheduled Principal | 0.00 | Rating Agency Expenses | 0.00 | |||||
| Unscheduled Principal | 0.00 | Attorney Fees & Expenses | 0.00 | |||||
| Principal Prepayments | 0.00 | Bankruptcy Expense | 0.00 | |||||
| Collection of Principal after Maturity Date | 0.00 | Taxes Imposed on Trust Fund | 0.00 | |||||
| Recoveries from Liquidation and Insurance Proceeds | 0.00 | Non-Recoverable Advances | 0.00 | |||||
| Excess of Prior Principal Amounts paid | 0.00 | Other Expenses | 0.00 | |||||
| Curtailments | 0.00 | Total Additional Trust Fund Expenses | 0.00 | |||||
| Negative Amortization | 0.00 | |||||||
| Principal Adjustments | 0.00 | Interest Reserve Deposit | 0.00 | |||||
| Total Principal Collected | 0.00 | |||||||
| Payments to Certificateholders & Others: | ||||||||
| Other: | Interest Distribution | 0.00 | ||||||
| Prepayment Penalties/Yield Maintenance | 0.00 | Principal Distribution | 0.00 | |||||
| Repayment Fees | 0.00 | Prepayment Penalties/Yield Maintenance | 0.00 | |||||
| Borrower Option Extension Fees | 0.00 | Borrower Option Extension Fees | 0.00 | |||||
| Equity Payments Received | 0.00 | Equity Payments Paid | 0.00 | |||||
| Net Swap Counterparty Payments Received | 0.00 | Net Swap Counterparty Payments Paid | 0.00 | |||||
| Total Other Collected | 0.00 | Total Payments to Certificateholders & Others | 0.00 | |||||
| Total Funds Collected | 0.00 | Total Funds Distributed | 0.00 | |||||
| Page 6 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Current Mortgage Loan and Property Stratification Tables Aggregate Pool | ||||||||||||||||
| Scheduled Balance | State (3) | |||||||||||||||
| Scheduled Balance | # of loans | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | State | # of Props. | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | |||
| Totals | Totals | |||||||||||||||
| See footnotes on last page of this section. | ||||||||||||||||
| Page 7 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Current Mortgage Loan and Property Stratification Tables Aggregate Pool | ||||||||||||||||
| Debt Service Coverage Ratio | Property Type (3) | |||||||||||||||
| Debt Service Coverage Ratio | # of loans | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | Property Type | # of Props. | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | |||
| Totals | Totals | |||||||||||||||
| Note Rate | Seasoning | |||||||||||||||
| Note Rate | # of loans | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | Seasoning | # of loans | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | |||
| Totals | Totals | |||||||||||||||
| See footnotes on last page of this section. | ||||||||||||||||
| Page 8 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Current Mortgage Loan and Property Stratification Tables Aggregate Pool | ||||||||||||||||
| Anticipated Remaining Term (ARD and Balloon Loans) | Remaining Stated Term (Fully Amortizing Loans) | |||||||||||||||
| Anticipated Remaining Term (2) | # of loans | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | Remaining Stated Term | # of loans | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | |||
| Totals | Totals | |||||||||||||||
| Remaining Amortization Term (ARD and Balloon Loans) | Age of Most Recent NOI | |||||||||||||||
| Remaining Amortization Term | # of loans | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | Age of Most Recent NOI | # of loans | Scheduled Balance | % of Agg. Bal. | WAM (2) | WAC | Weighted Avg DSCR (1) | |||
| Totals | Totals | |||||||||||||||
(1) Debt Service Coverage Ratios are updated periodically as new NOI figures become available from borrowers on an asset level. In all cases, the most recent DSCR provided by the Servicer is used. To the extent that no DSCR is provided by the Servicer, information from the offering document is used. The Trustee makes no representations as to the accuracy of the data provided by the borrower for this calculation. | ||||||||||||||||
| (2) Anticipated Remaining Term and WAM are each calculated based upon the term from the current month to the earlier of the Anticipated Repayment Date, if applicable, and the maturity date. | ||||||||||||||||
| (3) Data in this table was calculated by allocating pro-rata the current loan information to the properties based upon the Cut-off Date balance of each property as disclosed in the offering document. | ||||||||||||||||
| Page 9 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Mortgage Loan Detail | |||||||||||||||||||
| Loan Number | ODCR | Property Type (1) | City | State | Interest Payment | Principal Payment | Gross Coupon | Anticipated Repayment Date | Maturity Date | Neg. Amort (Y/N) | Beginning Scheduled Balance | Ending Scheduled Balance | Paid Thru Date | Appraisal Reduction Date | Appraisal Reduction Amount | Res. Strat. (2) | Mod. Code (3) | ||
| Totals | |||||||||||||||||||
| (1) Property Type Code | (2) Resolution Strategy Code | (3) Modification Code | ||||||||||||||||||||
| MF | - | Multi-Family | OF | - | Office | 1 | - | Modification | 6 | - | DPO | 10 | - | Deed in Lieu Of | 1 | - | Maturity Date Extension | 6 | - | Capitalization of Interest | ||
| RT | - | Retail | MU | - | Mixed Use | 2 | - | Foreclosure | 7 | - | REO | Foreclosure | 2 | - | Amortization Change | 7 | - | Capitalization of Taxes | ||||
| HC | - | Health Care | LO | - | Lodging | 3 | - | Bankruptcy | 8 | - | Resolved | 11 | - | Full Payoff | 3 | - | Principal Write-Off | 8 | - | Principal Write-Off | ||
| IN | - | Industrial | SS | - | Self Storage | 4 | - | Extension | 9 | - | Pending Return | 12 | - | Reps and Warranties | 4 | - | Blank | 9 | - | Combination | ||
| WH | - | Warehouse | OT | - | Other | 5 | - | Note Sale | to Master Servicer | 13 | - | Other or TBD | 5 | - | Temporary Rate Reduction | |||||||
| MH | - | Mobile Home Park | ||||||||||||||||||||
| Page 10 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| NOI Detail | |||||||||||
| Loan Number | ODCR | Property Type | City | State | Ending Scheduled Balance | Most Recent Fiscal NOI | Most Recent NOI | Most Recent NOI Start Date | Most Recent NOI End Date | ||
| Total | |||||||||||
| Page 11 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Principal Prepayment Detail | ||||||||
| Loan Number | Loan Group | Offering Document | Principal Prepayment Amount | Prepayment Penalties | ||||
| Cross-Reference | Payoff Amount | Curtailment Amount | Prepayment Premium | Yield Maintenance Premium | ||||
| Totals | ||||||||
| Page 12 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Historical Detail | |||||||||||||||||||||
| Delinquencies | Prepayments | Rate and Maturities | |||||||||||||||||||
| Distribution | 30-59 Days | 60-89 Days | 90 Days or More | Foreclosure | REO | Modifications | Curtailments | Payoff | Next Weighted Avg. | ||||||||||||
| Date | # | Balance | # | Balance | # | Balance | # | Balance | # | Balance | # | Balance | # | Balance | # | Balance | Coupon | Remit | WAM | ||
| Note: Foreclosure and REO Totals are excluded from the delinquencies. | |||||||||||||||||||||
| Page 13 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Delinquency Loan Detail | |||||||||||||||
| Loan Number | Offering Document Cross-Reference | # of Months Delinq. | Paid Through Date | Current P & I Advances | Outstanding P & I Advances ** | Status of Mortgage Loan (1) | Resolution Strategy Code (2) | Servicing Transfer Date | Foreclosure Date | Actual Principal Balance | Outstanding Servicing Advances | Bankruptcy Date | REO Date | ||
| Totals | |||||||||||||||
| (1) Status of Mortgage Loan | (2) Resolution Strategy Code | |||||||||||||||||||
| A | - | Payment Not Received | 0 | - Current | 4 | - | Assumed Scheduled Payment | 1 | - | Modification | 6 | - | DPO | 10 | - | Deed In Lieu Of | ||||
| But Still in Grace Period | 1 | - One Month Delinquent | (Performing Matured Balloon) | 2 | - | Foreclosure | 7 | - | REO | Foreclosure | ||||||||||
| Or Not Yet Due | 2 | - Two Months Delinquent | 5 | - | Non Performing Matured Balloon | 3 | - | Bankruptcy | 8 | - | Resolved | 11 | - | Full Payoff | ||||||
| B | - | Late Payment But Less | 3 | - Three or More Months Delinquent | 4 | - | Extension | 9 | - | Pending Return | 12 | - | Reps and Warranties | |||||||
| Than 1 Month Delinquent | 5 | - | Note Sale | to Master Servicer | 13 | - | Other or TBD | |||||||||||||
| ** Outstanding P & I Advances include the current period advance. | ||||||||||||||||||||
| Page 14 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Specially Serviced Loan Detail - Part 1 | |||||||||||||||||
| Distribution Date | Loan Number | Offering Document Cross-Reference | Servicing Transfer Date | Resolution Strategy Code (1) | Scheduled Balance | Property Type (2) | State | Interest Rate | Actual Balance | Net Operating Income | NOI Date | DSCR | Note Date | Maturity Date | Remaining Amortization Term | ||
| (1) Resolution Strategy Code | (2) Property Type Code | ||||||||||||||
| 1 | - Modification | 6 | - | DPO | 10 | - | Deed In Lieu Of | MF | - | Multi-Family | OF | - | Office | ||
| 2 | - Foreclosure | 7 | - | REO | Foreclosure | RT | - | Retail | MU | - | Mixed use | ||||
| 3 | - Bankruptcy | 8 | - | Resolved | 11 | - | Full Payoff | HC | - | Health Care | LO | - | Lodging | ||
| 4 | - Extension | 9 | - | Pending Return | 12 | - | Reps and Warranties | IN | - | Industrial | SS | - | Self Storage | ||
| 5 | - Note Sale | to Master Servicer | 13 | - | Other or TBD | WH | - | Warehouse | OT | - | Other | ||||
| MH | - | Mobile Home Park | |||||||||||||
| Page 15 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Specially Serviced Loan Detail - Part 2 | |||||||||||
| Distribution Date | Loan Number | Offering Document Cross-Reference | Resolution Strategy Code (1) | Site Inspection Date | Phase 1 Date | Appraisal Date | Appraisal Value | Other REO Property Revenue | Comment | ||
| (1) Resolution Strategy Code | ||||||||||
| 1 | - | Modification | 6 | - | DPO | 10 | - | Deed In Lieu Of | ||
| 2 | - | Foreclosure | 7 | - | REO | Foreclosure | ||||
| 3 | - | Bankruptcy | 8 | - | Resolved | 11 | - | Full Payoff | ||
| 4 | - | Extension | 9 | - | Pending Return | 12 | - | Reps and Warranties | ||
| 5 | - | Note Sale | to Master Servicer | 13 | - | Other or TBD | ||||
| Page 16 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Advance Summary | ||||||
| Current P&I Advances | Outstanding P&I Advances | Outstanding Servicing Advances | Current Period Interest on P&I and Servicing Advances Paid | |||
| Totals | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Page 17 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Modified Loan Detail | |||||||||
| Loan Number | Offering Document Cross-Reference | Pre-Modification Balance | Post-Modification Balance | Pre-Modification Interest Rate | Post-Modification Interest Rate | Modification Date | Modification Description | ||
| Totals | |||||||||
| Page 18 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Historical Liquidated Loan Detail | ||||||||||||||
| Distribution Date | ODCR | Beginning Scheduled Balance | Fees, Advances, and Expenses * | Most Recent Appraised Value or BPO | Gross Sales Proceeds or Other Proceeds | Net Proceeds Received on Liquidation | Net Proceeds Available for Distribution | Realized Loss to Trust | Date of Current Period Adj. to Trust | Current Period Adjustment to Trust | Cumulative Adjustment to Trust | Loss to Loan with Cum Adj. to Trust | ||
| Current Total | ||||||||||||||
| Cumulative Total | ||||||||||||||
| * Fees, Advances and Expenses also include outstanding P & I advances and unpaid fees (servicing, trustee, etc.). | ||||||||||||||
| Page 19 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Historical Bond/Collateral Loss Reconciliation Detail | |||||||||||||||||||||||||||||||||||
| Distribution Date | Offering Document Cross-Reference | Beginning Balance at Liquidation | Aggregate Realized Loss on Loans | Prior Realized Loss Applied to Certificates | Amounts Covered by Credit Support | Interest (Shortages)/ Excesses | Modification /Appraisal Reduction Adj. | Additional (Recoveries) /Expenses | Realized Loss Applied to Certificates to Date | Recoveries of Realized Losses Paid as Cash | (Recoveries)/ Losses Applied to Certificate Interest | ||||||||||||||||||||||||
| Totals | |||||||||||||||||||||||||||||||||||
| Page 20 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Interest Shortfall Reconciliation Detail - Part 1 | ||||||||||||||||||||||||||||||||
| Offering Document Cross- Reference | Stated Principal Balance at Contribution | Current Ending Scheduled Balance | Special Servicing Fees | ASER | (PPIS) Excess | Non-Recoverable (Scheduled Interest) | Interest on Advances | Modified Interest Rate (Reduction) /Excess | ||||||||||||||||||||||||
| Monthly | Liquidation | Work Out | ||||||||||||||||||||||||||||||
| Totals | ||||||||||||||||||||||||||||||||
| Page 21 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Interest Shortfall Reconciliation Detail - Part 2 | ||||||||
| Offering Document Cross-Reference | Stated Principal Balance at Contribution | Current Ending Scheduled Balance | Reimb of Advances to the Servicer | Other (Shortfalls)/ Refunds | Comments | |||
| Current Month | Left to Reimburse Master Servicer | |||||||
| Totals | ||||||||
| Interest Shortfall Reconciliation Detail Part 2 Total | 0.00 | |||||||
| Interest Shortfall Reconciliation Detail Part 1 Total | 0.00 | |||||||
| Total Interest Shortfall Allocated to Trust | 0.00 | |||||||
| Page 22 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Defeased Loan Detail | |||||||
| Loan Number | Offering Document Cross-Reference | Ending Scheduled Balance | Maturity Date | Note Rate | Defeasance Status | ||
| Totals | |||||||
| Page 23 of 24 |
| Deutsche Mortgage Asset & Receiving Corporation Commercial Mortgage Pass-Through Certificates Series 2016-CD1 | For Additional Information please contact | |
| CTSLink Customer Service | |||
| 1-866-846-4526 | |||
| Reports Available www.ctslink.com | |||
| Wells Fargo Bank, N.A. | |||
| Corporate Trust Services | Payment Date: | 9/12/16 | |
| 8480 Stagecoach Circle | Record Date: | 8/31/16 | |
| Frederick, MD 21701-4747 | Determination Date: | 9/6/16 | |
| Supplemental Reporting | ||
| Page 24 of 24 |
ANNEX C
FORM OF OPERATING ADVISOR ANNUAL REPORT
Report Date: Report will be delivered annually no later than May 1 (April 30 on leap years).
Transaction: CD 2016-CD1
Operating Advisor: Park Bridge Lender Services LLC
Special Servicer: Rialto Capital Advisors, LLC
Directing Certificateholder: RREF III Debt AIV, LP (or its affiliate)
| I. | Executive Summary |
Based on the requirements and qualifications set forth in the Pooling and Servicing Agreement dated as of August 1, 2016 (the “Pooling and Servicing Agreement”), among Midland Loan Services, a Division of PNC Bank, National Association, as Master Servicer, Rialto Capital Advisors, LLC, as Special Servicer, Wells Fargo Bank, National Association, as Trustee, Wells Fargo Bank, National Association, as Certificate Administrator, and Park Bridge Lender Services LLC, as Operating Advisor and Asset Representations Reviewer, as well as the items listed below, the Operating Advisor has undertaken a limited review of the Special Servicer’s operational activities in light of the Servicing Standard and the requirements of the Pooling and Servicing Agreement with respect to the resolution and/or liquidation of the Specially Serviced Loans and provides this Operating Advisor Annual Report.
No information or any other content included in this Operating Advisor Annual Report contravenes any provision of the Pooling and Servicing Agreement. This Operating Advisor Annual Report sets forth the Operating Advisor’s assessment of the Special Servicer’s performance of its duties under the Pooling and Servicing Agreement during the prior calendar year on a platform-level basis with respect to the resolution and/or liquidation of Specially Serviced Loans during the prior calendar year.
Subject to the restrictions in the Pooling and Servicing Agreement, this Operating Advisor Annual Report (A) identifies any material deviations, if any (i) from the Servicing Standard and (ii) from the Special Servicer’s obligations under the Pooling and Servicing Agreement with respect to the resolution and/or liquidation of Specially Serviced Loans and (B) complies with all of the confidentiality requirements described in the Pooling and Servicing Agreement.
In connection with the assessment set forth in this report, the Operating Advisor:
| 1. | Reviewed any annual compliance statement delivered to the Operating Advisor pursuant to Section 10.11 the Pooling and Servicing Agreement and the following issues were noted therein: [ ] |
Operating Advisor Actions:
| 2. | Reviewed any annual independent public accountants’ servicing report delivered to the Operating Advisor pursuant to Section 10.13 of the Pooling and Servicing Agreement and the following issues were noted therein: [ ] |
Operating Advisor Actions:
| 3. | Reviewed any [Final] Asset Status Report and other information or communications delivered to the Operating Advisor and the following issues were noted therein: [ ] |
Operating Advisor Actions:
Based on such review and/or consultation with the Special Servicer and performance of the other obligations of the Operating Advisor under the Pooling and Servicing Agreement, the Operating Advisor
| C-1 |
[does, does not] believe there are material violations of the Special Servicer’s compliance with its obligations under the Pooling and Servicing Agreement.
Terms used but not defined herein have the meaning set forth in the Pooling and Servicing Agreement as described herein.
| PARK BRIDGE LENDER SERVICES LLC | ||
| By: | Park Bridge Advisors LLC Its Sole Member | |
| By: | Park Bridge Financial LLC | |
| Its Sole Member |
| By: | ||
| Name: Title: |
| C-2 |
ANNEX D-1
MORTGAGE LOAN REPRESENTATIONS AND WARRANTIES
Each of GACC and CGMRC will in its respective Mortgage Loan Purchase Agreement make, with respect to each Mortgage Loan sold by it that is included in the issuing entity, representations and warranties generally to the effect set forth below, as of the Closing Date, or as of such other date specifically provided in the applicable representation and warranty, subject to exceptions set forth in Annex D-2 and Annex D-3 to this prospectus. Prior to the execution of the related final Mortgage Loan Purchase Agreement, there may be additions, subtractions or other modifications to the representations, warranties and exceptions. These representations, warranties and exceptions should not be read alone, but should only be read in conjunction with the prospectus. Capitalized terms used but not otherwise defined in this Annex D-1 will have the meanings set forth in this prospectus or, if not defined in this prospectus, in the related Mortgage Loan Purchase Agreement.
Each Mortgage Loan Purchase Agreement, together with the related representations and warranties (subject to the exceptions to such representations and warranties), serves to contractually allocate risk between the related Mortgage Loan Seller, on the one hand, and the issuing entity, on the other. We present the representations and warranties set forth below for the sole purpose of describing some of the terms and conditions of that risk allocation. The presentation of representations and warranties below is not intended as statements regarding the actual characteristics of the Mortgage Loans, the related Mortgaged Properties or other matters. We cannot assure you that the Mortgage Loans actually conform to the statements made in the representations and warranties that we present below.
(1) Whole Loan; Ownership of Mortgage Loans. Except with respect to a Mortgage Loan that is part of a Whole Loan, each Mortgage Loan is a whole loan and not a participation interest in a Mortgage Loan. Each Mortgage Loan that is part of a Whole Loan is a portion of a whole loan evidenced by a Mortgage Note At the time of the sale, transfer and assignment to Purchaser, no Mortgage Note or Mortgage was subject to any assignment (other than assignments to the Mortgage Loan Seller or, with respect to any Non-Serviced Mortgage Loan, to the trustee for the related Non-Serviced Securitization Trust), participation or pledge, and the Mortgage Loan Seller had good title to, and was the sole owner of, each Mortgage Loan free and clear of any and all liens, charges, pledges, encumbrances, participations, any other ownership interests on, in or to such Mortgage Loan other than any servicing rights appointment or similar agreement. Mortgage Loan Seller has full right and authority to sell, assign and transfer each Mortgage Loan, and the assignment to Purchaser constitutes a legal, valid and binding assignment of such Mortgage Loan free and clear of any and all liens, pledges, charges or security interests of any nature encumbering such Mortgage Loan.
(2) Loan Document Status. Each related Mortgage Note, Mortgage, Assignment of Leases, Rents and Profits (if a separate instrument), guaranty and other agreement executed by or on behalf of the related Borrower, guarantor or other obligor in connection with such Mortgage Loan is the legal, valid and binding obligation of the related Borrower, guarantor or other obligor (subject to any non-recourse provisions contained in any of the foregoing agreements and any applicable state anti-deficiency or market value limit deficiency legislation), as applicable, and is enforceable in accordance with its terms, except (i) as such enforcement may be limited by (a) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (b) general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (ii) that certain provisions in such Loan Documents (including, without limitation, provisions requiring the payment of default interest, late fees or prepayment/yield maintenance fees, charges and/or premiums) are, or may be, further limited or rendered unenforceable by or under applicable law, but (subject to the limitations set forth inclause (i) above) such limitations or unenforceability will not render such Loan Documents invalid as a whole or materially interfere with the mortgagee’s realization of the principal benefits and/or security provided thereby (clauses (i) and(ii) collectively, the “Standard Qualifications”).
| D-1-1 |
Except as set forth in the immediately preceding sentences, there is no valid offset, defense, counterclaim or right of rescission available to the related Borrower with respect to any of the related Mortgage Notes, Mortgages or other Loan Documents, including, without limitation, any such valid offset, defense, counterclaim or right based on intentional fraud by Mortgage Loan Seller in connection with the origination of the Mortgage Loan, that would deny the mortgagee the principal benefits intended to be provided by the Mortgage Note, Mortgage or other Loan Documents.
(3) Mortgage Provisions. The Loan Documents for each Mortgage Loan contain provisions that render the rights and remedies of the holder thereof adequate for the practical realization against the Mortgaged Property of the principal benefits of the security intended to be provided thereby, including realization by judicial or, if applicable, non-judicial foreclosure subject to the limitations set forth in the Standard Qualifications.
(4) Mortgage Status; Waivers and Modifications. Since origination and except by written instruments set forth in the related Mortgage File or as otherwise provided in the related Loan Documents (a) the material terms of such Mortgage, Mortgage Note, Mortgage Loan guaranty, and related Loan Documents have not been waived, impaired, modified, altered, satisfied, canceled, subordinated or rescinded in any respect; (b) no related Mortgaged Property or any portion thereof has been released from the lien of the related Mortgage in any manner which materially interferes with the security intended to be provided by such Mortgage or the use or operation of the remaining portion of such Mortgaged Property; and (c) neither the related Borrower nor the related guarantor has been released from its material obligations under the Mortgage Loan. With respect to each Mortgage Loan, except as contained in a written document included in the Mortgage File, there have been no modifications, amendments or waivers, that could be reasonably expected to have a material adverse effect on such Mortgage Loan consented to by Mortgage Loan Seller on or after July 19, 2016.
(5) Lien; Valid Assignment. Subject to the Standard Qualifications, each assignment of Mortgage and assignment of Assignment of Leases, Rents and Profits to the Trust constitutes a legal, valid and binding assignment to the Trust. Each related Mortgage and Assignment of Leases, Rents and Profits is freely assignable without the consent of the related Borrower. Each related Mortgage is a legal, valid and enforceable first lien on the related Borrower’s fee or leasehold interest in the Mortgaged Property in the principal amount of such Mortgage Loan or allocated loan amount (subject only to Permitted Encumbrances (as defined below) and the exceptions to paragraph (6) set forth in Annex D-2 and Annex D-3 (each such exception, a “Title Exception”)), except as the enforcement thereof may be limited by the Standard Qualifications. Such Mortgaged Property (subject to and excepting Permitted Encumbrances and the Title Exceptions) as of origination was, and as of the Cut-off Date, to the Mortgage Loan Seller’s knowledge, is free and clear of any recorded mechanics’ liens, recorded materialmen’s liens and other recorded encumbrances which are prior to or equal with the lien of the related Mortgage, except those which are bonded over, escrowed for or insured against by a lender’s title insurance policy (as described below), and, to the Mortgage Loan Seller’s knowledge and subject to the rights of tenants (as tenants only)(subject to and excepting Permitted Encumbrances and the Title Exceptions), no rights exist which under law could give rise to any such lien or encumbrance that would be prior to or equal with the lien of the related Mortgage, except those which are bonded over, escrowed for or insured against by a lender’s title insurance policy (as described below). Notwithstanding anything in this prospectus to the contrary, no representation is made as to the perfection of any security interest in rents or other personal property to the extent that possession or control of such items or actions other than the filing of Uniform Commercial Code (“UCC”) financing statements is required in order to effect such perfection.
(6) Permitted Liens; Title Insurance. Each Mortgaged Property securing a Mortgage Loan is covered by an American Land Title Association loan title insurance policy or a comparable form of loan title insurance policy approved for use in the applicable jurisdiction (or, if such policy is yet to be issued, by a pro forma policy, a preliminary title policy with escrow instructions or a “marked up” commitment, in each case binding on the title insurer)(the “Title Policy”) in the original principal amount of such Mortgage Loan (or with respect to a Mortgage Loan secured by multiple properties,
| D-1-2 |
an amount equal to at least the allocated loan amount with respect to the Title Policy for each such property) after all advances of principal (including any advances held in escrow or reserves), that insures for the benefit of the owner of the indebtedness secured by the Mortgage, the first priority lien of the Mortgage, which lien is subject only to (a) the lien of current real property taxes, water charges, sewer rents and assessments not yet due and payable; (b) covenants, conditions and restrictions, rights of way, easements and other matters of public record; (c) the exceptions (general and specific) and exclusions set forth in such Title Policy; (d) other matters to which like properties are commonly subject; (e) the rights of tenants (as tenants only) under leases (including subleases) pertaining to the related Mortgaged Property and condominium declarations; and (f) if the related Mortgage Loan is cross-collateralized and cross-defaulted with another Mortgage Loan (each a “Crossed Mortgage Loan”), the lien of the Mortgage for another Mortgage Loan that is cross-collateralized and cross-defaulted with such Crossed Mortgage Loan,provided that none of which items (a) through (f), individually or in the aggregate, materially and adversely interferes with the value or current use of the Mortgaged Property or the security intended to be provided by such Mortgage or the Borrower’s ability to pay its obligations when they become due (collectively, the “Permitted Encumbrances”). Except as contemplated byclause (f) of the preceding sentence, none of the Permitted Encumbrances are mortgage liens that are senior to or coordinate and co-equal with the lien of the related Mortgage. Such Title Policy (or, if it has yet to be issued, the coverage to be provided thereby) is in full force and effect, all premiums thereon have been paid and no claims have been made by the Mortgage Loan Seller thereunder and no claims have been paid thereunder. Neither the Mortgage Loan Seller, nor to the Mortgage Loan Seller’s knowledge, any other holder of the Mortgage Loan, has done, by act or omission, anything that would materially impair the coverage under such Title Policy.
(7) Junior Liens. It being understood that B notes secured by the same Mortgage as a Mortgage Loan are not subordinate mortgages or junior liens, except for any Crossed Mortgage Loan, there are, as of origination, and to the Mortgage Loan Seller’s knowledge, as of the Cut-off Date, no subordinate mortgages or junior liens securing the payment of money encumbering the related Mortgaged Property (other than Permitted Encumbrances and the Title Exceptions, taxes and assessments, mechanics and materialmen’s liens (which are the subject of the representation in paragraph (5) above), and equipment and other personal property financing). Except as set forth in Annex D-2 and Annex D-3, the Mortgage Loan Seller has no knowledge of any mezzanine debt secured directly by interests in the related Borrower.
(8) Assignment of Leases, Rents and Profits. There exists as part of the related Mortgage File an Assignment of Leases, Rents and Profits (either as a separate instrument or incorporated into the related Mortgage). Subject to the Permitted Encumbrances and the Title Exceptions, each related Assignment of Leases, Rents and Profits creates a valid first-priority collateral assignment of, or a valid first-priority lien or security interest in, rents and certain rights under the related lease or leases, subject only to a license granted to the related Borrower to exercise certain rights and to perform certain obligations of the lessor under such lease or leases, including the right to operate the related leased property, except as the enforcement thereof may be limited by the Standard Qualifications. The related Mortgage or related Assignment of Leases, Rents and Profits, subject to applicable law, provides that, upon an event of default under the Mortgage Loan, a receiver is permitted to be appointed for the collection of rents or for the related mortgagee to enter into possession to collect the rents or for rents to be paid directly to the mortgagee.
(9) UCC Filings. If the related Mortgaged Property is operated as a hospitality property, the Mortgage Loan Seller has filed and/or recorded or caused to be filed and/or recorded (or, if not filed and/or recorded, have been submitted in proper form for filing and/or recording), UCC financing statements in the appropriate public filing and/or recording offices necessary at the time of the origination of the Mortgage Loan to perfect a valid security interest in all items of physical personal property reasonably necessary to operate such Mortgaged Property owned by such Borrower and located on the related Mortgaged Property (other than any non-material personal property, any personal property subject to a purchase money security interest, a sale and leaseback financing arrangement as permitted under the terms of the related Loan Documents or any other personal
| D-1-3 |
property leases applicable to such personal property), to the extent perfection may be effected pursuant to applicable law by recording or filing, as the case may be. Subject to the Standard Qualifications, each related Mortgage (or equivalent document) creates a valid and enforceable lien and security interest on the items of personalty described above. No representation is made as to the perfection of any security interest in rents or other personal property to the extent that possession or control of such items or actions other than the filing of UCC financing statements are required in order to effect such perfection.
(10) Condition of Property. Mortgage Loan Seller or the originator of the Mortgage Loan inspected or caused to be inspected each related Mortgaged Property within six months of origination of the Mortgage Loan and within twelve months of the Cut-off Date.
An engineering report or property condition assessment was prepared in connection with the origination of each Mortgage Loan no more than twelve months prior to the Cut-off Date. To the Mortgage Loan Seller’s knowledge, based solely upon due diligence customarily performed in connection with the origination of comparable mortgage loans, as of the Closing Date, each related Mortgaged Property was free and clear of any material damage (other than (i) any damage or deficiency that is estimated to cost less than $50,000 to repair, (ii) any deferred maintenance for which escrows were established at origination and (iii) any damage fully covered by insurance) that would affect materially and adversely the use or value of such Mortgaged Property as security for the Mortgage Loan.
(11) Taxes and Assessments. All taxes, governmental assessments and other outstanding governmental charges (including, without limitation, water and sewage charges), or installments thereof, that could be a lien on the related Mortgaged Property that would be of equal or superior priority to the lien of the Mortgage and that prior to the Cut-off Date have become delinquent in respect of each related Mortgaged Property have been paid, or an escrow of funds has been established in an amount sufficient to cover such payments and reasonably estimated interest and penalties, if any, thereon. For purposes of this representation and warranty, real estate taxes and governmental assessments and other outstanding governmental charges and installments thereof shall not be considered delinquent until the earlier of (a) the date on which interest and/or penalties would first be payable thereon and (b) the date on which enforcement action is entitled to be taken by the related taxing authority.
(12) Condemnation. As of the date of origination and to the Mortgage Loan Seller’s knowledge as of the Cut-off Date, there is no proceeding pending, and, to the Mortgage Loan Seller’s knowledge as of the date of origination and as of the Cut-off Date, there is no proceeding threatened, for the total or partial condemnation of such Mortgaged Property that would have a material adverse effect on the value, use or operation of the Mortgaged Property.
(13) Actions Concerning Mortgage Loan. As of the date of origination and to the Mortgage Loan Seller’s knowledge as of the Cut-off Date, there was no pending or filed action, suit or proceeding, arbitration or governmental investigation involving any Borrower, guarantor, or Borrower’s interest in the Mortgaged Property, an adverse outcome of which would reasonably be expected to materially and adversely affect (a) such Borrower’s title to the Mortgaged Property, (b) the validity or enforceability of the Mortgage, (c) such Borrower’s ability to perform under the related Mortgage Loan, (d) such guarantor’s ability to perform under the related guaranty, (e) the principal benefit of the security intended to be provided by the Loan Documents or (f) the current principal use of the Mortgaged Property.
(14) Escrow Deposits. All escrow deposits and payments required to be escrowed with lender pursuant to each Mortgage Loan are in the possession, or under the control, of the Mortgage Loan Seller or its servicer, and there are no deficiencies (subject to any applicable grace or cure periods) in connection therewith, and all such escrows and deposits (or the right thereto) that are required to be escrowed with lender under the related Loan Documents are being conveyed by the Mortgage Loan Seller to Purchaser or its servicer (or, with respect to any Non-Serviced Mortgage Loan, to the depositor or servicer for the related Non-Serviced Securitization Trust).
| D-1-4 |
(15) No Holdbacks. The Stated Principal Balance as of the Cut-off Date of the Mortgage Loan set forth on the mortgage loan schedule attached asExhibit A to the MLPA has been fully disbursed as of the Closing Date and there is no requirement for future advances thereunder (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 related Mortgaged Property, the Borrower or other considerations determined by Mortgage Loan Seller to merit such holdback).
(16) Insurance. Each related Mortgaged Property is, and is required pursuant to the related Mortgage to be, insured by a property insurance policy providing coverage for loss in accordance with coverage found under a “special cause of loss form” or “all risk form” that includes replacement cost valuation issued by an insurer meeting the requirements of the related Loan Documents and having a claims-paying or financial strength rating of any one of the following: (i) at least “A-:VIII” from A.M. Best Company, (ii) at least “A3” (or the equivalent) from Moody’s Investors Service, Inc. or (iii) at least “A-” from Standard & Poor’s Ratings Services (collectively the “Insurance Rating Requirements”), in an amount (subject to a customary deductible) not less than the lesser of (1) the original principal balance of the Mortgage Loan and (2) the full insurable value on a replacement cost basis of the improvements, furniture, furnishings, fixtures and equipment owned by the Borrower and included in the Mortgaged Property (with no deduction for physical depreciation), but, in any event, not less than the amount necessary or containing such endorsements as are necessary to avoid the operation of any coinsurance provisions with respect to the related Mortgaged Property.
Each related Mortgaged Property is also covered, and required to be covered pursuant to the related Loan Documents, by business interruption or rental loss insurance which (subject to a customary deductible) covers a period of not less than 12 months (or with respect to each Mortgage Loan on a single asset with a principal balance of $50 million or more, 18 months).
If any material part of the improvements, exclusive of a parking lot, located on a Mortgaged Property is in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, the related Borrower is required to maintain insurance in the maximum amount available under the National Flood Insurance Program.
If the Mortgaged Property is located within 25 miles of the coast of the Gulf of Mexico or the Atlantic coast of Florida, Georgia, South Carolina or North Carolina, the related Borrower is required to maintain coverage for windstorm and/or windstorm related perils and/or “named storms” issued by an insurer meeting the Insurance Rating Requirements or endorsement covering damage from windstorm and/or windstorm related perils and/or named storms.
The Mortgaged Property is covered, and required to be covered pursuant to the related Loan Documents, by a commercial general liability insurance policy issued by an insurer meeting the Insurance Rating Requirements including coverage for property damage, contractual damage and personal injury (including bodily injury and death) in amounts as are generally required by the Mortgage Loan Seller for loans originated for securitization, and in any event not less than $1 million per occurrence and $2 million in the aggregate.
An architectural or engineering consultant has performed an analysis of each of the Mortgaged Properties located in seismic zones 3 or 4 in order to evaluate the structural and seismic condition of such property, for the sole purpose of assessing either the scenario expected limit (“SEL”) or the probable maximum loss (“PML”) for the Mortgaged Property in the event of an earthquake. In such instance, the SEL or PML, as applicable, was based on a 475-year return period, an exposure period of 50 years and a 10% probability of exceedance. If the resulting report concluded that the SEL or PML, as applicable, would exceed 20% of the amount of the replacement costs of the improvements, earthquake insurance on such Mortgaged Property was obtained by an insurer rated at least “A:VIII” by A.M. Best Company or “A3” (or the equivalent) from Moody’s Investors Service, Inc. or “A-” by Standard & Poor’s Ratings Services in an amount not less than 100% of the SEL or PML, as applicable.
| D-1-5 |
The Loan Documents require insurance proceeds in respect of a property loss to be applied either (a) to the repair or restoration of all or part of the related Mortgaged Property, with respect to all property losses in excess of 5% of the then outstanding principal amount of the related Mortgage Loan (or Whole Loan, if applicable), the lender (or a trustee appointed by it) having the right to hold and disburse such proceeds as the repair or restoration progresses, or (b) to the payment of the outstanding principal balance of such Mortgage Loan (or Whole Loan, if applicable) together with any accrued interest thereon.
All premiums on all insurance policies referred to in this section required to be paid as of the Cut-off Date have been paid, and such insurance policies name the lender under the Mortgage Loan and its successors and assigns as a loss payee under a mortgagee endorsement clause or, in the case of the general liability insurance policy, as named or additional insured. Such insurance policies will inure to the benefit of the Trustee (or, in the case of a Mortgage Loan that is a Non-Serviced Mortgage Loan, the applicable Other Trustee). Each related Mortgage Loan obligates the related Borrower to maintain all such insurance and, at such Borrower’s failure to do so, authorizes the lender to maintain such insurance at the Borrower’s cost and expense and to charge such Borrower for related premiums. All such insurance policies (other than commercial liability policies) require at least 10 days’ prior notice to the lender of termination or cancellation arising because of nonpayment of a premium and at least 30 days prior notice to the lender of termination or cancellation (or such lesser period, not less than 10 days, as may be required by applicable law) arising for any reason other than non-payment of a premium and no such notice has been received by Seller.
(17)Access; Utilities; Separate Tax Lots. Each Mortgaged Property (a) is located on or adjacent to a public road and has direct legal access to such road, or has access via an irrevocable easement or irrevocable right of way permitting ingress and egress to/from a public road, (b) is served by or has uninhibited access rights to public or private water and sewer (or well and septic) and all required utilities, all of which are appropriate for the current use of the Mortgaged Property, and (c) constitutes one or more separate tax parcels which do not include any property which is not part of the Mortgaged Property or is subject to an endorsement under the related Title Policy insuring the Mortgaged Property, or in certain cases, an application has been, or will be, made to the applicable governing authority for creation of separate tax lots, in which case the Mortgage Loan requires the Borrower to escrow an amount sufficient to pay taxes for the existing tax parcel of which the Mortgaged Property is a part until the separate tax lots are created.
(18)No Encroachments. To Mortgage Loan Seller’s knowledge based solely on surveys obtained in connection with origination and the lender’s Title Policy (or, if such policy is not yet issued, a pro forma title policy, a preliminary title policy with escrow instructions or a “marked up” commitment) obtained in connection with the origination of each Mortgage Loan, all material improvements that were included for the purpose of determining the appraised value of the related Mortgaged Property at the time of the origination of such Mortgage Loan are within the boundaries of the related Mortgaged Property, except encroachments that do not materially and adversely affect the value or current use of such Mortgaged Property or for which insurance or endorsements were obtained under the Title Policy. No improvements on adjoining parcels encroach onto the related Mortgaged Property except for encroachments that do not materially and adversely affect the value or current use of such Mortgaged Property or for which insurance or endorsements were obtained under the Title Policy. No improvements encroach upon any easements except for encroachments the removal of which would not materially and adversely affect the value or current use of such Mortgaged Property or for which insurance or endorsements obtained with respect to the Title Policy.
(19) No Contingent Interest or Equity Participation. No Mortgage Loan has a shared appreciation feature, any other contingent interest feature or a negative amortization feature (except that an ARD Loan may provide for the accrual of the portion of interest in excess of the rate in effect prior to the Anticipated Repayment Date) or an equity participation by Mortgage Loan Seller.
(20) REMIC. The Mortgage Loan is a “qualified mortgage” within the meaning of Code Section 860G(a)(3)(but determined without regard to the rule in the U.S. Department of Treasury Regulations (the “Treasury Regulations”) Section 1.860G-2(f)(2) that treats certain defective mortgage loans as
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qualified mortgages), and, accordingly, (A) the issue price of the Mortgage Loan to the related Borrower at origination did not exceed the non-contingent principal amount of the Mortgage Loan and (B) either: (a) such Mortgage Loan is secured by an interest in real property (including buildings and structural components thereof, but excluding personal property) having a fair market value (i) at the date the Mortgage Loan was originated at least equal to 80% of the adjusted issue price of the Mortgage Loan (or Whole Loan, as applicable) on such date or (ii) at the Closing Date at least equal to 80% of the adjusted issue price of the Mortgage Loan (or Whole Loan, if applicable) on such date,provided that for purposes hereof, the fair market value of the real property interest must first be reduced by (A) the amount of any lien on the real property interest that is senior to the Mortgage Loan and (B) a proportionate amount of any lien that is in parity with the Mortgage Loan; or (b) substantially all of the proceeds of such Mortgage Loan were used to acquire, improve or protect the real property which served as the only security for such Mortgage Loan (other than a recourse feature or other third-party credit enhancement within the meaning of Section 1.860G-2(a)(1)(ii) of the Treasury Regulations). If the Mortgage Loan was “significantly modified” prior to the Closing Date so as to result in a taxable exchange under Section 1001 of the Code, it either (x) was modified as a result of the default or reasonably foreseeable default of such Mortgage Loan or (y) satisfies the provisions of eithersub-clause (B)(a)(i) above (substituting the date of the last such modification for the date the Mortgage Loan was originated) orsub-clause (B)(a)(ii), including the proviso thereto. Any prepayment premium and yield maintenance charges applicable to the Mortgage Loan constitute “customary prepayment penalties” within the meaning of Section 1.860G-1(b)(2) of the Treasury Regulations. All terms used in this paragraph shall have the same meanings as set forth in the related Treasury Regulations.
(21) Compliance with Usury Laws. The Mortgage Rate (exclusive of any default interest, late charges, yield maintenance charge, or prepayment premiums) of such Mortgage Loan complied as of the date of origination with, or was exempt from, applicable state or federal laws, regulations and other requirements pertaining to usury.
(22) Authorized to do Business. To the extent required under applicable law, as of the Cut-off Date or as of the date that such entity held the Mortgage Note, each holder of the Mortgage Note was authorized to transact and do business in the jurisdiction in which each related Mortgaged Property is located, or the failure to be so authorized does not materially and adversely affect the enforceability of such Mortgage Loan by the Trust.
(23) Trustee under Deed of Trust. With respect to each Mortgage which is a deed of trust, as of the date of origination and, to the Mortgage Loan Seller’s knowledge, as of the Closing Date, a trustee, duly qualified under applicable law to serve as such, currently so serves and is named in the deed of trust or has been substituted in accordance with the Mortgage and applicable law or may be substituted in accordance with the Mortgage and applicable law by the related mortgagee.
(24) Local Law Compliance. To the Mortgage Loan Seller’s knowledge, based upon any of a letter from any governmental authorities, a legal opinion, an architect’s letter, a zoning consultant’s report, an endorsement to the related Title Policy, or other affirmative investigation of local law compliance consistent with the investigation conducted by the Mortgage Loan Seller for similar commercial, multifamily or, if applicable, manufactured housing community mortgage loans intended for securitization, with respect to the improvements located on or forming part of each Mortgaged Property securing a Mortgage Loan as of the date of origination of such Mortgage Loan and as of the Cut-off Date, there are no material violations of applicable zoning ordinances, building codes and land laws (collectively “Zoning Regulations”) other than those which (i) constitute a legal non-conforming use or structure, as to which as the Mortgaged Property may be restored or repaired to the full extent necessary to maintain the use of the structure immediately prior to a casualty or the inability to restore or repair to the full extent necessary to maintain the use or structure immediately prior to the casualty would not materially and adversely affect the use or operation of the Mortgaged Property, (ii) are insured by the Title Policy or other insurance policy, (iii) are insured by law and ordinance insurance coverage in amounts customarily required by the Mortgage Loan Seller for loans originated for securitization that provides coverage for additional costs to rebuild and/or repair the property to
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current Zoning Regulations or (iv) would not have a material adverse effect on the Mortgage Loan. The terms of the Loan Documents require the Borrower to comply in all material respects with all applicable governmental regulations, zoning and building laws.
(25) Licenses and Permits. Each Borrower covenants in the Loan Documents that it shall keep all material licenses, permits and applicable governmental authorizations necessary for its operation of the Mortgaged Property in full force and effect, and to the Mortgage Loan Seller’s knowledge based upon a letter from any government authorities or other affirmative investigation of local law compliance consistent with the investigation conducted by the Mortgage Loan Seller for similar commercial, multifamily or, if applicable, manufactured housing community mortgage loans intended for securitization, all such material licenses, permits and applicable governmental authorizations are in effect. The Mortgage Loan requires the related Borrower to be qualified to do business in the jurisdiction in which the related Mortgaged Property is located.
(26) Recourse Obligations. The Loan Documents for each Mortgage Loan provide that (a) the related Borrower and at least one individual or entity shall be fully liable for actual losses, liabilities, costs and damages arising from certain acts of the related Borrower and/or its principals specified in the related Loan Documents, which acts generally include the following: (i) acts of fraud or intentional material misrepresentation, (ii) misapplication or misappropriation of rents, insurance proceeds or condemnation awards, (iii) intentional material physical waste of the Mortgaged Property (but, in some cases, only to the extent there is sufficient cash flow generated by the related Mortgaged Property to prevent such waste), and (iv) any breach of the environmental covenants contained in the related Loan Documents, and (b) the Mortgage Loan shall become full recourse to the related Borrower and at least one individual or entity, if the related Borrower files a voluntary petition under federal or state bankruptcy or insolvency law.
(27) Mortgage Releases. The terms of the related Mortgage or related Loan Documents do not provide for release of any material portion of the Mortgaged Property from the lien of the Mortgage except (a) a partial release, accompanied by principal repayment, or partial Defeasance (as defined in paragraph (32)), of not less than a specified percentage at least equal to the lesser of (i) 110% of the related allocated loan amount of such portion of the Mortgaged Property and (ii) the outstanding principal balance of the Mortgage Loan, (b) upon payment in full of such Mortgage Loan, (c) upon a Defeasance (as defined in paragraph (32)), (d) releases of out-parcels that are unimproved or other portions of the Mortgaged Property which will not have a material adverse effect on the underwritten value of the Mortgaged Property and which were not afforded any material value in the appraisal obtained at the origination of the Mortgage Loan and are not necessary for physical access to the Mortgaged Property or compliance with zoning requirements, or (e) as required pursuant to an order of condemnation. With respect to any partial release under the precedingclauses (a) or(d), either: (x) such release of collateral (i) would not constitute a “significant modification” of the subject Mortgage Loan within the meaning of Section 1.860G-2(b)(2) of the Treasury Regulations and (ii) would not cause the subject Mortgage Loan to fail to be a “qualified mortgage” within the meaning of Code Section 860G(a)(3)(A); or (y) the mortgagee or servicer can, in accordance with the related Loan Documents, condition such release of collateral on the related Borrower’s delivery of an opinion of tax counsel to the effect specified in the immediately precedingclause (x). For purposes of the precedingclause (x), if the fair market value of the real property constituting such Mortgaged Property after the release is not equal to at least 80% of the principal balance of the Mortgage Loan (or Whole Loan, as applicable) outstanding after the release, the Borrower is required to make a payment of principal in an amount not less than the amount required by the REMIC Provisions.
In the case of any Mortgage Loan, in the event of a taking of any portion of a Mortgaged Property by a State or any political subdivision or authority thereof, whether by legal proceeding or by agreement, the Borrower can be required to pay down the principal balance of the Mortgage Loan in an amount not less than the amount required by the REMIC Provisions and, to such extent, condemnation proceeds may not be required to be applied to the restoration of the Mortgaged Property or released to the Borrower, if, immediately after the release of such portion of the Mortgaged Property from the lien of the Mortgage (but taking into account the planned restoration) the fair market value of the real
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property constituting the remaining Mortgaged Property is not equal to at least 80% of the remaining principal balance of the Mortgage Loan (or Whole Loan, as applicable).
No Mortgage Loan that is secured by more than one Mortgaged Property or that is a Crossed Mortgage Loan permits the release of cross-collateralization of the related Mortgaged Properties or a portion thereof, including due to a partial condemnation, other than in compliance with the loan-to-value ratio and other requirements of the REMIC Provisions.
(28) Financial Reporting and Rent Rolls. Each Mortgage Loan requires the Borrower to provide the owner or holder of the Mortgage with quarterly (other than for single-tenant properties) and annual operating statements, and quarterly (other than for single-tenant properties) rent rolls for properties that have leases contributing more than 5% of the in-place base rent and annual financial statements, which annual financial statements with respect to each Mortgage Loan with more than one Borrower are in the form of an annual combined balance sheet of the Borrower entities (and no other entities), together with the related combined statements of operations, members’ capital and cash flows, including a combining balance sheet and statement of income for the Mortgaged Properties on a combined basis.
(29) Acts of Terrorism Exclusion. With respect to each Mortgage Loan over $20 million, the related special-form all-risk insurance policy and business interruption policy (issued by an insurer meeting the Insurance Rating Requirements) do not specifically exclude Acts of Terrorism, as defined in the Terrorism Risk Insurance Act of 2002, as amended by the Terrorism Risk Insurance Program Reauthorization Act of 2007 and the Terrorism Risk Insurance Program Reauthorization Act of 2015 (collectively referred to as “TRIA”), from coverage, or if such coverage is excluded, it is covered by a separate terrorism insurance policy. With respect to each other Mortgage Loan, the related special-form all-risk insurance policy and business interruption policy (issued by an insurer meeting the Insurance Rating Requirements) did not, as of the date of origination of the Mortgage Loan, and, to Mortgage Loan Seller’s knowledge, do not, as of the Cut-off Date, specifically exclude Acts of Terrorism, as defined in TRIA, from coverage, or if such coverage is excluded, it is covered by a separate terrorism insurance policy. With respect to each Mortgage Loan, the related Loan Documents do not expressly waive or prohibit the mortgagee from requiring coverage for Acts of Terrorism, as defined in TRIA, or damages related thereto except to the extent that any right to require such coverage may be limited by commercial availability on commercially reasonable terms, or as otherwise indicated in Annex D-2 and Annex D-3;provided,however, that if TRIA or a similar or subsequent statute is not in effect, then,provided that terrorism insurance is commercially available, the Borrower under each Mortgage Loan is required to carry terrorism insurance, but in such event the Borrower shall not be required to spend on terrorism insurance coverage more than two times the amount of the insurance premium that is payable in respect of the property and business interruption/rental loss insurance required under the related Loan Documents (without giving effect to the cost of terrorism and earthquake components of such casualty and business interruption/rental loss insurance) at such time, and if the cost of terrorism insurance exceeds such amount, the Borrower is required to purchase the maximum amount of terrorism insurance available with funds equal to such amount.
(30) Due on Sale or Encumbrance. Subject to specific exceptions set forth below, each Mortgage Loan contains a “due on sale” or other such provision for the acceleration of the payment of the unpaid principal balance of such Mortgage Loan if, without the consent of the holder of the Mortgage (which consent, in some cases, may not be unreasonably withheld) and/or complying with the requirements of the related Loan Documents (which provide for transfers without the consent of the lender which are customarily acceptable to the Mortgage Loan Seller lending on the security of property comparable to the related Mortgaged Property, including, without limitation, transfers of worn-out or obsolete furnishings, fixtures, or equipment promptly replaced with property of equivalent value and functionality and transfers by leases entered into in accordance with the Loan Documents), (a) the related Mortgaged Property, or any equity interest of greater than 50% in the related Borrower, is directly or indirectly pledged, transferred or sold, other than as related to (i) family and estate planning transfers or transfers upon death or legal incapacity, (ii) transfers to certain affiliates as
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defined in the related Loan Documents, (iii) transfers of less than, or other than, a controlling interest in the related Borrower, (iv) transfers to another holder of direct or indirect equity in the Borrower, a specific Person designated in the related Loan Documents or a Person satisfying specific criteria identified in the related Loan Documents, such as a qualified equityholder, (v) transfers of stock or similar equity units in publicly traded companies, (vi) a substitution or release of collateral within the parameters of paragraphs (27) and (32) in this prospectus or the exceptions thereto set forth in Annex D-2 and Annex D-3, or (vii) by reason of any mezzanine debt that existed at the origination of the related Mortgage Loan as set forth on Schedule D-1 to Annex D-2 and Annex D-3, or future permitted mezzanine debt in each case as set forth on Schedule D-2 to Annex D-2 and Annex D-3 or (b) the related Mortgaged Property is encumbered with a subordinate lien or security interest against the related Mortgaged Property, other than (i) any Companion Loan or any subordinate debt that existed at origination and is permitted under the related Loan Documents, (ii) purchase money security interests, (iii) any Crossed Mortgage Loan as set forth on Schedule D-3 to Annex D-2 and Annex D-3 or (iv) Permitted Encumbrances. The Mortgage or other Loan Documents provide that to the extent any Rating Agency fees are incurred in connection with the review of and consent to any transfer or encumbrance, the Borrower is responsible for such payment along with all other reasonable fees and expenses incurred by the Mortgagee relative to such transfer or encumbrance.
(31) Single-Purpose Entity. Each Mortgage Loan requires the Borrower to be a Single-Purpose Entity for at least as long as the Mortgage Loan is outstanding. Both the Loan Documents and the organizational documents of the Borrower with respect to each Mortgage Loan with a Cut-off Date Stated Principal Balance in excess of $5 million provide that the Borrower is a Single-Purpose Entity, and each Mortgage Loan with a Cut-off Date Stated Principal Balance of $20 million or more has a counsel’s opinion regarding non-consolidation of the Borrower. For this purpose, a “Single-Purpose Entity” shall mean an entity, other than an individual, whose organizational documents (or if the Mortgage Loan has a Cut-off Date Stated Principal Balance equal to $5 million or less, its organizational documents or the related Loan Documents) provide substantially to the effect that it was formed or organized solely for the purpose of owning and operating one or more of the Mortgaged Properties securing the Mortgage Loans and prohibit it from engaging in any business unrelated to such Mortgaged Property or Properties, and whose organizational documents further provide, or which entity represented in the related Loan Documents, substantially to the effect that it does not have any assets other than those related to its interest in and operation of such Mortgaged Property or Properties, or any indebtedness other than as permitted by the related Mortgage(s) or the other related Loan Documents, that it has its own books and records and accounts separate and apart from those of any other person (other than a Borrower for a Crossed Mortgage Loan), and that it holds itself out as a legal entity, separate and apart from any other person or entity.
(32) Defeasance. With respect to any Mortgage Loan that, pursuant to the Loan Documents, can be defeased (a “Defeasance”), (i) the Loan Documents provide for Defeasance as a unilateral right of the Borrower, subject to satisfaction of conditions specified in the Loan Documents; (ii) the Mortgage Loan cannot be defeased within two years after the Closing Date; (iii) the Borrower is permitted to pledge only United States “government securities” within the meaning of Section 1.860G-2(a)(8)(ii) of the Treasury Regulations, the revenues from which will, in the case of a full Defeasance, be sufficient to make all scheduled payments under the Mortgage Loan when due, including the entire remaining principal balance on the maturity date (or on or after the first date on which payment may be made without payment of a yield maintenance charge or prepayment penalty) or, if the Mortgage Loan is an ARD Loan, the entire principal balance outstanding on the Anticipated Repayment Date, and if the Mortgage Loan permits partial releases of real property in connection with partial Defeasance, the revenues from the collateral will be sufficient to pay all such scheduled payments calculated on a principal amount equal to a specified percentage at least equal to the lesser of (a) 110% of the allocated loan amount for the real property to be released and (b) the outstanding principal balance of the Mortgage Loan; (iv) the Borrower is required to provide a certification from an independent certified public accountant that the collateral is sufficient to make all scheduled payments under the Mortgage Note as set forth inclause (iii) above; (v) if the Borrower would continue to own assets in addition to the Defeasance collateral, the portion of the Mortgage Loan secured by defeasance collateral is required to be assumed (or the mortgagee may require such assumption) by a Single-
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Purpose Entity; (vi) the Borrower is required to provide an opinion of counsel that the mortgagee has a perfected security interest in such collateral prior to any other claim or interest; and (vii) the Borrower is required to pay all rating agency fees associated with Defeasance (if rating confirmation is a specific condition precedent thereto) and all other reasonable expenses associated with Defeasance, including, but not limited to, accountant’s fees and opinions of counsel.
(33) Fixed Interest Rates. Each Mortgage Loan bears interest at a rate that remains fixed throughout the remaining term of such Mortgage Loan, except in the case of ARD Loans and situations where default interest is imposed.
(34) Ground Leases. For purposes of the MLPA, a “Ground Lease” shall mean a lease creating a leasehold estate in real property where the fee owner as the ground lessor conveys for a term or terms of years its entire interest in the land, or with respect to air rights leases, the air, and buildings and other improvements, if any, comprising the premises demised under such lease to the ground lessee (who may, in certain circumstances, own the building and improvements on the land), subject to the reversionary interest of the ground lessor as fee owner and does not include industrial development agency (IDA) or similar leases for purposes of conferring a tax abatement or other benefit.
With respect to any Mortgage Loan where the Mortgage Loan is secured by a leasehold estate under a Ground Lease in whole or in part, and the related Mortgage does not also encumber the related lessor’s fee interest in such Mortgaged Property, based upon the terms of the Ground Lease and any estoppel or other agreement received from the ground lessor in favor of Mortgage Loan Seller, its successors and assigns, Mortgage Loan Seller represents and warrants that:
| (a) | The Ground Lease or a memorandum regarding such Ground Lease has been duly recorded or submitted for recordation in a form that is acceptable for recording in the applicable jurisdiction. The Ground Lease or an estoppel or other agreement received from the ground lessor permits the interest of the lessee to be encumbered by the related Mortgage and does not restrict the use of the related Mortgaged Property by such lessee, its successors or assigns in a manner that would materially adversely affect the security provided by the related Mortgage; |
| (b) | The lessor under such Ground Lease has agreed in a writing included in the related Mortgage File (or in such Ground Lease) that the Ground Lease may not be amended or modified, or canceled or terminated by agreement of lessor and lessee, without the prior written consent of the lender, and no such consent has been granted by the Mortgage Loan Seller since the origination of the Mortgage Loan except as reflected in any written instruments which are included in the related Mortgage File; |
| (c) | The Ground Lease has an original term (or an original term plus one or more optional renewal terms, which, under all circumstances, may be exercised, and will be enforceable, by either Borrower or the mortgagee) that extends not less than 20 years beyond the stated maturity of the related Mortgage Loan, or 10 years past the stated maturity if such Mortgage Loan fully amortizes by the stated maturity (or with respect to a Mortgage Loan that accrues on an actual 360 basis, substantially amortizes); |
| (d) | The Ground Lease either (i) is not subject to any liens or encumbrances superior to, or of equal priority with, the Mortgage, except for the related fee interest of the ground lessor and the Permitted Encumbrances, or (ii) is subject to a subordination, non-disturbance and attornment agreement to which the mortgagee on the lessor’s fee interest in the Mortgaged Property is subject; |
| (e) | The Ground Lease does not place commercially unreasonable restrictions on the identity of the Mortgagee and the Ground Lease is assignable to the holder of the Mortgage Loan and its successors and assigns without the consent of the lessor thereunder, and in the |
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| event it is so assigned, it is further assignable by the holder of the Mortgage Loan and its successors and assigns without the consent of the lessor; |
| (f) | The Mortgage Loan Seller has not received any written notice of material default under or notice of termination of such Ground Lease. To the Mortgage Loan Seller’s knowledge, there is no material default under such Ground Lease and no condition that, but for the passage of time or giving of notice, would result in a material default under the terms of such Ground Lease and to the Mortgage Loan Seller’s knowledge, such Ground Lease is in full force and effect as of the Closing Date; |
| (g) | The Ground Lease or ancillary agreement between the lessor and the lessee requires the lessor to give to the lender written notice of any default, and provides that no notice of default or termination is effective against the lender unless such notice is given to the lender; |
| (h) | A lender is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under the Ground Lease through legal proceedings) to cure any default under the Ground Lease which is curable after the lender’s receipt of notice of any default before the lessor may terminate the Ground Lease; |
| (i) | The Ground Lease does not impose any restrictions on subletting that would be viewed as commercially unreasonable by the Mortgage Loan Seller in connection with loans originated for securitization; |
| (j) | Under the terms of the Ground Lease, an estoppel or other agreement received from the ground lessor and the related Mortgage (taken together), any related insurance proceeds or the portion of the condemnation award allocable to the ground lessee’s interest (other than (i) de minimis amounts for minor casualties or (ii) in respect of a total or substantially total loss or taking as addressed inclause (k) below) will be applied either to the repair or to restoration of all or part of the related Mortgaged Property with (so long as such proceeds are in excess of the threshold amount specified in the related Loan Documents) the lender or a trustee appointed by it having the right to hold and disburse such proceeds as repair or restoration progresses, or to the payment of the outstanding principal balance of the Mortgage Loan, together with any accrued interest; |
| (k) | In the case of a total or substantially total taking or loss, under the terms of the Ground Lease, an estoppel or other agreement and the related Mortgage (taken together), any related insurance proceeds, or portion of the condemnation award allocable to ground lessee’s interest in respect of a total or substantially total loss or taking of the related Mortgaged Property to the extent not applied to restoration, will be applied first to the payment of the outstanding principal balance of the Mortgage Loan, together with any accrued interest; and |
| (l) | Provided that the lender cures any defaults which are susceptible to being cured, the ground lessor has agreed to enter into a new lease with lender upon termination of the Ground Lease for any reason, including rejection of the Ground Lease in a bankruptcy proceeding. |
(35) Servicing. The servicing and collection practices used by the Mortgage Loan Seller with respect to the Mortgage Loan have been, in all respects, legal and have met customary industry standards for servicing of commercial loans for conduit loan programs.
(36) Origination and Underwriting. The origination practices of the Mortgage Loan Seller (or the related originator if the Mortgage Loan Seller was not the originator) with respect to each Mortgage Loan have been, in all material respects, legal and as of the date of its origination, such Mortgage
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Loan and the origination thereof complied in all material respects with, or was exempt from, all requirements of federal, state or local law relating to the origination of such Mortgage Loan;provided that such representation and warranty does not address or otherwise cover any matters with respect to federal, state or local law otherwise covered in this Annex D-1.
(37) No Material Default; Payment Record. No Mortgage Loan has been more than 30 days delinquent, without giving effect to any grace or cure period, in making required payments since origination, and as of the date hereof, no Mortgage Loan is more than 30 days delinquent (beyond any applicable grace or cure period) in making required payments as of the Closing Date. To the Mortgage Loan Seller’s knowledge, there is (a) no material default, breach, violation or event of acceleration existing under the related Mortgage Loan, or (b) no event (other than payments due but not yet delinquent) which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default, breach, violation or event of acceleration, which default, breach, violation or event of acceleration, in the case of eitherclause (a) orclause (b), materially and adversely affects the value of the Mortgage Loan or the value, use or operation of the related Mortgaged Property,provided, however, that this representation and warranty does not cover any default, breach, violation or event of acceleration that specifically pertains to or arises out of an exception scheduled to any other representation and warranty made by the Mortgage Loan Seller in this Annex D-1. No person other than the holder of such Mortgage Loan may declare any event of default under the Mortgage Loan or accelerate any indebtedness under the Loan Documents.
(38) Bankruptcy. As of the date of origination of the related Mortgage Loan and to the Mortgage Loan Seller’s knowledge as of the Cut-off Date, no Borrower, guarantor or tenant occupying a single-tenant property is a debtor in state or federal bankruptcy, insolvency or similar proceeding.
(39) Organization of Borrower. With respect to each Mortgage Loan, in reliance on certified copies of the organizational documents of the Borrower delivered by the Borrower in connection with the origination of such Mortgage Loan, the Borrower is an entity organized under the laws of a state of the United States of America, the District of Columbia or the Commonwealth of Puerto Rico. Except with respect to any Crossed Mortgage Loan, no Mortgage Loan has a Borrower that is an Affiliate of another Borrower under another Mortgage Loan. (An “Affiliate” for purposes of this paragraph (39) means, a Borrower that is under direct or indirect common ownership and control with another Borrower.)
(40) Environmental Conditions. A Phase I environmental site assessment (or update of a previous Phase I and or Phase II site assessment) and, with respect to certain Mortgage Loans, a Phase II environmental site assessment (collectively, an “ESA”) meeting ASTM requirements conducted by a reputable environmental consultant in connection with such Mortgage Loan within 12 months prior to its origination date (or an update of a previous ESA was prepared), and such ESA either (i) did not identify the existence of recognized environmental conditions (as such term is defined in ASTM E1527-05 or its successor, hereinafter “Environmental Condition”) at the related Mortgaged Property or the need for further investigation with respect to any Environmental Condition that was identified, or (ii) if the existence of an Environmental Condition or need for further investigation was indicated in any such ESA, then at least one of the following statements is true: (A) an amount reasonably estimated by a reputable environmental consultant to be sufficient to cover the estimated cost to cure any material noncompliance with applicable environmental laws or the Environmental Condition has been escrowed by the related Borrower and is held or controlled by the related lender; (B) if the only Environmental Condition relates to the presence of asbestos-containing materials, radon in indoor air, lead based paint or lead in drinking water, and the only recommended action in the ESA is the institution of such a plan, an operations or maintenance plan has been required to be instituted by the related Borrower that can reasonably be expected to mitigate the identified risk; (C) the Environmental Condition identified in the related environmental report was remediated or abated in all material respects prior to the date hereof, and, if and as appropriate, a no further action or closure letter was obtained from the applicable governmental regulatory authority (or the Environmental Condition affecting the related Mortgaged Property was otherwise listed by such governmental authority as “closed” or a reputable environmental consultant has concluded that no
| D-1-13 |
further action is required); (D) a secured creditor environmental policy or a pollution legal liability insurance policy that covers liability for the Environmental Condition was obtained from an insurer rated no less than A- (or the equivalent) by Moody’s, S&P and/or Fitch; (E) a party not related to the Borrower was identified as the responsible party for such Environmental Condition and such responsible party has financial resources reasonably estimated to be adequate to address the situation; or (F) a party related to the Borrower having financial resources reasonably estimated to be adequate to address the situation is required to take action. To Mortgage Loan Seller’s knowledge, except as set forth in the ESA, there is no Environmental Condition (as such term is defined in ASTM E1527-05 or its successor) at the related Mortgaged Property.
(41) Appraisal. The Servicing File contains an appraisal of the related Mortgaged Property with an appraisal date within 6 months of the Mortgage Loan origination date, and within 12 months of the Closing Date. The appraisal is signed by an appraiser who is either a Member of the Appraisal Institute (“MAI”) and/or has been licensed and certified to prepare appraisals in the state where the Mortgaged Property is located. Each appraiser has represented in such appraisal or in a supplemental letter that the appraisal satisfies the requirements of the “Uniform Standards of Professional Appraisal Practice” as adopted by the Appraisal Standards Board of the Appraisal Foundation and has certified that such appraiser had no interest, direct or indirect, in the Mortgaged Property or the Borrower or in any loan made on the security thereof, and its compensation is not affected by the approval or disapproval of the Mortgage Loan.
(42) Mortgage Loan Schedule. The information pertaining to each Mortgage Loan which is set forth in the mortgage loan schedule attached asExhibit A to the MLPA is true and correct in all material respects as of the Cut-off Date and contains all information required by the MLPA to be contained therein.
(43) Cross-Collateralization. No Mortgage Loan is cross-collateralized or cross-defaulted with any mortgage loan that is outside the Trust, except as set forth in Schedule D-3 to Annex D-2 and Annex D-3.
(44) Advance of Funds by the Mortgage Loan Seller. After origination, no advance of funds has been made by Mortgage Loan Seller to the related Borrower other than in accordance with the Loan Documents, and, to Mortgage Loan Seller’s knowledge, no funds have been received from any person other than the related Borrower or an affiliate for, or on account of, payments due on the Mortgage Loan (other than as contemplated by the Loan Documents, such as, by way of example and not in limitation of the foregoing, amounts paid by the tenant(s) into a lender-controlled lockbox if required or contemplated under the related lease or Loan Documents). Neither Mortgage Loan Seller nor any affiliate thereof has any obligation to make any capital contribution to any Borrower under a Mortgage Loan, other than contributions made on or prior to the date hereof.
(45) Compliance with Anti-Money Laundering Laws. Mortgage Loan Seller has complied in all material respects with all applicable anti-money laundering laws and regulations, including without limitation the USA Patriot Act of 2001 with respect to the origination of the Mortgage Loan, the failure to comply with which would have a material adverse effect on the Mortgage Loan.
For purposes of these representations and warranties, the phrases “the Seller’s knowledge” or “the Seller’s belief” and other words and phrases of like import shall mean, except where otherwise expressly set forth in this prospectus, the actual state of knowledge or belief of the Seller, its officers and employees directly responsible for the underwriting, origination, servicing or sale of the Mortgage Loans regarding the matters expressly set forth in this prospectus.
| D-1-14 |
ANNEX D-2
EXCEPTIONS TO MORTGAGE LOAN REPRESENTATIONS AND WARRANTIES
FOR GERMAN AMERICAN CAPITAL CORPORATION
Annex A-1 | Mortgage Loans | Representations | Exceptions | |||
| 1 | 10 Hudson Yards | (5) Lien; Valid Assignment;
(6) Permitted Liens; Title Insurance; and
(8) Assignment of Leases, Rents and Profits | The Mortgaged Property is encumbered by three PILOT mortgages, in the maximum aggregate amount of $475,000,000, which secure the related Borrower’s obligation to pay the PILOT payments (payments in lieu of New York City real property taxes) under the sublease with the New York City Industrial Development Agency. The PILOT mortgages are senior in priority to the related Mortgage. The PILOT mortgages also contain an assignment of leases and rents senior to the assignment of leases and rents with respect to the related Mortgage Loan. | |||
| 2 | Fiserv at 2900 Westside | (5) Lien; Valid Assignment and
(6) Permitted Liens; Title Insurance | The sole tenant, Fiserv Solutions, Inc., has a right of first offer to purchase the entire Mortgaged Property upon the same terms as which landlord is willing to transfer the property to the third party. Under the lease such right does not apply to a transfer in connection with a foreclosure (or any other third party sale or auction) or deed-in-lieu of foreclosure, provided , however, such right of first offer will apply to subsequent purchasers of the Mortgaged Property. | |||
| 2 | Fiserv at 2900 Westside | (7) Junior Liens | U.S. Bank National Association is the holder of a subordinate mortgage (“Subordinate Mortgage”) encumbering the fee estate of the Development Authority of Alpharetta in the related Mortgaged Property. The subordinate mortgage secures the Development Authority of Alpharetta’s obligations under its Series 2014 bonds (the “Authority Bonds”). The related Borrower is the owner of the Authority Bonds. The holder of the subordinate mortgage is a party to both a security deed and a pledge, assignment and subordination agreement (the “Pledge Agreement”) which, among other provisions, subordinates the Subordinate Mortgage to the related Mortgage. | |||
| 4 | Prudential Plaza | (10) Condition of Property | The date of the physical condition assessment is June 26, 2015, which is more than twelve months prior to the Cut-off Date. |
| D-2-1 |
Annex A-1 | Mortgage Loans | Representations | Exceptions | |||
| 14 | Deerbrook Commons | (10) Condition of Property | The date of the property condition report Is July 23, 2015, which is more than twelve months prior to the Cut-off Date. | |||
| 4 | Prudential Plaza | (13) Actions Concerning Mortgage Loan | The Prudential Plaza Whole Loan refinanced a prior loan in the aggregate original principal amount of $410,000,000 that was secured by the related Mortgaged Property. The prior loan was evidenced bypari passu notes and suchpari passunotes were deposited into two securitizations in 2006. In 2012, the prior loan was transferred to special servicing and thepari passu notes were modified to reflect a $336 million senior portion (the A note) and a $74 million junior portion (the B note). In connection with the refinancing of the prior loan on July 30, 2015, the proceeds of the Prudential Plaza Whole Loan were used to pay the A note in full and the prior lender cancelled the B note without repayment. On February 24, 2016, the trustees of the 2006 securitizations (the “Plaintiffs”) sued the borrower under the prior loan and Mark Karasick and Michael Silberberg, the non-recourse carveout guarantors under the prior loans (after an equity recapitalization in 2013) and the non-recourse carveout guarantors under the Prudential Plaza Whole Loan (the “Guarantors” and together with the borrower under the prior loan, the “Defendants”) in the United States District Court for the Southern District of New York (Docket # 1:16-CV-01450 (JGK)). Since the filing of the complaint, the Plaintiffs filed an amended complaint, the Defendants filed a third party complaint against the special servicer of the prior loan for contribution and indemnity with respect to the claims of Plaintiffs, and the Defendants also filed a motion to dismiss the amended complaint. The special servicer of the prior loan has filed a motion to dismiss the third party complaint of Defendants. The court has not yet ruled on either motion to dismiss.
The adverse outcome of this litigation could materially and adversely affect the Guarantors’ ability to perform under the guaranty related to the Mortgage Loan. In addition, if a Guarantor were to go into personal bankruptcy or the Guarantors were to collectively fail to maintain the net worth or minimum liquid assets requirements specified in the guaranty delivered in connection with the Prudential Plaza Whole Loan, these events would trigger an event of default under the Loan Documents which could |
| D-2-2 |
Annex A-1 | Mortgage Loans | Representations | Exceptions | |||
| cause the Prudential Plaza Whole Loan to become a specially serviced loan under the COMM 2015-CCRE26 pooling and servicing agreement. The Borrower is required under the Loan Documents to pay the related special servicing fees, however, in the event such fees are not recovered from the Borrower, the Trust would be responsible for its proportional share (approximately 12.0%) of the special servicing fees. | ||||||
| 16 | Oxford Glen Apartments | (13) Actions Concerning Mortgage Loan | Craig Stansberry, the non-recourse carveout guarantor under the Mortgage Loan, is the guarantor of a loan secured by another multifamily property (the “Other Loan”) that went into default in January 2013. The lender under the Other Loan commenced an action against Stansberry related to the defaulted Other Loan. In connection with a forbearance agreement related to the Other Loan, Stansberry guaranteed the payment obligations under the Other Loan. Required payment of the obligations under the Other Loan could materially and adversely affect Stansberry’s ability to perform under the guaranty related to the Mortgage Loan. | |||
| 3 | Westfield San Francisco Centre | (16) Insurance | If the Borrower elects to have the insurance policies issued by a syndicate of insurers, then, if such syndicate consists of 5 or more members, at least 60% of the insurance coverage (or 75% if such syndicate consists of 4 or fewer members) is required to be provided by insurance companies having the rating of “A” or better by S&P (and the equivalent rating by Moody’s or Fitch to the extent Moody’s or Fitch rates any class of certificates and rates such insurance companies), and the remaining 40% (or the remaining 25% if such syndicate consists of 4 or fewer members) is required to be provided by insurance companies having a claims paying ability rating of “BBB” or better by S&P (and the equivalent rating by Moody’s or Fitch to the extent Moody’s or Fitch rates any class of certificates and rates such insurance companies) and the only insurance companies subject to the foregoing rating criteria are those covering the total insured value of all of Borrower’s and its affiliates owned property located in the State of California. Notwithstanding the foregoing, the Borrower may use Ironshore Specialty Insurance Company (“Ironshore”) as an insurer within the non-primary layers of the syndicate of insurers with a participation amount no greater than $10,000,000, provided that Ironshore maintain |
| D-2-3 |
Annex A-1 | Mortgage Loans | Representations | Exceptions | |||
| reinsurance with a “cut-through” endorsement that has the effect of raising requirements as set forth herein or such higher rating as may be required by a Rating Agency. | ||||||
| 5 | U-Haul AREC Portfolio | (16) Insurance | The Borrower has a self-insured retention on commercial general liability of $5,000,000, which is permitted so long as the guarantor maintains net equity of at least $250,000,000 as reflected in its most recent audited financial statements. | |||
| 6 | Birch Run Premium Outlets | (16) Insurance | If the Borrower elects to have the insurance policies issued by a syndicate of insurers, then, if such syndicate consists of 5 or more members, at least 60% of the insurance coverage (or 75% if such syndicate consists of 4 or fewer members) is required to be provided by insurance companies having the rating of “A” or better by S&P, and the remaining 40% (or the remaining 25% if such syndicate consists of 4 or fewer members) is required to be provided by insurance companies having a claims paying ability rating of “BBB” or better by S&P. | |||
| 30 | Shady Haven MHC | (16) Insurance | The Loan Documents provide that the Borrower is required to maintain coverage for flood related perils, for a period not less than six months, only to the extent that such insurance can be obtained at commercially reasonable rates. | |||
| 5 | U-Haul AREC Portfolio | (24) Local Law Compliance | The U-Haul Moving & Storage of Historic Ybor City Mortgaged Property is legal non-conforming as to use. In the event of an intentional or voluntary abandonment of such legal non-conforming use for more than 180 days or of damage or destruction of 60% or more of the current assessed taxable value of all structures comprising the legal non-conforming use, the Mortgaged Property must be rebuilt in accordance with current zoning.
Two building code violations are open at the Couer D’ Alene Mortgaged Property. The Borrower has covenanted to use commercially reasonable efforts to cure such open building code violations. | |||
| 26 | Holiday Inn Express Cocoa Beach | (24) Local Law Compliance | The Mortgaged Property is legal non-conforming as to use. In the event the Mortgaged Property is subject to a casualty or condemnation of over 50% of the replacement cost, the Mortgaged Property must be rebuilt in accordance with current zoning. |
| D-2-4 |
Annex A-1 | Mortgage Loans | Representations | Exceptions | |||
| 1 | 10 Hudson Yards | (25) Licenses and Permits | As of the closing date of the Mortgage Loan, the Borrower had received temporary certificates of occupancy covering the core and shell of the building, and the premises currently leased and occupied by Coach, Inc., L’Oreal USA, Inc. and VaynerMedia. Temporary certificates of occupancy for the remaining leased premises are required to be sought by the Borrower in connection with the completion of the tenant improvements being installed in such premises. | |||
| 3 | Westfield San Francisco Centre | (26) Recourse Obligations | The liability of the guarantor for the full recourse amount is capped at an amount equal to 10% of the then outstanding principal balance of the Whole Loan, and in no event will the guarantor be liable for losses solely related to the Borrowers’ failure to pay debt service on or to repay the Whole Loan, to remain solvent or adequately capitalized or to pay their debts as they become due. | |||
| 1 | 10 Hudson Yards | (26) Recourse Obligations | There is no guarantor and no environmental indemnitor (other than the Borrower) under the Mortgage Loan. | |||
| 6 | Birch Run Premium Outlets | (26) Recourse Obligations | The Loan Documents do not provide for recourse for intentional material physical waste of the Mortgaged Property. In addition, with respect to other non-recourse carve-outs, the liability of the guarantor is capped at $24,600,000, plus all of the reasonable out-of-pocket costs and expenses (including court costs and reasonable attorneys’ fees) incurred by the lender in the enforcement of the guaranty or the preservation of the lender’s rights thereunder. | |||
| 2 | Fiserv at 2900 Westside | (31) Single-Purpose Entity | The Borrower guarantees the payments under the Authority Lease and owns the Authority Bonds, which Authority Bonds have been assigned to the lender under the Mortgage Loan pursuant to the Pledge Agreement as additional collateral for the Mortgage Loan. | |||
| 5 | U-Haul AREC Portfolio | (31) Single-Purpose Entity | The Borrower may acquire properties adjacent to the existing Mortgaged Properties for expansion purposes. Any such after-acquired adjacent property will be encumbered by the lien of the Mortgage on the related Mortgaged Property. In addition, the Borrower is permitted to enter into an operating lease, as a tenant, with respect to one or more storage facilities acquired by an affiliate of the Borrower, which will be operated |
| D-2-5 |
Annex A-1 | Mortgage Loans | Representations | Exceptions | |||
| jointly with one of the existing Mortgaged Properties. | ||||||
| 30 | Shady Haven MHC | (31) Single-Purpose Entity | The Borrower previously owned and transferred two mobile homes that are located on the Mortgaged Property to an affiliate. | |||
| 4 | Prudential Plaza | (32) Defeasance | Pursuant to a REMIC declaration dated July 26, 2016, the Mortgage Loan may be defeased commencing on any business day following July 26, 2018, which is two years from the start-up date of the REMIC formed in connection with the Mortgage Loan, which date is less than two years from the Closing Date. | |||
| 1 | 10 Hudson Yards | (40) Environmental Conditions | The Phase I environmental site assessment identified an above-ground storage tank at the Mortgaged Property that the Borrower is required to register with the New York State Department of Environmental Conservation, and recommended that the Borrower obtain a Notice of Satisfaction from the New York City Office of Environmental Remediation satisfying the “E-Designation” received by the Mortgaged Property in connection with the rezoning process. | |||
| 5 | U-Haul AREC Portfolio | (40) Environmental Conditions | The related Phase I environmental site assessments identified the existence of recognized environmental conditions at each of the U-Haul N Miami Beach Mortgaged Property and the U-Haul Center North Irby Street Mortgaged Property and recommended that a limited Phase II environmental site assessment be performed at the U-Haul Center North Irby Street Mortgaged Property. To address these environmental conditions, and in lieu of a Phase II environmental site assessment, the borrower obtained a blanket environmental insurance policy that expires on August 12, 2016 (and obtained a new replacement blanket environmental insurance policy that will commence on August 12, 2016 and expire on August 12, 2019). The Mortgage Loan documents require that the borrower extend such policy (or provide coverage under a substantially similar replacement policy) for so long as the related Mortgage Loan debt is outstanding. | |||
| 3 | Westfield San Francisco Centre | (43) Cross-Collateralization | The Mortgage Loan is evidenced by a $23,494,624 pari passu A-1-EMP-C2 note, a $6,505,376 pari passu A-1-SFC-C2 note, a $23,494,624 pari passu A-1-EMP-C3 note and a |
| D-2-6 |
Annex A-1 | Mortgage Loans | Representations | Exceptions | |||
| $6,505,376 pari passu A-1-SFC-C3 note. The Mortgaged Property is also security for twenty-two pari passu notes with an aggregate original principal balance of $373,077,000, and four junior notes with an aggregate original principal balance of $124,923,000. The notes are cross-collateralized and cross defaulted with each other. | ||||||
| 4 | Prudential Plaza | (43) Cross-Collateralization | The Mortgage Loan is evidenced by a $50,000,000 pari passu A-2-1 note. The Mortgaged Property is also security for four other pari passu notes with an aggregate original principal balance of $365,000,000. The notes are cross-collateralized and cross defaulted with each other. | |||
| 5 | U-Haul AREC Portfolio | (43) Cross-Collateralization | The Mortgage Loan is evidenced by a $48,500,000 pari passu A-1 note. The Mortgaged Property is also security for a $46,000,000 pari passu A-2 note. The notes are cross-collateralized and cross defaulted with each other. | |||
| 6 | Birch Run Premium Outlets | (43) Cross-Collateralization | The Mortgage Loan is evidenced by a $25,000,000 pari passu A-2-A note and a $18,000,000 pari passu A-4 note. The Mortgaged Property is also security for four other pari passu notes with an aggregate original principal balance of $80,000,000. The notes are cross-collateralized and cross defaulted with each other. | |||
| 8 | Gas Company Tower & World Trade Center Parking Garage | (43) Cross-Collateralization | The Mortgage Loan is evidenced by a $40,000,000 pari passu A-1-C note. The Mortgaged Property is also security for five pari passu notes with an aggregate original principal balance of $104,000,000, and two junior notes with an aggregate original principal balance of $175,000,000. The notes are cross-collateralized and cross defaulted with each other. |
| D-2-7 |
SCHEDULE D-1
GERMAN AMERICAN CAPITAL CORPORATION
LOANS WITH EXISTING MEZZANINE DEBT
Loan No. | Mortgage Loan | |
| 1 | 10 Hudson Yards | |
| 8 | Gas Company Tower & World Trade Center Parking Garage |
| D-2-8 |
SCHEDULE D-2
GERMAN AMERICAN CAPITAL CORPORATION
MORTGAGE LOANS WITH RESPECT TO WHICH MEZZANINE DEBT IS PERMITTED IN THE FUTURE
Loan No. | Mortgage Loan | |
| 4 | Prudential Plaza | |
| 18 | Kahana Retail | |
| 21 | San Marin Shopping Center |
| D-2-9 |
SCHEDULE D-3
GERMAN AMERICAN CAPITAL CORPORATION
CROSSED MORTGAGE LOANS
None
| D-2-10 |
ANNEX D-3
EXCEPTIONS TO MORTGAGE LOAN REPRESENTATIONS AND WARRANTIES
FOR CITIGROUP GLOBAL MARKETS REALTY CORP.
Annex A-1 | Mortgage Loans | Representations | Exceptions | |||
| 9 15 | Vertex Pharmaceuticals HQ 401 South State Street | (5) Lien; Valid Assignment | Each of the subject Mortgage Loans is part of a Non-Serviced Whole Loan and, accordingly, there will be no assignment of Mortgage or assignment of any related Assignment of Leases, Rents and Profits to the Trust. With respect to the subject Mortgage Loan identified as Vertex Pharmaceuticals HQ, the related Mortgage and any Assignment of Leases, Rents and Profits are expected to be assigned to the trustee for the commercial mortgage securitization involving the issuance of the Wells Fargo Commercial Mortgage Trust 2016-BNK1, Commercial Mortgage Pass-Through Certificates, Series 2016-BNK1 (such securitization, the “WFCM 2016-BNK1 Securitization”; and such trustee, the “WFCM 2016-BNK1 Trustee”), which trustee is expected to be the mortgagee of record. With respect to the subject Mortgage Loan identified as 401 South State Street, the related Mortgage and any Assignment of Leases, Rents and Profits have been assigned to the trustee for the commercial mortgage securitization involving the issuance of the Citigroup Commercial Mortgage Trust 2016-P4, Commercial Mortgage Pass-Through Certificates, Series 2016-P4 (such securitization, the “CGCMT 2016-P4 Securitization”; and such trustee, the “CGCMT 2016-P4 Trustee”), which trustee is the mortgagee of record. | |||
| 9 | Vertex Pharmaceuticals HQ | (6) Permitted Liens; Title Insurance | The related Mortgage secures the subject Mortgage Loan and the related Companion Loans on apari passu basis. | |||
| 15 | 401 South State Street | (6) Permitted Liens; Title Insurance | The related Mortgage secures the subject Mortgage Loan and the related Companion Loan on apari passu basis. | |||
| 9 | Vertex Pharmaceuticals HQ | (7) Junior Liens | With respect to the subject Mortgage Loan, there exists mezzanine debt secured directly by interests in the related borrower. | |||
| 15 | 401 South State Street | (7) Junior Liens | With respect to the subject Mortgage Loan, there exists mezzanine debt secured directly by interests in the related borrower. |
D-3-1
Annex A-1 | Mortgage Loans | Representations | Exceptions | |||
| 9 | Vertex Pharmaceuticals HQ | (8) Assignment of Leases and Rents | The related Mortgage and any related Assignments of Leases, Rents and Profits secure the subject Mortgage Loan and the related Companion Loans on a pari passu basis. | |||
| 15 | 401 South State Street | (8) Assignment of Leases and Rents | The related Mortgage and any related Assignments of Leases, Rents and Profits secure the subject Mortgage Loan and the related Companion Loan on a pari passu basis. | |||
| 9 | Vertex Pharmaceuticals HQ | (16) Insurance | The related loan documents permit insurance through multi-layered policies, provided that: (A) if four (4) or fewer insurance companies issue the policies, then at least 75% of the required coverage is required to be provided by insurance companies with a rating of “A” or better by S&P Global Ratings (“S&P”), “A2” or better by Moody’s Investors Services, Inc. (“Moody’s”) (to the extent Moody’s rates the Certificates and rates the insurance companies) and “A” or better by Fitch Ratings, Inc. (“Fitch”) (to the extent Fitch rates the Certificates and rates the insurance companies), with no carrier rated below “BBB” by S&P, “Baa2” by Moody’s (to the extent Moody’s rates the Certificates and rates the insurance companies) and “BBB” by Fitch (to the extent Fitch rates the Certificates and rates the insurance companies); and (B) if five (5) or more insurance companies issue the policies, then at least 60% of the required coverage is required to be provided by insurance companies with a rating of “A” or better by S&P, “A2” or better by Moody’s (to the extent Moody’s rates the Certificates and rates the insurance companies) and “A” or better by Fitch (to the extent Fitch rates the Certificates and rates the insurance companies), with no carrier rated below “BBB” by S&P, “Baa2” by Moody’s (to the extent Moody’s rates the Certificates and rates the insurance companies) and “BBB” by Fitch (to the extent Fitch rates the Certificates and rates the insurance companies). |
D-3-2
Annex A-1 | Mortgage Loans | Representations | Exceptions | |||
| 10 | 60 East 55th Street | (16) Insurance | The related Mortgaged Property consists of four commercial condominium units in a mixed use condominium which also contains 76 additional residential units. The condominium declaration and by-laws provide that in the event of any casualty or destruction of the overall building as a result of fire or other casualty, the net insurance proceeds, if the same is less than $1,000,000, will be payable to the board of managers of the condominium and, if in excess of $1,000,000, all proceeds will be held in trust by an insurance trustee (which insurance trustee is required to have a credit rating of at least an “A” by S&P, “A2” by Moody’s or “A” by Fitch or an equivalent rating by any other statistical rating agency in the event any of the foregoing have not rated any such insurance trustee) for the benefit of all unit owners. The board of managers is required to arrange for repair or restoration of the building and is required to disburse the proceeds of all insurance policies to the contractors engaged in such repair and restoration. If the cost of repair is in excess of the proceeds, the additional costs will constitute a common expense and the board of managers may assess all the unit owners for the deficit as a special assessment in proportion to each unit owner’s respective common interest. In the event that 75% or more of the building or common elements is destroyed or taken, restoration will not commence unless 75% of the unit owners agree to proceed with the same. If restoration is not elected, the related Mortgaged Property will be subject to a partition action and net proceeds of any partition sale, along with insurance proceeds held by the board of managers or insurance trustee, will be disbursed to each unit owner in proportion to its respective common interests | |||
| 15 | 401 South State Street | (17) Access; Utilities; Separate Tax Lots | The related Mortgaged Property is served by utilities provided under a grant of privilege obtained from the city of Chicago. The grant of privilege is renewable for five-year terms with payment of an annual fee. | |||
| 10 | 60 East 55th Street | (24) Local Law Compliance | The related Mortgaged Property is occupied, in part, by a certain tenant (the “Core Club”) that is required to have a special permit (the “BSA Approval”), with respect to certain of its operations being a gym and spa facility, issued by the New York City Board of Standards and Appeals (the “BSA”). The BSA Approval is |
D-3-3
Annex A-1 | Mortgage Loans | Representations | Exceptions | |||
| necessary in order for the Core Club to continue certain of its intended uses as a physical culture establishment. The BSA Approval was obtained but, as of the origination date of the subject Mortgage Loan, has expired. Notwithstanding the BSA Approval expiration, the physical culture establishment that was the subject of the BSA Approval has been in continuous use. The related borrower is required to cause the Core Club to: (i) file (A) an application together with all documents required by the BSA for an extension of the term of the BSA Approval pursuant to the BSA’s special order calendar, and (B) a waiver together with all documents required by the BSA on account that the BSA Approval has expired (the “BSA Application”) within the timeframe required by the BSA to renew and extend the term of the BSA Approval; (ii) pursue the BSA Application to completion; and (iii) cooperate in every way with the Core Club, the BSA and with all requirements of the BSA Application (x) in order to cause the BSA to provide one or more renewals of the BSA Approval, and (y) as necessary for the BSA Approval to be renewed and in effect for the term of the subject Mortgage Loan. | ||||||
| In addition, the certificate of occupancy at the related Mortgaged Property is a temporary certificate of occupancy (a “TCO”). Although the current TCO does not reflect the physical culture use of the Core Club, the related borrower has confirmed that the city has approved the physical culture use. Such use is anticipated to be reflected on the TCO when the same is renewed. The related loan documents require that the related borrower (i) use commercially reasonable efforts to cause the related condominium board to maintain the current TCO and to cause the condominium board to cause the TCO to be continuously renewed at all times until a new, permanent certificate of occupancy is obtained for the related Mortgaged Property (the “New PCO”), (ii) diligently and in good faith pursue completion of all of the conditions required under applicable legal requirements including, without limitation, causing any violations with respect to the unit to be removed of record, for the issuance of the New PCO and (iii) cause to be delivered to the lender copies of each updated TCO as and when issued and deliver to the lender a copy of the New PCO upon its issuance. |
D-3-4
Annex A-1 | Mortgage Loans | Representations | Exceptions | |||
| 17 | NY Rite Aid Portfolio | (24) Local Law Compliance | With respect to the subject Mortgage Loan, one or more of the related Mortgaged Properties constitute a legal non-conforming use which, following a casualty or destruction, may not be resumed if, among other things, the replacement cost or damage exceeds a specified threshold and/or the restoration or repair is not completed or the prior use is not resumed (or certain key steps in connection therewith are not taken) within a specified time frame. | |||
| 10 | 60 East 55th Street | (25) Licenses and Permits | The related Mortgaged Property is occupied, in part, by a certain tenant (the “Core Club”) that is required to have a special permit (the “BSA Approval”), with respect to certain of its operations being a gym and spa facility, issued by the New York City Board of Standards and Appeals (the “BSA”). The BSA Approval is necessary in order for the Core Club to continue certain of its intended uses as a physical culture establishment. The BSA Approval was obtained but, as of the origination date of the subject Mortgage Loan, has expired. Notwithstanding the BSA Approval expiration, the physical culture establishment that was the subject of the BSA Approval has been in continuous use. The related borrower is required to cause the Core Club to: (i) file (A) an application together with all documents required by the BSA for an extension of the term of the BSA Approval pursuant to the BSA’s special order calendar, and (B) a waiver together with all documents required by the BSA on account that the BSA Approval has expired (the “BSA Application”) within the timeframe required by the BSA to renew and extend the term of the BSA Approval; (ii) pursue the BSA Application to completion; and (iii) cooperate in every way with the Core Club, the BSA and with all requirements of the BSA Application (x) in order to cause the BSA to provide one or more renewals of the BSA Approval, and (y) as necessary for the BSA Approval to be renewed and in effect for the term of the subject Mortgage Loan. In addition, the certificate of occupancy at the related Mortgaged Property is a temporary certificate of occupancy (a “TCO”). Although the current TCO does not reflect the physical culture use of the Core Club, the related borrower has confirmed that the city has approved the physical culture use. Such use is anticipated to be reflected on the TCO when the same is renewed. The related loan documents require that the related borrower (i) use commercially reasonable |
D-3-5
Annex A-1 | Mortgage Loans | Representations | Exceptions | |||
| efforts to cause the related condominium board to maintain the current TCO and to cause the condominium board to cause the TCO to be continuously renewed at all times until a new, permanent certificate of occupancy is obtained for the related Mortgaged Property (the “New PCO”), (ii) diligently and in good faith pursue completion of all of the conditions required under applicable legal requirements including, without limitation, causing any violations with respect to the unit to be removed of record, for the issuance of the New PCO and (iii) cause to be delivered to the lender copies of each updated TCO as and when issued and deliver to the lender a copy of the New PCO upon its issuance. | ||||||
| 10 | 60 East 55th Street | (26) Recourse Obligations | The related loan documents provide for full recourse to the related borrower and guarantor for a voluntary petition under federal or state bankruptcy or insolvency laws except to the extent that such petition was initiated in whole or in part, or approved or consented to in writing, by the lender. | |||
| 13 | Hilton Garden Inn San Leandro | (31) Single-Purpose Entity | The subject Mortgage Loan has a Cut-off Date Stated Principal Balance of greater than $20 million. However, the related loan documents did not require a counsel’s opinion regarding non-consolidation of the related borrower in connection with origination of the subject Mortgage Loan. | |||
| 9 | Vertex Pharmaceuticals HQ | (32) Defeasance | The defeasance collateral is permitted to be non-callable instruments other than United States “government securities” within the meaning of Treasury Regulations Section 1.860G-2(a)(8)(ii), provided that the real estate mortgage investment conduit formed pursuant to a securitization of the subject Mortgage Loan will not fail to maintain its status as a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code and for which each rating agency rating the securitization of the subject Mortgage Loan has delivered (except to the extent each rating agency, in writing, waives, declines or refuses to review or otherwise engage a request for rating agency confirmation) a written affirmation that its ratings of the securities issued in such securitization will not be downgraded, qualified or withdrawn as a result of such event. |
D-3-6
Annex A-1 | Mortgage Loans | Representations | Exceptions | |||
| 9 | Vertex Pharmaceuticals HQ | (43) Cross-Collateralization | The subject Mortgage Loan is cross-collateralized and cross-defaulted with Companion Loans that will be held outside the CD 2016-CD1 commercial mortgage securitization trust. | |||
| 15 | 401 South State Street | (43) Cross-Collateralization | The subject Mortgage Loan is cross-collateralized and cross-defaulted with a Companion Loan that will be held outside the CD 2016-CD1 commercial mortgage securitization trust. |
D-3-7
SCHEDULE D-1
CITIGROUP GLOBAL MARKETS REALTY CORP.
LOANS WITH EXISTING MEZZANINE DEBT
Loan No. | Mortgage Loan | |
| 9 | Vertex Pharmaceuticals HQ | |
| 15 | 401 South State Street |
D-3-8
SCHEDULE D-2
CITIGROUP GLOBAL MARKETS REALTY CORP.
MORTGAGE LOANS WITH RESPECT TO WHICH MEZZANINE DEBT IS PERMITTED IN THE FUTURE
Loan No. | Mortgage Loan | |
| 15 | 401 South State Street |
D-3-9
SCHEDULE D-3
CITIGROUP GLOBAL MARKETS REALTY CORP.
CROSSED MORTGAGE LOANS
None
D-3-10
ANNEX E
CLASS A-SB PLANNED PRINCIPAL BALANCE SCHEDULE
Period | Balance($) | |
| Initial | 46,236,000.00 | |
| 1 | 46,236,000.00 | |
| 2 | 46,236,000.00 | |
| 3 | 46,236,000.00 | |
| 4 | 46,236,000.00 | |
| 5 | 46,236,000.00 | |
| 6 | 46,236,000.00 | |
| 7 | 46,236,000.00 | |
| 8 | 46,236,000.00 | |
| 9 | 46,236,000.00 | |
| 10 | 46,236,000.00 | |
| 11 | 46,236,000.00 | |
| 12 | 46,236,000.00 | |
| 13 | 46,236,000.00 | |
| 14 | 46,236,000.00 | |
| 15 | 46,236,000.00 | |
| 16 | 46,236,000.00 | |
| 17 | 46,236,000.00 | |
| 18 | 46,236,000.00 | |
| 19 | 46,236,000.00 | |
| 20 | 46,236,000.00 | |
| 21 | 46,236,000.00 | |
| 22 | 46,236,000.00 | |
| 23 | 46,236,000.00 | |
| 24 | 46,236,000.00 | |
| 25 | 46,236,000.00 | |
| 26 | 46,236,000.00 | |
| 27 | 46,236,000.00 | |
| 28 | 46,236,000.00 | |
| 29 | 46,236,000.00 | |
| 30 | 46,236,000.00 | |
| 31 | 46,236,000.00 | |
| 32 | 46,236,000.00 | |
| 33 | 46,236,000.00 | |
| 34 | 46,236,000.00 | |
| 35 | 46,236,000.00 | |
| 36 | 46,236,000.00 | |
| 37 | 46,236,000.00 | |
| 38 | 46,236,000.00 | |
| 39 | 46,236,000.00 | |
| 40 | 46,236,000.00 | |
| 41 | 46,236,000.00 | |
| 42 | 46,236,000.00 | |
| 43 | 46,236,000.00 | |
| 44 | 46,236,000.00 | |
| 45 | 46,236,000.00 | |
| 46 | 46,236,000.00 | |
| 47 | 46,236,000.00 | |
| 48 | 46,236,000.00 | |
| 49 | 46,236,000.00 | |
| 50 | 46,236,000.00 | |
| 51 | 46,236,000.00 | |
| 52 | 46,236,000.00 | |
| 53 | 46,236,000.00 | |
| 54 | 46,236,000.00 | |
| 55 | 46,236,000.00 | |
| 56 | 46,236,000.00 | |
| 57 | 46,236,000.00 | |
| 58 | 46,236,000.00 | |
| 59 | 46,236,000.00 |
Period | Balance($) | |
| 60 | 46,235,575.46 | |
| 61 | 45,524,908.64 | |
| 62 | 44,758,682.31 | |
| 63 | 44,042,497.74 | |
| 64 | 43,270,911.54 | |
| 65 | 42,549,168.24 | |
| 66 | 41,824,730.11 | |
| 67 | 40,940,205.51 | |
| 68 | 40,209,747.64 | |
| 69 | 39,424,296.51 | |
| 70 | 38,688,173.86 | |
| 71 | 37,897,220.02 | |
| 72 | 37,155,390.51 | |
| 73 | 36,410,790.45 | |
| 74 | 35,611,601.76 | |
| 75 | 34,861,231.88 | |
| 76 | 34,056,438.44 | |
| 77 | 33,300,255.87 | |
| 78 | 32,541,248.66 | |
| 79 | 31,625,382.71 | |
| 80 | 30,860,107.38 | |
| 81 | 30,040,834.92 | |
| 82 | 29,269,636.10 | |
| 83 | 28,444,609.64 | |
| 84 | 27,667,443.32 | |
| 85 | 26,887,373.26 | |
| 86 | 26,053,729.37 | |
| 87 | 25,267,625.90 | |
| 88 | 24,428,121.20 | |
| 89 | 23,635,939.48 | |
| 90 | 22,840,797.40 | |
| 91 | 21,942,341.59 | |
| 92 | 21,140,862.86 | |
| 93 | 20,286,422.79 | |
| 94 | 19,478,751.52 | |
| 95 | 18,618,296.07 | |
| 96 | 17,804,386.21 | |
| 97 | 16,987,434.08 | |
| 98 | 16,117,963.28 | |
| 99 | 15,294,703.59 | |
| 100 | 14,419,105.67 | |
| 101 | 13,589,491.51 | |
| 102 | 12,756,775.86 | |
| 103 | 11,774,083.50 | |
| 104 | 10,934,569.81 | |
| 105 | 10,043,182.87 | |
| 106 | 9,197,193.83 | |
| 107 | 8,299,516.79 | |
| 108 | 7,447,004.24 | |
| 109 | 6,669,746.64 | |
| 110 | 5,847,127.90 | |
| 111 | 5,093,244.02 | |
| 112 | 4,296,038.84 | |
| 113 | 3,536,385.61 | |
| 114 | 2,832,882.48 | |
| 115 | 2,061,026.50 | |
| 116 | 1,387,764.08 | |
| 117 | 678,397.04 | |
| 118 | 67.39 | |
| 119 and thereafter | 0.00 |
| E-1 |
[THIS PAGE INTENTIONALLY LEFT BLANK]
No dealer, salesman or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
TABLE OF CONTENTS
| Summary of Certificates | 3 |
| Important Notice Regarding the Offered Certificates | 12 |
| Important Notice About Information Presented in This Prospectus | 12 |
| Summary of Terms | 20 |
| Risk Factors | 51 |
| Description of the Mortgage Pool | 121 |
| Transaction Parties | 217 |
| Description of the Certificates | 247 |
| Description of the Mortgage Loan Purchase Agreements | 279 |
| Pooling and Servicing Agreement | 290 |
| Certain Legal Aspects of Mortgage Loans | 400 |
| Certain Affiliations, Relationships and Related Transactions Involving Transaction Parties | 417 |
| Pending Legal Proceedings Involving Transaction Parties | 418 |
| Use of Proceeds | 418 |
| Yield and Maturity Considerations | 419 |
| Material Federal Income Tax Considerations | 432 |
| Certain State and Local Tax Considerations | 444 |
| Method of Distribution (Underwriter) | 444 |
| Incorporation of Certain Information by Reference | 446 |
| Where You Can Find More Information | 446 |
| Financial Information | 447 |
| Certain ERISA Considerations | 447 |
| Legal Investment | 451 |
| Legal Matters | 451 |
| Ratings | 452 |
| Index of Defined Terms | 454 |
| ANNEX A-1 | CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES | A-1-1 |
| ANNEX A-2 | CERTAIN POOL CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES | A-2-1 |
| ANNEX A-3 | DESCRIPTION OF TOP TWENTY MORTGAGE LOANS AND ADDITIONAL MORTGAGE LOAN INFORMATION | A-3-1 |
| ANNEX B | FORM OF REPORT TO CERTIFICATEHOLDERS | B-1 |
| ANNEX C | FORM OF OPERATING ADVISOR ANNUAL REPORT | C-1 |
| ANNEX D-1 | MORTGAGE LOAN REPRESENTATIONS AND WARRANTIES | D-1-1 |
| ANNEX D-2 | EXCEPTIONS TO MORTGAGE LOAN REPRESENTATIONS AND WARRANTIES FOR GERMAN AMERICAN CAPITAL CORPORATION | D-2-1 |
| ANNEX D-3 | EXCEPTIONS TO MORTGAGE LOAN REPRESENTATIONS AND WARRANTIES FOR CITIGROUP GLOBAL MARKETS REALTY CORP. | D-3-1 |
| ANNEX E | CLASS A-SB PLANNED PRINCIPAL BALANCE SCHEDULE | E-1 |
Dealers will be required to deliver a prospectus when acting as underwriters of these certificates and with respect to unsold allotments or subscriptions. In addition, all dealers selling these certificates will deliver a prospectus until the date that is ninety days from the date of this prospectus.
$625,865,000
(Approximate)
Deutsche Mortgage &
Asset Receiving Corporation
Depositor
CD 2016-CD1 Mortgage
Trust
(Central Index Key Number 0001679327)
Issuing Entity
CD 2016-CD1 Mortgage Trust
Commercial Mortgage Pass-
Through Certificates, Series 2016-CD1
| Class A-1 | $ | 30,826,000 |
| Class A-2 | $ | 40,000,000 |
| Class A-SB | $ | 46,236,000 |
| Class A-3 | $ | 168,000,000 |
| Class A-4 | $ | 207,191,000 |
| Class X-A | $ | 566,092,000 |
| Class A-M | $ | 73,839,000 |
| Class B | $ | 31,644,000 |
| Class C | $ | 28,129,000 |
PROSPECTUS
Deutsche Bank Securities
Co-Lead Manager and Joint Bookrunner
Citigroup
Co-Lead Manager and Joint Bookrunner
J.P. Morgan
Co-Manager
August 11, 2016