JP Morgan Chase Commercial Mortgage Securities
Filed: 10 Sep 07, 12:00am
Filed Pursuant to Rule 424(b)(3)
Registration file No.: 333-140804
SUPPLEMENT
(To Prospectus Dated August 3, 2007 and Prospectus Supplement Dated August 24, 2007)
$2,310,556,000 (Approximate)
J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP12
Issuing Entity
J.P. Morgan Chase Commercial Mortgage Securities Corp.
Depositor
JPMorgan Chase Bank, N.A.
UBS Real Estate Securities Inc.
Natixis Real Estate Capital Inc.
Nomura Credit & Capital, Inc.
Sponsors and Mortgage Loan Sellers
Commercial Mortgage Pass-Through Certificates, Series 2007-LDP12
This is a supplement to the prospectus supplement dated August 24, 2007 and the prospectus dated August 3, 2007, relating to the Depositor’s Commercial Mortgage Pass-Through Certificates, Series 2007-LDP12.
In addition to the certificates described in the prospectus supplement, the trust will also issue the Class X-PP1 and Class X-PP2 Certificates as part of the Depositor’s Commercial Mortgage Pass-Through Certificates, Series 2007-LDP12. The Class X-PP1 and Class X-PP2 Certificates will be entitled to receive solely any prepayment premiums collected on the mortgage loans that are calculated under the related mortgage loan documents as a specified percentage of the amount being prepaid. Accordingly, the Class X Certificates will not be entitled to receive those prepayment premiums.
The table entitled ‘‘Sensitivity to Principal Prepayments of the Pre-Tax Yields to Maturity of the Class X Certificates’’ on page S-229 of the prospectus supplement is deleted and replaced in its entirety with the following table:
Sensitivity to Principal Prepayments of the Pre-Tax
Yields to Maturity of the Class X Certificates
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Assumed Purchase Price (of Initial Notional Amount of Class X Certificates | | | Prepayment Assumption (CPR) | |||||||||||||||||||||||||||
| 0% | | | 25% | | | 50% | | | 75% | | | 100% | |||||||||||||||||
| 1.11663% | | | | | 8.7835 | | | | | | 8.6816 | | | | | | 8.5690 | | | | | | 8.4302 | | | | | | 7.8857 | |
Upon the issuance of the Class X-PP1 and Class X-PP2 Certificates, Cadwalader, Wickersham & Taft LLP, special counsel to the Depositor, will deliver its opinion that the portion of the trust fund consisting of the prepayment premiums described above and the related distribution accounts will be treated as a grantor trust for federal income tax purposes under subpart E, Part I of subchapter J of the Code, and the Class X-PP1 and Class X-PP2 Certificates will represent undivided beneficial interests in the related portions of the grantor trust.
| JPMorgan | UBS Investment Bank |
Natixis Securities North America Inc.
August 29, 2007
PROSPECTUS SUPPLEMENT (To Prospectus Dated August 3, 2007)
$2,310,556,000 (Approximate)
J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP12
Issuing Entity
J.P. Morgan Chase Commercial Mortgage Securities Corp.
Depositor
JPMorgan Chase Bank, N.A.
UBS Real Estate Securities Inc.
Natixis Real Estate Capital Inc.
Nomura Credit & Capital, Inc.
Sponsors and Mortgage Loan Sellers
Commercial Mortgage Pass-Through Certificates, Series 2007-LDP12
J.P. Morgan Chase Commercial Mortgage Securities Corp. is offering certain classes of the Series 2007-LDP12 Commercial Mortgage Pass-Through Certificates, which represent the beneficial ownership interests in the issuing entity, which will be a trust named J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP12. The assets of the issuing entity will primarily be 163 fixed rate mortgage loans secured by first liens on 179 commercial, multifamily and manufactured housing community properties and are generally the sole source of payments on the Series 2007-LDP12 certificates. Credit enhancement will be provided 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 Collateral Suppor t Deficit’’ in this prospectus supplement. The Series 2007-LDP12 certificates are obligations of the issuing entity only and are not obligations of J.P. Morgan Chase Commercial Mortgage Securities Corp., the sponsors, the mortgage loan sellers or any of their respective affiliates, and neither the Series 2007-LDP12 certificates nor the underlying mortgage loans are insured or guaranteed by any governmental agency or any other person or entity. Each class of certificates will be entitled to receive monthly distributions of interest or principal and interest on the 15th day of each month (or if the 15th day is not a business day, the following business day), commencing on September 17, 2007.
| | | | | | | | | | | | | | | | | | | | | |
| | Initial Class Certificate Balance or Notional Amount(1) | | | Initial Approx. Pass-Through Rate | | | Pass-Through Rate Description | | | Assumed Final Distribution Date(3) | | | Expected Ratings (Moody’s/S&P/Fitch)(5) | | | Rated Final Distribution Date(3) | ||||
| Class A-1(6) | | | | $ | 19,008,000 | | | | 5.73800% | | | Fixed | | | October 15, 2011 | | | Aaa/AAA/AAA | | | February 15, 2051 |
| Class A-2(6) | | | | $ | 444,899,000 | | | | 5.82700% | | | Fixed | | | August 15, 2012 | | | Aaa/AAA/AAA | | | February 15, 2051 |
| Class A-3(6) | | | | $ | 346,187,000 | | | | 6.18884% | | | WAC(7) | | | August 15, 2014 | | | Aaa/AAA/AAA | | | February 15, 2051 |
| Class A-4 (6) | | | | $ | 601,693,000 | | | | 5.88200% | | | Fixed(8) | | | July 15, 2017 | | | Aaa/AAA/AAA | | | February 15, 2051 |
| Class A-SB(6) | | | | $ | 54,181,000 | | | | 5.83300% | | | Fixed(8) | | | October 15, 2016 | | | Aaa/AAA/AAA | | | February 15, 2051 |
| Class A-1A(6) | | | | $ | 287,299,000 | | | | 5.85000% | | | Fixed(8) | | | July 15, 2017 | | | Aaa/AAA/AAA | | | February 15, 2051 |
| Class X | | | | $ | 2,504,667,937 | (9) | | | 0.27528% | | | Variable(10) | | | September 15, 2027 | | | Aaa/AAA/AAA | | | February 15, 2051 |
| Class A-M | | | | $ | 250,467,000 | | | | 6.26084% | | | WAC(11) | | | August 15, 2017 | | | Aaa/AAA/AAA | | | February 15, 2051 |
| Class A-J | | | | $ | 197,242,000 | | | | 6.26084% | | | WAC(11) | | | August 15, 2017 | | | NR/AAA/AAA | | | February 15, 2051 |
| Class B | | | | $ | 21,916,000 | | | | 6.26084% | | | WAC(11) | | | August 15, 2017 | | | NR/AA+/AA+ | | | February 15, 2051 |
| Class C | | | | $ | 28,178,000 | | | | 6.26084% | | | WAC(11) | | | August 15, 2017 | | | NR/AA/AA | | | February 15, 2051 |
| Class D | | | | $ | 21,916,000 | | | | 6.26084% | | | WAC(11) | | | August 15, 2017 | | | NR/AA−/AA− | | | February 15, 2051 |
| Class E | | | | $ | 12,523,000 | | | | 6.26084% | | | WAC(11) | | | August 15, 2017 | | | NR/A+/A+ | | | February 15, 2051 |
| Class F | | | | $ | 25,047,000 | | | | 6.26084% | | | WAC(11) | | | August 15, 2017 | | | NR/A/A | | | February 15, 2051 |
(Footnotes on table on page S-9)
You should carefully consider the risk factors beginning on page S-43 of this prospectus supplement and page 9 of the prospectus.
Neither the certificates nor the underlying mortgage loans are insured or guaranteed by any governmental agency or instrumentality 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 depositor, any of its affiliates or any other entity.
| The 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 supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense. J.P. Morgan Chase Commercial Mortgage Securities Corp. will not list the offered certificates on any securities exchange or on any automated quotation system of any securities association. |
| The underwriters, J.P. Morgan Securities Inc., UBS Securities LLC and Natixis Securities North America Inc., will purchase the offered certificates from J.P. Morgan Chase Commercial Mortgage Securities Corp. and will offer them to the public at negotiated prices, plus, in certain cases, interest, determined at the time of sale. J.P. Morgan Securities Inc. and UBS Securities LLC are acting as co-lead managers for this offering with respect to each of the offered certificates. Natixis Securities North America Inc. is acting as a co-manager for this offering. J.P. Morgan Securities Inc. is acting as sole bookrunner for this offering. |
| 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 30, 2007. We expect to receive from this offering approximately 101.752% of the initial aggregate principal balance of the offered certificates, plus accrued interest from August 1, 2007, before deducting expenses payable by us. |
| JPMorgan | UBS Investment Bank |
Natixis Securities North America Inc.
August 24, 2007
TABLE OF CONTENTS
S-3
S-4
S-5
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the offered certificates is contained in two separate documents that progressively provide more detail: (a) the accompanying prospectus, which provides general information, some of which may not apply to the offered certificates; and (b) this prospectus supplement, which describes the specific terms of the offered certificates. If the terms of the offered certificates vary between this prospectus supplement and the accompanying prospectus, you should rely on the information contained in this prospectus supplement.
You should rely only on the information contained in this prospectus supplement and the prospectus. We have not authorized anyone to provide you with information that is different from that contained in this prospectus supplement and the prospectus. The information contained in this prospectus supplement is accurate only as of the date of this prospectus supplement.
This prospectus supplement begins with several introductory sections describing the Series 2007-LDP12 certificates and the trust in abbreviated form:
Summary of Certificates, commencing on page S-9 of this prospectus supplement, which sets forth important statistical information relating to the Series 2007-LDP12 certificates;
Summary of Terms, commencing on page S-11 of this prospectus supplement, which gives a brief introduction of the key features of the Series 2007-LDP12 certificates and a description of the underlying mortgage loans; and
Risk Factors, commencing on page S-43 of this prospectus supplement, which describe risks that apply to the Series 2007-LDP12 certificates which are in addition to those described in the prospectus with respect to the securities issued by the trust generally.
This prospectus supplement and the accompanying prospectus include cross references to sections in these materials where you can find further related discussions. The Tables of Contents in this prospectus supplement and the prospectus identify the pages where these sections are located.
Certain capitalized terms are defined and used in this prospectus supplement and the prospectus to assist you in understanding the terms of the offered certificates and this offering. The capitalized terms used in this prospectus supplement are defined on the pages indicated under the caption ‘‘Index of Defined Terms’’ commencing on page S-239 of this prospectus supplement. The capitalized terms used in the prospectus are defined on the pages indicated under the caption ‘‘Index of Defined Terms’’ commencing on page 129 of the prospectus.
All annexes and schedules attached to this prospectus supplement are a part of this prospectus supplement.
In this prospectus supplement, the terms ‘‘Depositor,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’ refer to J.P. Morgan Chase Commercial Mortgage Securities Corp.
EUROPEAN ECONOMIC AREA
IN RELATION TO EACH MEMBER STATE OF THE EUROPEAN ECONOMIC AREA WHICH HAS IMPLEMENTED THE PROSPECTUS DIRECTIVE (EACH, A ‘‘RELEVANT MEMBER STATE’’), EACH UNDERWRITER HAS REPRESENTED AND AGREED THAT WITH EFFECT FROM AND INCLUDING THE DATE ON WHICH THE PROSPECTUS DIRECTIVE IS IMPLEMENTED IN THAT RELEVANT MEMBER STATE (THE ‘‘RELEVANT IMPLEMENTATION DATE’’) IT HAS NOT MADE AND WILL NOT MAKE AN OFFER OF CERTIFICATES TO THE PUBLIC IN THAT RELEVANT MEMBER STATE PRIOR TO THE PUBLICATION OF A PROSPECTUS IN RELATION TO THE CERTIFICATES WHICH HAS BEEN APPROVED BY THE COMPETENT AUTHORITY IN THAT RELEVANT MEMBER STATE OR, WHERE APPROPRIATE, APPROVED IN ANOTHER RELEVANT MEMBER STATE AND NOTIFIED TO THE COMPETENT AUTHORITY IN THAT RELEVANT MEMBER STATE, ALL IN ACCORDANCE WITH THE
S-6
PROSPECTUS DIRECTIVE, EXCEPT THAT IT MAY, WITH EFFECT FROM AND INCLUDING THE RELEVANT IMPLEMENTATION DATE, MAKE AN OFFER OF CERTIFICATES TO THE PUBLIC IN THAT RELEVANT MEMBER STATE AT ANY TIME:
(A) TO LEGAL ENTITIES WHICH ARE AUTHORIZED OR REGULATED TO OPERATE IN THE FINANCIAL MARKETS OR, IF NOT SO AUTHORIZED OR REGULATED, WHOSE CORPORATE PURPOSE IS SOLELY TO INVEST IN SECURITIES;
(B) TO ANY LEGAL ENTITY WHICH HAS TWO OR MORE OF (1) AN AVERAGE OF AT LEAST 250 EMPLOYEES DURING THE LAST FINANCIAL YEAR; (2) A TOTAL BALANCE SHEET OF MORE THAN €43,000,000 AND (3) AN ANNUAL NET TURNOVER OF MORE THAN €50,000,000, AS SHOWN IN ITS LAST ANNUAL OR CONSOLIDATED ACCOUNTS; OR
(C) IN ANY OTHER CIRCUMSTANCES WHICH DO NOT REQUIRE THE PUBLICATION BY THE ISSUER OF A PROSPECTUS PURSUANT TO ARTICLE 3 OF THE PROSPECTUS DIRECTIVE.
FOR THE PURPOSES OF THIS PROVISION, THE EXPRESSION AN ‘‘OFFER OF CERTIFICATES TO THE PUBLIC’’ IN RELATION TO ANY CERTIFICATES IN ANY RELEVANT MEMBER STATE MEANS THE COMMUNICATION IN ANY FORM AND BY ANY MEANS OF SUFFICIENT INFORMATION ON THE TERMS OF THE OFFER AND THE CERTIFICATES TO BE OFFERED SO AS TO ENABLE AN INVESTOR TO DECIDE TO PURCHASE OR SUBSCRIBE THE CERTIFICATES, AS THE SAME MAY BE VARIED IN THAT MEMBER STATE BY ANY MEASURE IMPLEMENTING THE PROSPECTUS DIRECTIVE IN THAT MEMBER STATE AND THE EXPRESSION ‘‘PROSPECTUS DIRECTIVE’’ MEANS DIRECTIVE 2003/71/EC AND INCLUDES ANY RELEVANT IMPLEMENTING MEASURE IN EACH RELEVANT MEMBER STATE.
UNITED KINGDOM
EACH UNDERWRITER HAS REPRESENTED AND AGREED THAT:
(A) (i) IT IS A PERSON WHOSE ORDINARY ACTIVITIES INVOLVE IT IN ACQUIRING, HOLDING, MANAGING, OR DISPOSING OF INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF ITS BUSINESS AND (ii) IT HAS NOT OFFERED OR SOLD AND WILL NOT OFFER OR SELL THE CERTIFICATES OTHER THAN TO PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR BUSINESSES OR WHO IT IS REASONABLE TO EXPECT WILL ACQUIRE, HOLD, MANAGE OR DISPOSE OF INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIR BUSINESSES WHERE THE ISSUE OF THE CERTIFICATES WOULD OTHERWISE CONSTITUTE A CONTRAVENTION OF SECTION 19 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (‘‘FSMA’’);
(B) 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 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 DEPOSITOR; AND
(C) IT HAS COMPLIED AND WILL COMPLY WITH ALL APPLICABLE PROVISIONS OF THE FSMA WITH RESPECT TO ANYTHING DONE BY IT IN RELATION TO THE CERTIFICATES IN, FROM OR OTHERWISE INVOLVING THE UNITED KINGDOM.
NOTICE TO UNITED KINGDOM INVESTORS
THE DISTRIBUTION OF THIS PROSPECTUS SUPPLEMENT IF MADE BY A PERSON WHO IS NOT AN AUTHORIZED PERSON UNDER THE FSMA, IS BEING MADE ONLY TO, OR DIRECTED ONLY AT, PERSONS WHO (1) ARE OUTSIDE THE UNITED KINGDOM, OR (2) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS, OR (3) ARE PERSONS FALLING WITHIN ARTICLES 49(2)(A) THROUGH (D) (‘‘HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC.’’) OR 19 (INVESTMENT PROFESSIONALS) OF THE FINANCIAL SERVICES AND
S-7
MARKET ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS THE ‘‘RELEVANT PERSONS’’). THIS PROSPECTUS SUPPLEMENT MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS PROSPECTUS SUPPLEMENT RELATES, INCLUDING THE OFFERED CERTIFICATES, IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS.
POTENTIAL INVESTORS IN THE UNITED KINGDOM ARE ADVISED THAT ALL, OR MOST, OF THE PROTECTIONS AFFORDED BY THE UNITED KINGDOM REGULATORY SYSTEM WILL NOT APPLY TO AN INVESTMENT IN THE OFFERED CERTIFICATES AND THAT COMPENSATION WILL NOT BE AVAILABLE UNDER THE UNITED KINGDOM FINANCIAL SERVICES COMPENSATION SCHEME.
S-8
Summary of Certificates
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class | | | Initial Class Certificate Balance or Notional Amount(1) | | | Approx. Initial Credit Support(2) | | | Pass- Through Rate Description | | | Assumed Final Distribution Date(3) | | | Initial Approx. Pass- Through Rate | | | Weighted Average Life (Yrs.)(4) | | | Expected Ratings (Moody’s/S&P/ Fitch)(5) | | | Principal Window(4) | |||||||||
| Offered Certificates | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| A-1(6) | | | | $ | 19,008,000 | | | | 30.000% | | | Fixed | | | October 15, 2011 | | | | | 5.73800 | % | | | | | 2.36 | | | | Aaa/AAA/AAA | | | 09/07 - 10/11 |
| A-2(6) | | | | $ | 444,899,000 | | | | 30.000% | | | Fixed | | | August 15, 2012 | | | | | 5.82700 | % | | | | | 4.78 | | | | Aaa/AAA/AAA | | | 11/11 - 08/12 |
| A-3(6) | | | | $ | 346,187,000 | | | | 30.000% | | | WAC(7) | | | August 15, 2014 | | | | | 6.18884 | % | | | | | 6.81 | | | | Aaa/AAA/AAA | | | 05/14 - 08/14 |
| A-4(6) | | | | $ | 601,693,000 | | | | 30.000% | | | Fixed(8) | | | July 15, 2017 | | | | | 5.88200 | % | | | | | 9.80 | | | | Aaa/AAA/AAA | | | 10/16 -07/17 |
| A-SB(6) | | | | $ | 54,181,000 | | | | 30.000% | | | Fixed(8) | | | October 15, 2016 | | | | | 5.83300 | % | | | | | 6.89 | | | | Aaa/AAA/AAA | | | 10/11 - 10/16 |
| A-1A(6) | | | | $ | 287,299,000 | | | | 30.000% | | | Fixed(8) | | | July 15, 2017 | | | | | 5.85000 | % | | | | | 8.59 | | | | Aaa/AAA/AAA | | | 09/07 - 07/17 |
| X | | | | $ | 2,504,667,937 | (9) | | | N/A | | | Variable(10) | | | September 15, 2027 | | | | | 0.27528 | % | | | | | N/A | | | | Aaa/AAA/AAA | | | N/A |
| A-M | | | | $ | 250,467,000 | | | | 20.000% | | | WAC(11) | | | August 15, 2017 | | | | | 6.26084 | % | | | | | 9.90 | | | | Aaa/AAA/AAA | | | 07/17 - 08/17 |
| A-J | | | | $ | 197,242,000 | | | | 12.125% | | | WAC(11) | | | August 15, 2017 | | | | | 6.26084 | % | | | | | 9.96 | | | | NR/AAA/AAA | | | 08/17 - 08/17 |
| B | | | | $ | 21,916,000 | | | | 11.250% | | | WAC(11) | | | August 15, 2017 | | | | | 6.26084 | % | | | | | 9.96 | | | | NR/AA+/AA+ | | | 08/17 - 08/17 |
| C | | | | $ | 28,178,000 | | | | 10.125% | | | WAC(11) | | | August 15, 2017 | | | | | 6.26084 | % | | | | | 9.96 | | | | NR/AA/AA | | | 08/17 - 08/17 |
| D | | | | $ | 21,916,000 | | | | 9.250% | | | WAC(11) | | | August 15, 2017 | | | | | 6.26084 | % | | | | | 9.96 | | | | NR/AA−/AA− | | | 08/17 - 08/17 |
| E | | | | $ | 12,523,000 | | | | 8.750% | | | WAC(11) | | | August 15, 2017 | | | | | 6.26084 | % | | | | | 9.96 | | | | NR/A+/A+ | | | 08/17 - 08/17 |
| F | | | | $ | 25,047,000 | | | | 7.750% | | | WAC(11) | | | August 15, 2017 | | | | | 6.26084 | % | | | | | 9.96 | | | | NR/ A/A | | | 08/17 - 08/17 |
| Non- Offered Certificates | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| G | | | | $ | 28,177,000 | | | | 6.625% | | | WAC(11) | | | N/A | | | | | 6.26084 | % | | | | | N/A | | | | NR/A−/A− | | | N/A |
| H | | | | $ | 28,178,000 | | | | 5.500% | | | WAC(11) | | | N/A | | | | | 6.26084 | % | | | | | N/A | | | | NR/BBB+/BBB+ | | | N/A |
| J | | | | $ | 28,177,000 | | | | 4.375% | | | WAC(11) | | | N/A | | | | | 6.26084 | % | | | | | N/A | | | | NR/BBB/BBB | | | N/A |
| K | | | | $ | 28,178,000 | | | | 3.250% | | | WAC(11) | | | N/A | | | | | 6.26084 | % | | | | | N/A | | | | NR/BBB−/BBB− | | | N/A |
| L | | | | $ | 9,392,000 | | | | 2.875% | | | Fixed(8) | | | N/A | | | | | 5.12500 | % | | | | | N/A | | | | NR/BB+/BB+ | | | N/A |
| M | | | | $ | 9,393,000 | | | | 2.500% | | | Fixed(8) | | | N/A | | | | | 5.12500 | % | | | | | N/A | | | | NR/BB/BB | | | N/A |
| N | | | | $ | 6,261,000 | | | | 2.250% | | | Fixed(8) | | | N/A | | | | | 5.12500 | % | | | | | N/A | | | | NR/BB−/BB− | | | N/A |
| P | | | | $ | 6,262,000 | | | | 2.000% | | | Fixed(8) | | | N/A | | | | | 5.12500 | % | | | | | N/A | | | | NR/B+/B+ | | | N/A |
| Q | | | | $ | 6,262,000 | | | | 1.750% | | | Fixed(8) | | | N/A | | | | | 5.12500 | % | | | | | N/A | | | | NR/ B/B | | | N/A |
| T | | | | $ | 3,131,000 | | | | 1.625% | | | Fixed(8) | | | N/A | | | | | 5.12500 | % | | | | | N/A | | | | NR/B−/B− | | | N/A |
| NR | | | | $ | 40,700,937 | | | | N/A | | | Fixed(8) | | | N/A | | | | | 5.12500 | % | | | | | N/A | | | | NR/NR/NR | | | N/A |
| |
| |
|
| (1) | Approximate, subject to a permitted variance of plus or minus 5%. |
| (2) | The credit support percentages set forth for the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A Certificates are, in each case, represented in the aggregate without regard to loan groups and taking into account each certificate with a lower distribution priority. |
| (3) | The assumed final distribution dates set forth in this prospectus supplement have been determined on the basis of the assumptions described in ‘‘Description of the Certificates—Assumed Final Distribution Date; Rated Final Distribution Date’’ in this prospectus supplement. The rated final distribution date for each class of certificates is February 15, 2051. See ‘‘Description of the Certificates—Assumed Final Distribution Date; Rated Final Distribution Date’’ in this prospectu s supplement. |
| (4) | The weighted average life and period during which distributions of principal would be received as set forth in the foregoing table with respect to each class of certificates are based on the assumptions set forth under ‘‘Yield and Maturity Considerations—Weighted Average Life’’ in this prospectus supplement and on the assumptions that there are no prepayments or losses on the mortgage loans and that there are no extensions of maturity dates of the mortgage loans. |
| (5) | Ratings shown are those of Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and Fitch, Inc. |
| (6) | For purposes of making distributions on the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A certificates, the pool of mortgage loans will be deemed to consist of two distinct loan groups, loan group 1 and loan group 2. As of the cut-off date, loan group 1 will consist of 129 mortgage loans, representing approximately 88.5% of the aggregate principal balance of the pool of mortgage loans. As of the cut-off date, loan group 2 will consist of 34 mortgage loans, representing approximately 11.5% of the aggregate principal balance of the pool |
S-9
| of mortgage loans. As of the cut-off date, loan group 2 will consist of 34 mortgage loans, representing approximately 92.9% of all the mortgage loans secured by multifamily and manufactured housing community properties. So long as funds are sufficient on any distribution date to make distributions of all interest and principal on such distribution date to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB, Class A-1A and Class X certificates, interest and principal distributions on the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-SB certificates will be based upon amounts available relating to mortgage loans in loan group 1 and interest and principal distributions on the Class A-1A certificates will be based upon amounts available relating to mortgage loans in loan group 2. In addition, generally the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-SB certificates will be entitled to re ceive distributions of principal collected or advanced in respect of mortgage loans in loan group 2 after the certificate principal balance of the Class A-1A certificates has been reduced to zero, and the Class A-1A certificates will be entitled to receive distributions of principal collected or advanced in respect of mortgage loans in loan group 1 after the certificate principal balances of the Class A-4 and Class A-SB certificates have been reduced to zero. However, on and after any distribution date on which the certificate principal balances of the Class A-M through Class NR certificates have been reduced to zero, distributions of principal collected or advanced in respect of the pool of mortgage loans will be distributed to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB, and Class A-1A certificates, pro rata. |
| (7) | The pass-through rate applicable to the Class A-3 certificates on each distribution date will be a per annum rate equal to 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), minus 0.07200%. |
| (8) | For any distribution date, if 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 the first day of the related due period is less than the fixed per annum rate specified in the table for any of the Class A-4, Class A-SB, Class A-1A, Class L, Class M, Class N, Class P, Class Q, Class T and Class NR certificates with respect to the distribution date, then the pass-through rate for that class of certificates on that distribution date will equal the weighted average of the net mortgage rates on the mortgage loans (in each case adjusted, if necessar y, to accrue on the basis of a 360-day year consisting of twelve 30-day months). |
| (9) | The Class X notional amount will be equal to the aggregate of the class balances of the certificates (other than the Class X, Class R, Class S and Class LR certificates). |
| (10) | The pass-through rate on the Class X certificates will be based on the weighted average of the interest strip rates of the components of the Class X certificates. See ‘‘Description of the Certificates—Distributions’’ in this prospectus supplement. |
| (11) | The pass-through rate applicable to the Class A-M, Class A-J, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J and Class K certificates on each distribution date will be a per annum rate equal to 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). |
The Class R, Class S and Class LR certificates are not offered by this prospectus supplement and are not represented in this table.
S-10
Summary of Terms
This summary highlights selected information from this prospectus supplement. 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 and the accompanying prospectus carefully.
Relevant Parties and Dates
| | |
| Depositor | | J.P. Morgan Chase Commercial Mortgage Securities Corp., a wholly-owned subsidiary of JPMorgan Chase Bank, N.A., a national banking association organized under the laws of the United States, which is a wholly-owned subsidiary of JPMorgan Chase & Co., a Delaware corporation. The depositor’s address is 270 Park Avenue, New York, New York 10017, and its telephone number is (212) 834-9299. See ‘‘Transaction Parties—The Depositor’’ in this prospectus supplement. |
| | |
| Issuing Entity | | J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP12, a New York common law trust to be established on the closing date of the securitization under the pooling and servicing agreement. For more detailed information, see ‘‘Transaction Parties—The Issuing Entity’’ in this prospectus supplement. |
| | |
| Mortgage Loan Sellers | | JPMorgan Chase Bank, N.A. (‘‘JPMCB’’) a national banking association organized under the laws of the United States, UBS Real Estate Securities Inc. (‘‘UBSRESI’’), a Delaware corporation, Natixis Real Estate Capital Inc., a New York corporation, and Nomura Credit & Capital, Inc., a Delaware corporation. See ‘‘Transaction Parties—The Mortgage Loan Sellers’’ in this prospectus supplement. |
Sellers of the Mortgage Loans
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Seller | | | Number of Mortgage Loans | | | Aggregate Principal Balance of Mortgage Loans | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | % of Initial Loan Group 2 Balance | |||||||||||||||
| JPMCB | | | | | 53 | | | | | $ | 1,033,008,004 | | | | | | 41.2 | % | | | | | 42.7 | % | | | | | 30.1 | % |
| UBSRESI | | | | | 43 | | | | | | 609,612,842 | | | | | | 24.3 | | | | | | 24.5 | | | | | | 22.8 | |
| Natixis | | | | | 48 | | | | | | 477,010,408 | | | | | | 19.0 | | | | | | 19.7 | | | | | | 13.7 | |
| NCCI | | | | | 19 | | | | | | 385,036,682 | | | | | | 15.4 | | | | | | 13.0 | | | | | | 33.4 | |
| Total: | | | | | 163 | | | | | $ | 2,504,667,937 | | | | | | 100.0 | % | | | | | 100.0 | % | | | | | 100.0 | % |
| | |
| Master Servicer | | Wells Fargo Bank, N.A., a national banking association, will act as the master servicer with respect to the mortgage loans. The principal commercial mortgage servicing offices of Wells Fargo Bank, N.A. are located at 45 Fremont Street, 2nd Floor, San Francisco, California 94105 and its telephone number is (800) 986-9711. See ‘‘Transaction Parties—The Master Servicer’’ in this prospectus supplement. |
S-11
| | |
| The master servicer will be primarily responsible for collecting payments and gathering information with respect to the mortgage loans included in the trust fund and the companion loans that are not part of the trust fund. See ‘‘Servicing of the Mortgage Loans’’ in this prospectus supplement. | |
| | |
| Each of the Carespring Portfolio loan (identified as Loan No. 6 on Annex A-1 to this prospectus supplement) and the Logan Portfolio loans (identified by the Loan Nos. 143, 145, 146, 148-153, 155-157, 159 and 161 on Annex A-1 to this prospectus supplement) and the related pari passu companion loans are being serviced under the pooling and servicing agreement entered into in connection with the issuance of the J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP11, Commercial Mortgage Pass-Through Certificates, Series 2007-LDP11, which is also referred to as the ‘‘JPMCC 2007-LDP11 pooling and servicing agreement’’ in this prospectus supplement. The Carespring Portfolio loan and the Logan Portfolio loans are also referred to as the ‘‘non-serviced m ortgage loans’’ in this prospectus supplement. The master servicer under the JPMCC 2007-LDP11 pooling and servicing agreement is Wachovia Bank, National Association, a national banking association. The servicing offices of Wachovia Bank, National Association are located at NC 1075, 8739 Research Drive URP4, Charlotte, North Carolina 28262 and its telephone number is 800-326-1334. | |
| | |
| Special Servicer | | J.E. Robert Company, Inc., a Virginia corporation, will act as special servicer with respect to the mortgage loans and will be primarily responsible for making decisions and performing certain servicing functions with respect to the mortgage loans that, in general, are in default or as to which default is imminent. The primary servicing offices of the special servicer are located at 1650 Tysons Boulevard, Suite 1600, McLean, Virginia, and its telephone number is (703) 714-8000. We anticipate that the initial directing certificateholder will be JER Investors Trust Inc., an affiliate of the special servicer. The special servicer may be removed without cause under certain circumstances described in this prospectus supplement. See ‘‘Transaction Parties—The Special Servicer’’ in this prospectus supplement. |
| | |
| CWCapital Asset Management LLC, a Massachusetts limited liability company, will act as special servicer with respect to the non-serviced mortgage loans and the related pari passu companion loans pursuant to the terms of the JPMCC 2007-LDP11 pooling and servicing agreement and the related intercreditor agreement. The primary servicing offices of CWCapital Asset | |
S-12
| | |
| Management LLC are located at 701 Thirteenth Street, NW, Suite 1000, Washington, DC 20005, and its telephone number is (202) 715-9500. | |
| | |
| Trustee | | LaSalle Bank National Association, a national banking association, with its principal offices located at 135 South LaSalle Street, Suite 1625, Chicago, Illinois 60603, Attention: Global Securities and Trust Services, J.P. Morgan 2007-LDP12. See ‘‘Transaction Parties—The Trustee, Certificate Registrar, Authenticating Agent and Custodian’’ in this prospectus supplement. Following the transfer of the mortgage loans into the trust, the trustee, on behalf of the trust, will become the mortgagee of record under each mortgage loan, except for the non-serviced mortgage loans for which LaSalle Bank National Association, as tr ustee, is the mortgagee of record under the JPMCC 2007-LDP11 pooling and servicing agreement. |
| | |
| Sponsors | | JPMorgan Chase Bank, N.A., a national banking association, UBS Real Estate Securities Inc., a Delaware corporation, Natixis Real Estate Capital Inc., a New York corporation, and Nomura Credit & Capital, Inc., a Delaware corporation. For more information, see ‘‘Transaction Parties—The Sponsors’’ in this prospectus supplement and ‘‘The Sponsor’’ in the prospectus. |
| | |
| Certain Affiliations | | JPMorgan Chase Bank, N.A. and its affiliates are playing several roles in this transaction. J.P. Morgan Chase Commercial Mortgage Securities Corp. is the depositor and a wholly-owned subsidiary of JPMorgan Chase Bank, N.A. JPMorgan Chase Bank, N.A. and the other mortgage loan sellers originated or acquired the mortgage loans and will be selling them to the depositor. JPMorgan Chase Bank, N.A. is also an affiliate of J.P. Morgan Securities Inc., an underwriter for the offering of the certificates. UBS Real Estate Securities Inc., a sponsor, mortgage loan seller and originator, is an affiliate of UBS Securities LLC, one of the underwriters. In addition, with respect to 18 mortgage loans, representing approximately 1.6% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, an affiliate of UBS Real Estate Securities Inc. has a direct or indirect ownership interest in the related borrower. Nomura Credit & Capital, Inc. is a sponsor, mortgage loan seller and originator. Natixis Real Estate Capital Inc., a sponsor, mortgage loan seller and originator, is an affiliate of Natixis Securities North America Inc., one of the underwriters. These roles and other potential relationships may give rise to conflicts of interest as further described under ‘‘Risk Factors—Potential Conflicts of Interest’’ in this prospectus supplement. |
S-13
| | |
| Cut-off Date | | With respect to each mortgage loan, the due date of that mortgage loan in August 2007 or, with respect to those mortgage loans that have their first due date after August 2007, the origination date of that mortgage loan. |
| | |
| Closing Date | | On or about August 30, 2007. |
| | |
| Distribution Date | | The 15th day of each month or, if the 15th day is not a business day, the next succeeding business day, beginning in September 2007. |
| | |
| Interest Accrual Period | | Interest will accrue on the offered certificates during the calendar month prior to the related distribution date. Interest will be calculated on the offered certificates assuming that each month has 30 days and each year has 360 days. |
| | |
| Due Period | | For any mortgage loan and any distribution date, the period commencing on the day immediately following the due date for the mortgage loan in the month preceding the month in which that distribution date occurs and ending on and including the due date for the mortgage loan in the month in which that distribution date occurs; provided that the first due period with respect to any mortgage loan with its first due date after August 2007 will begin on the day immediately following the cut-off date of such mortgage loan. However, in the event that the last day of a due period (or applicable grace period) is not a business day, any periodic payments re ceived with respect to the mortgage loans relating to that due period on the business day immediately following that last day will be deemed to have been received during that due period and not during any other due period. |
| | |
| Determination Date | | For any distribution date, the fourth business day prior to the distribution date. |
S-14
Transaction Overview
On the closing date, each mortgage loan seller will sell its 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 trust, which will be the issuing entity, will be formed by a pooling and servicing agreement, to be dated as of August 1, 2007 among the depositor, the master servicer, the special servicer and the trustee. The master servicer will service the mortgage loans (other than the specially serviced mortgage loans and the non-serviced mortgage loans) to the extent described in this prospectus supplement in accordance with the pooling and servicing agreement and provide the information to the trustee necessary for the trustee to calculate distributions and other information regarding the certificates.
The transfers of the mortgage loans from the mortgage loan sellers to the depositor and from the depositor to the issuing entity in exchange for the certificates are illustrated below:
S-15
Offered Securities
| | |
| General | | We are offering the following classes of commercial mortgage pass-through certificates as part of Series 2007-LDP12: |
| | |
| • Class A-1 • Class A-2 • Class A-3 • Class A-4 • Class A-SB • Class A-1A • Class X • Class A-M • Class A-J • Class B • Class C • Class D • Class E • Class F | |
| | |
| The Series 2007-LDP12 will consist of the above classes and the following classes that are not being offered through this prospectus supplement and the accompanying prospectus: Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T, Class NR, Class S, Class R and Class LR. | |
| | |
| The Series 2007-LDP12 certificates will collectively represent beneficial ownership interests in the issuing entity, a trust created by J.P. Morgan Chase Commercial Mortgage Securities Corp. The trust’s assets will primarily be 163 fixed rate mortgage loans secured by first liens on 179 commercial, multifamily and manufactured housing community properties. | |
| | |
| Certificate Balances | | Your certificates will have the approximate aggregate initial certificate balance or notional amount set forth below, subject to a variance of plus or minus 5%: |
| | | | | | |
| Class A-1 | | | | | $19,008,000 | |
| Class A-2 | | | | | $444,899,000 | |
| Class A-3 | | | | | $346,187,000 | |
| Class A-4 | | | | | $601,693,000 | |
| Class A-SB | | | | | $54,181,000 | |
| Class A-1A | | | | | $287,299,000 | |
| Class X | | | | | $2,504,667,937 | |
| Class A-M | | | | | $250,467,000 | |
| Class A-J | | | | | $197,242,000 | |
| Class B | | | | | $21,916,000 | |
| Class C | | | | | $28,178,000 | |
| Class D | | | | | $21,916,000 | |
| Class E | | | | | $12,523,000 | |
| Class F | | | | | $25,047,000 | |
S-16
| | |
| Pass-Through Rates | | |
| | |
| A. Offered Certificates | | Your certificates will accrue interest at an annual rate called a pass-through rate. The initial pass-through rate is set forth below for each class: |
| | | | | | |
| Class A-1 | | | | | 5.73800 | % |
| Class A-2 | | | | | 5.82700 | % |
| Class A-3 | | | | | 6.18884 | %(1) |
| Class A-4 | | | | | 5.88200 | %(2) |
| Class A-SB | | | | | 5.83300 | %(2) |
| Class A-1A | | | | | 5.85000 | %(2) |
| Class X | | | | | 0.27528 | %(3) |
| Class A-M | | | | | 6.26084 | %(4) |
| Class A-J | | | | | 6.26084 | %(4) |
| Class B | | | | | 6.26084 | %(4) |
| Class C | | | | | 6.26084 | %(4) |
| Class D | | | | | 6.26084 | %(4) |
| Class E | | | | | 6.26084 | %(4) |
| Class F | | | | | 6.26084 | %(4) |
| ||
| | |
|
| (1) | The pass-through rate applicable to the Class A-3 certificates on each distribution date will be a per annum rate equal to 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), minus 0.07200%. |
| (2) | For any distribution date, if 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 the first day of the related due period is less than the fixed per annum rate specified in the table for any of the Class A-4, Class A-SB and Class A-1A certificates with respect to the distribution date, then the pass-through rate for that class of certificates on that distribution date will equal 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). |
| (3) | The interest accrual amount on the Class X certificates will be calculated by reference to a notional amount equal to the aggregate of the certificate balances of each class of certificates (other than the Class X, Class R, Class LR and Class S certificates). The pass-through rate on the Class X certificates will be based on the weighted average of the interest strip rates of the components of the Class X certificates. See ‘‘Description of the Certificates— Distributions’’ in this prospectus supplement. |
| (4) | The pass-through rate applicable to the Class A-M, Class A-J, Class B, Class C, Class D, Class E and Class F certificates on each distribution date will be a per annum rate equal to 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). |
| | |
| B. Interest Rate Calculation Convention | | Interest on the certificates will be calculated based on a 360-day year consisting of twelve 30-day months, or a ‘‘30/360 basis.’’ |
| | |
| For purposes of calculating the pass-through rates on any class of certificates with a pass-through rate that is based on, limited by or equal to, the weighted average | |
S-17
| | |
| of the net mortgage rates on all the mortgage loans or the mortgage loans in any loan group, the mortgage loan interest rates will not reflect any default interest rate, any rate increase occurring after an anticipated repayment date, any mortgage loan term modifications agreed to by the special servicer or any modifications resulting from a borrower’s bankruptcy or insolvency. | |
| | |
| For purposes of calculating the pass-through rates on the 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 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’’ in this prospectus supplement. | |
| | |
| C. Servicing and Administration Fees | | The master servicer and the special servicer are entitled to a master servicing fee and a special servicing fee, respectively, from the interest payments on the mortgage loans. The master servicing fee for each distribution date is calculated on the outstanding principal amount of each mortgage loan (including the non-serviced mortgage loans) in the trust fund at the master servicing fee rate equal to a per annum rate ranging from 0.02000% to 0.13500%. The special servicing fee for each distribution date is calculated based on the outstanding principal amount of each mortgage loan or REO loan (excluding the non-serviced mortgage loans) that is a speci ally serviced mortgage loan or REO loan at the special servicing fee rate equal to a per annum rate of 0.25%. The master servicer and the special servicer are also entitled to additional fees and amounts, including income on the amounts held in permitted investments, liquidation fees and workout fees. The trustee fee for each distribution date is calculated on the outstanding principal amount of each mortgage loan (including the non-serviced mortgage loans) in the trust fund at the trustee fee rate equal to a per annum rate equal to 0.00077%. See ‘‘Transaction Parties—Servicing and Other Compensation and Pay ment of Expenses’’ in this prospectus supplement. |
S-18
Distributions
| | |
| A. Amount and Order of Distributions | | On each distribution date, funds available for distribution from the mortgage loans, net of specified trust fees, reimbursements and expenses, will be distributed in the following amounts and order of priority: |
| | |
| First/Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB, Class A-1A and Class X certificates: To pay interest concurrently, (a) on the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-SB certificates, pro rata, from the portion of the funds available for distribution attributable to the mortgage loans in loan group 1, (b) on the Class A-1 A certificates from the portion of the funds available for distribution attributable to the mortgage loans in loan group 2 and (c) on the Class X certificates from the funds available for distribution attributabl e to all mortgage loans, without regard to loan groups, in each case in accordance with their interest entitlements. However, if, on any distribution date, the funds available for distribution (or applicable portion) are insufficient to pay in full the total amount of interest to be paid to any of the classes described above, the funds available for distribution will be allocated among all those classes, pro rata, without regard to loan group, in accordance with their interest entitlements for that distribution date. | |
| | |
| Second/Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A certificates: To the extent of funds allocated to principal and available for distribution, (a)(1) first, to the Class A-SB certificates, available principal received from loan group 1 and, after the Class A-1A certificates have been reduced to zero, funds attributed to principal received from loan group 2 remaining after payments specified in clause (b) below have been made, until the certificate balance of the Class A-SB certificates is reduced to the planned principal balance for the related distribution date set forth in Annex D to this prospectus supplement, (2) then to principal on the Class A-1 certificates, in an amount equal to the funds attributable to mortgage loans in loan group 1 remaining after the payments specified in clause (a)(1) above have been made and, after the Class A-1A certificates have been reduced to zero, the funds attributable to mortgage loans in loan group 2, until the certificate balance of the Class A-1 certificates has been reduced to zero, (3) then to principal on the Class A-2 certificates, in an amount equal to the funds attributable to mortgage loans in loan group 1 remaining after the payments specified in clauses | |
S-19
| | |
| (a)(1) and (a)(2) above have been made and, after the Class A-1 A certificates have been reduced to zero, the funds attributable to mortgage loans in loan group 2, until the certificate balance of the Class A-2 certificates has been reduced to zero, (4) then to principal on the Class A-3 certificates, in an amount equal to the funds attributable to mortgage loans in loan group 1 remaining after the payments specified in clauses (a)(1), (a)(2) and (a)(3) above have been made and, after the Class A-1A certificates have been reduced to zero, the funds attributable to mortgage loans in loan group 2 until the certificate balance of the Class A-3 certificates has been reduced to zero, (5) then to principal on the Class A-4 certificates, in an amount equal to the funds attributable to mortgage loans in loan group 1 remaining after the payments specified in clauses (a)(1), (a)(2), (a)(3) and (a)(4) above have been made and, aft er the Class A-1A certificates have been reduced to zero, the funds attributable to mortgage loans in loan group 2, until the certificate balance of the Class A-4 certificates has been reduced to zero and (6) then to principal on the Class A-SB certificates in an amount equal to the funds attributable to mortgage loans in loan group 1 remaining after the payments specified in clauses (a)(1), (a)(2), (a)(3), (a)(4) and (a)(5) above have been made and, after the Class A-1A certificates have been reduced to zero, the funds attributable to mortgage loans in loan group 2, until the certificate balance of the Class A-SB certificates has been reduced to zero, and (b) to the Class A-1A certificates, in an amount equal to the funds attributable to mortgage loans in loan group 2 and, after the certificate balances of the Class A-4 and Class A-SB certificates have been reduced to zero, the funds attributable to mortgage loans in loan group& nbsp;1 remaining after the payments specified in clause (a) above have been made, until the certificate balance of the Class A-1A certificates has been reduced to zero. If the certificate balance of each and every class of certificates other than the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A certificates has been reduced to zero as a result of the allocation of mortgage loan losses to those certificates, funds available for distributions of principal will be distributed to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A certificates, pro rata, rather than sequentially, without regard to loan groups or the distribution priorities above. | |
| | |
| Third/Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A certificates: To reimburse the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1 A certificates, pro rata, for any previously unreimbursed losses on the mortgage loans allocable to principal that | |
S-20
| | |
| were previously borne by those classes, without regard to loan groups. | |
| | |
| Fourth/Class A-M certificates: To the Class A-M certificates as follows: (a) first, to interest on the Class A-M certificates, in an amount up to their interest entitlement; (b) second, to the extent of funds allocated to principal and available for distribution remaining after distributions in respect of principal to each class with a higher priority (in this case, the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A certificates, to principal on the Class A-M certificates, until the certificate balance of the Class A-M certificates has been reduced to zero; and (c) third, to reimburse the Class A-M certificates, for any previously unreimbursed losses on the mortgage loans allocable to principal that were previously borne by that class. | |
| | |
| Fifth/Class A-J certificates: To the Class A-J certificates in a manner analogous to the Class A-M certificates’ allocations of priority Fourth above. | |
| | |
| Sixth/Class B certificates: To the Class B certificates in a manner analogous to the Class A-M certificates’ allocations of priority Fourth above. | |
| | |
| Seventh/Class C certificates: To the Class C certificates in a manner analogous to the Class A-M certificates’ allocations of priority Fourth above. | |
| | |
| Eighth/Class D certificates: To the Class D certificates in a manner analogous to the Class A-M certificates’ allocations of priority Fourth above. | |
| | |
| Ninth/Class E certificates: To the Class E certificates in a manner analogous to the Class A-M certificates’ allocations of priority Fourth above. | |
| | |
| Tenth/Class F certificates: To the Class F certificates in a manner analogous to the Class A-M certificates’ allocations of priority Fourth above. | |
| | |
| Eleventh/Non-offered certificates (other than the Class S certificates): In the amounts and order of priority described in ‘‘Description of the Certificates— Distributions’’ in this prospectus supplement. | |
| | |
| For purposes of making distributions to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A certificates, except in the event of insufficient funds, as described above, the pool of mortgage loans will be deemed to consist of two distinct groups, loan group 1 and loan group 2. Loan group 1 will consist of 129 mortgage loans, representing approximately 88.5% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date and loan group 2 will consist of 34 mortgage loans, representing | |
S-21
| | |
| approximately 11.5% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date. Loan group 2 will include approximately 92.9% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date of loans secured by multifamily and manufactured housing community properties. Annex A-1 to this prospectus supplement will set forth the loan group designation with respect to each mortgage loan. | |
| | |
| B. Interest and Principal Entitlements | | A description of the interest entitlement of each class of offered certificates can be found in ‘‘Description of the Certificates— Distributions’’ in this prospectus supplement. |
| | |
| A description of the amount of principal required to be distributed to each class of offered certificates entitled to principal on a particular distribution date also can be found in ‘‘Description of the Certificates—Distributions’’ in this prospectus supplement. | |
| | |
| C. Prepayment Premiums; Yield Maintenance Charges | | Yield maintenance charges with respect to the mortgage loans will be allocated to the offered certificates as described in ‘‘Description of the Certificates—Allocation of Yield Maintenance Charges and Prepayment Premiums’’ in this prospectus supplement. |
| | |
| For an explanation of the calculation of yield maintenance charges, see ‘‘Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans’’ in this prospectus supplement. | |
| | |
| On each distribution date, any additional interest collected in respect of a mortgage loan in the trust fund with an anticipated repayment date during the related collection period will be distributed to the holders of the Class S certificates. This interest will not be available to provide credit support for other classes of certificates or offset any interest shortfalls. | |
| | |
| D. General | | The chart below 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 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 the mortgage loan that has an anticipated repayment date) on any distribution date in descending order (beginning with the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB, Class A-1A and |
S-22
| | |
| Class X certificates). It also shows the manner in which mortgage loan losses are allocated to certain classes of certificates in ascending order (beginning with the other classes of certificates (other than the Class S, Class R and Class LR certificates) that are not being offered by this prospectus supplement). No principal payments or mortgage loan losses will be allocated to the Class S, Class R, Class LR or Class X certificates, although principal payments and mortgage loan losses will reduce the notional amount of the Class X certificates and, therefore, the amount of interest they accrue. | |
| ||
| | |
|
| * | The Class X certificates are interest-only 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. | |
| | |
| Principal losses on mortgage loans that are allocated to a class of certificates (other than the Class X, Class S, Class R and Class LR certificates) will reduce the certificate balance of that class of certificates. | |
| | |
| See ‘‘Description of the Certificates’’ in this prospectus supplement. | |
S-23
| | |
| 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 extraordinary expenses of the trust; and shortfalls resulting from a modification of a mortgage loan’s interest rate or principal balance or from other unanticipated or default-related expenses of the trust. In addition, prepayment interest shortfalls that are not co vered by certain compensating interest payments made by the master servicer are required to be allocated to the certificates. See ‘‘Description of the Certificates—Distributions’’ in this prospectus supplement. |
Advances
| | |
| A. P&I Advances | | The master servicer is required to advance a delinquent periodic mortgage loan payment if it determines that the advance will be recoverable (unless the special servicer determines that the advance would be non-recoverable). The master servicer will not 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 or 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. See ‘‘Description of the Certificates—A dvances’’ in this prospectus supplement. There may be other circumstances in which the master servicer will not be required to advance one 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. Neither the master servicer nor the trustee is required to advance amounts determined to be non-recoverable. See ‘‘Description of the Certificates— Advances’’ in this prospectus supplement. If an interest advance is made by the master servicer, the master servicer will not advance its servicing fee, but will advance the trustee’s fee. See ‘‘Description of the Certificates& mdash;Advances’’ in this prospectus supplement. |
S-24
| | |
| B. Property Protection Advances | | The master servicer may be required (with respect to those mortgage loans for which it is acting as master servicer), and the special servicer may be permitted (with respect to those mortgage loans for which it is acting as special servicer), to make advances to pay delinquent real estate taxes, assessments and hazard insurance premiums and similar expenses necessary to: |
| | | |
| • | protect and maintain the related mortgaged property; | |
| | | |
| • | maintain the lien on the related mortgaged property; or | |
| | | |
| • | enforce the related mortgage loan documents. | |
| | |
| If the master servicer fails to make a required advance of this type, the trustee is required to make this advance. None of the master servicer, the special servicer or the trustee is required to advance amounts determined to be non-recoverable. See ‘‘Description of the Certificates—Advances’’ in this prospectus supplement. | |
| | |
| C. Interest on Advances | | The master servicer, the special servicer and the trustee, as applicable, will be entitled to interest on the above described advances at the ‘‘Prime Rate’’ as published in The Wall Street Journal, as described in this prospectus supplement. 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 ‘‘Description of the Certificates—Advances’’ and ‘‘—Subordination; Allocation of Collateral Support Deficit’’ in this prospectus supplement and ‘‘Description of the Certificates—Advances in Respect of Delinquencies’’ and ‘‘Description of the Pooling Agreements—Certificate Account’’ in the prospectus. |
The Mortgage Loans
| | |
| The Mortgage Pool | | The trust’s primary assets will be 163 fixed rate mortgage loans, each evidenced by one or more promissory notes secured by first mortgages, deeds of trust or similar security instruments on the fee and/or leasehold estate of the related borrower in 179 commercial, multifamily and manufactured housing community properties. |
S-25
| | |
| The aggregate principal balance of the mortgage loans as of the cut-off date will be approximately $2,504,667,937. | |
| | |
| The Sawgrass Mills Mall loan (identified as Loan No. 2 on Annex A-1 to this prospectus supplement) with a principal balance as of the cut-off date of $150,000,000 and representing approximately 6.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (6.8%, 0.0%), is one of multiple mortgage loans that is part of a split loan structure, and is secured by the same mortgage instrument on the related mortgaged property. The first of these mortgage loans is the Sawgrass Mills Mall loan, which is included in the trust. Multiple additional mortgage loans, which are referred to in this prospectus supplement as the Sawgrass Mills Mall pari passu companion loans, are part of the split loan structure but are not included in the trust, and are pari passu in right of payment with the Sawgrass Mills Mall loan. The Sawgrass Mills Mall pari passu companion loans are evidenced by notes having an aggregate outstanding principal balance as of the cut-off date of $670,000,000. The Sawgrass Mills Mall pari passu companion loans are expected to be deposited into one or more future securitizations. Additional multiple mortgage loans, which are referred to in this prospectus supplement as the Sawgrass Mills Mall subordinate companion loans, are also part of the split loan structure but are not included in the trust, and are subordinate in right of payment to the Sawgrass Mills Mall loan and Sawgrass Mills Mall pari passu companion loans and pari passu in right and payment with respect to each other. The Sawgrass Mills Mall subordinate companion loans are evidenced by multiple notes having an aggregate outstanding principal balance as of the cut-off date of $30,000,000. | |
| | |
| The Sawgrass Mills Mall loan, the Sawgrass Mills Mall pari passu companion loans and the Sawgrass Mills Mall subordinate companion loans, referred to in this prospectus supplement as the Sawgrass Mills Mall whole loan, are subject to an intercreditor agreement. The intercreditor agreement generally allocates collections in respect of the Sawgrass Mills Mall whole loan prior to a monetary event of default, or material non-monetary event of default to the Sawgrass Mills Mall loan, the Sawgrass Mills Mall pari passu companion loans and the Sawgrass Mills Mall subordinate companion loans on a pro rata basis. After a monetary event of default or material n on-monetary event of default, the intercreditor agreement generally allocates collections in respect of the Sawgrass Mills Mall whole loan first to | |
S-26
| | |
| the Sawgrass Mills Mall loan and the Sawgrass Mills Mall pari passu companion loans, on a pro rata basis, and second to the Sawgrass Mills Mall subordinate companion loans, on a pro rata basis. | |
| | |
| The Sawgrass Mills Mall loan, the Sawgrass Mills Mall pari passu companion loans and the Sawgrass Mills Mall subordinate companion loans will be serviced in accordance with the pooling and servicing agreement by the master servicer and the special servicer, and in accordance with the servicing standards provided in the pooling and servicing agreement. So long as a control appraisal event has not occurred with respect to the Sawgrass Mills Mall subordinate companion loans, a majority of the holders of the Sawgrass Mills Mall subordinate companion loans, by the outstanding principal balance, will have certain consent and/or consulting rights, subject to certain conditions set forth in the related intercreditor agreement to advise and direct the master servicer and/or the special servicer with respe ct to various servicing matters or mortgage loan modifications affecting each of the mortgage loans in the related split loan structure, including the Sawgrass Mills Mall loan that is included in the trust. See ‘‘Description of the Mortgage Pool—The Whole Loans— Sawgrass Mills Mall Whole Loan’’ in this prospectus supplement for a description of these consent and/or consulting rights. Upon the occurrence of a control appraisal event with respect to the Sawgrass Mills Mall subordinate companion loans, the directing certificateholder will have the rights described above. The directing certificateholder will, at all times, have the right to replace the special servicer with respect to the Sawgrass Mills Mall whole loan pursuant to the terms of the pooling and servicing agreement and the related intercreditor agreement. | |
| | |
| The mortgage loan amount used in this prospectus supplement for purposes of calculating the loan-to-value ratios and debt service coverage ratios for the Sawgrass Mills Mall whole loan is the aggregate principal balance of the Sawgrass Mills Mall loan and the Sawgrass Mills Mall pari passu companion loans. The aggregate principal balance of the Sawgrass Mills Mall subordinate companion loans is included in the calculation of loan-to-value ratios and debt service coverage ratios only where specifically indicated. | |
| | |
| The Carespring Portfolio loan (identified as Loan No. 6 on Annex A-1 to this prospectus supplement) with a principal balance as of the cut-off date of $68,310,000 and representing approximately 2.7% of the aggregate principal balance of the pool of mortgage loans as of | |
S-27
| | |
| the cut-off date (3.1%, 0.0%), consists of two of three mortgage loans that are part of a split loan structure, and is secured by the same mortgage instrument on the related mortgaged property. The second and third of these mortgage loans, referred to in this prospectus supplement as the Carespring Portfolio loan, are evidenced by the note A-2 and note A-3 and are included in the trust. The first of these mortgage loans, referred to in this prospectus supplement as the Carespring Portfolio pari passu companion loan is evidenced by the note A-1, and is pari passu in right of payment with the Carespring Portfolio loan. The Carespring Portfolio pari passu companion loan is included in the trust established in connection with the issuance of the J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP11, Commercial Mortgage Pass-Through Certificates, Seri es 2007-LDP11. The Carespring Portfolio pari passu companion loan has an outstanding principal balance as of the cut-off date of $34,155,000. | |
| | |
| Each of the Logan Portfolio loans (identified by the Loan Nos. set forth on the chart below) is one of two mortgage loans that are part of a split loan structure, and is secured by the same mortgage instrument on the related mortgaged property. Each of the Logan Portfolio whole loans are cross-collateralized and cross-defaulted with one another. The first of each of the Logan Portfolio whole loans (which is evidenced by the related note A-2) is included in the trust. The second of each of the Logan Portfolio whole loans (which is evidenced by the related note A-1) is part of the split loan structure but is not included in the trust, and is pari passu in right of payment with the respective Logan Portfolio loan. Each of the Logan Portfolio pari passu companion loans is included in the trust established in connection with the issuance of the J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP11, Commercial Mortgage Pass-Through Certificates, Series 2007-LDP11. | |
S-28
| | | | | | | | | | | | | | | | | | | | | |
| Loan No. | | | Mortgage Loan | | | Mortgage Loan Cut-off Date Principal Balance | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | Pari Passu Companion Loan Original Balance | ||||||
| 143 | | | Logan Portfolio-Beavercreek, OH | | | | $ | 1,915,000 | | | | 0.1% | | | 0.1% | | | | $ | 1,915,000 | |
| 145 | | | Logan Portfolio-Decatur, AL | | | | $ | 1,755,000 | | | | 0.1% | | | 0.1% | | | | $ | 1,755,000 | |
| 146 | | | Logan Portfolio-Huntsville, AL | | | | $ | 1,750,000 | | | | 0.1% | | | 0.1% | | | | $ | 1,750,000 | |
| 148 | | | Logan Portfolio-Flowood, MS | | | | $ | 1,655,000 | | | | 0.1% | | | 0.1% | | | | $ | 1,655,000 | |
| 149 | | | Logan Portfolio-Bowling Green, KY | | | | $ | 1,630,000 | | | | 0.1% | | | 0.1% | | | | $ | 1,630,000 | |
| 150 | | | Logan Portfolio-Savannah, GA | | | | $ | 1,555,000 | | | | 0.1% | | | 0.1% | | | | $ | 1,555,000 | |
| 151 | | | Logan Portfolio-Murfreesboro, TN | | | | $ | 1,545,000 | | | | 0.1% | | | 0.1% | | | | $ | 1,545,000 | |
| 152 | | | Logan Portfolio-West Monroe, LA | | | | $ | 1,540,000 | | | | 0.1% | | | 0.1% | | | | $ | 1,540,000 | |
| 153 | | | Logan Portfolio-Gallatin, TN | | | | $ | 1,475,000 | | | | 0.1% | | | 0.1% | | | | $ | 1,475,000 | |
| 155 | | | Logan Portfolio-Canton, MI | | | | $ | 1,365,000 | | | | 0.1% | | | 0.1% | | | | $ | 1,365,000 | |
| 156 | | | Logan Portfolio-Fort Oglethorpe, GA | | | | $ | 1,305,000 | | | | 0.1% | | | 0.1% | | | | $ | 1,305,000 | |
| 157 | | | Logan Portfolio-Oxford, AL | | | | $ | 1,280,000 | | | | 0.1% | | | 0.1% | | | | $ | 1,280,000 | |
| 159 | | | Logan Portfolio-Evansville, IN | | | | $ | 1,245,000 | | | | 0.0% | | | 0.1% | | | | $ | 1,245,000 | |
| 161 | | | Logan Portfolio-Austin, TX | | | | $ | 1,165,000 | | | | 0.0% | | | 0.1% | | | | $ | 1,165,000 | |
| | |
| The Carespring Portfolio loan and each of the Logan Portfolio loans and their related pari passu companion loan(s) are being serviced by the master servicer and the special servicer under the JPMCC 2007-LDP11 pooling and servicing agreement, and in accordance with the servicing standards provided in that pooling and servicing agreement. | |
| | |
| In addition, each of the Carespring Portfolio loan and each of the Logan Portfolio loans and their related pari passu companion loans are subject to an intercreditor agreement. The directing certificateholder under the JPMCC 2007-LDP11 pooling and servicing agreement has certain consent and/or consulting rights, subject to certain conditions set forth in the related intercreditor agreement to advise and direct the master servicer and/or the special servicer with respect to various servicing matters or mortgage loan modifications affecting each of the mortgage loans in the related split loan structure, including the related mortgage loan that is included in the trust. See ‘‘Description of the Mortgage Pool—The Whole Loans—Pari Passu Whole Loans’’ in this prospectus supplement for a description of these consent and/or consulting rights. | |
| | |
| The mortgage loan amount used in this prospectus supplement for purposes of calculating the loan-to-value ratios and debt service coverage ratios for each pari passu split loan structure described above, also referred to in this prospectus supplement as pari passu loan groups, is the aggregate principal balance of the related mortgage loan and its pari passu companion loan(s). | |
| | |
| In addition to the split loan structures described above, 4 mortgage loans (referred to in this prospectus | |
S-29
| | |
| supplement as the AB mortgage loans) are each evidenced by the senior of two or more notes secured by a single mortgage on the related mortgaged property and a single assignment of leases, with the related subordinate companion loan not being part of the trust fund. | |
| | |
| The AB mortgage loans are set forth below. | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Number | | | Mortgage Loan | | | A Note Cut-off Date Loan Balance | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | % of Initial Loan Group 2 Balance | | | B Note Original Balance | |||||||||||||||||
| 1 | | | | Plaza El Segundo | | | | | $162,000,000 | | | | | | 6.5 | % | | | | | 7.3 | % | | | | | 0.0 | % | | | | | $13,000,000 | |
| 5 | | | | Ten Penn Center | | | | | $69,000,000 | | | | | | 2.8 | % | | | | | 3.1 | % | | | | | 0.0 | % | | | | | $0 | (1) |
| 30 | | | | Hotel Pacific | | | | | $23,500,000 | | | | | | 0.9 | % | | | | | 1.1 | % | | | | | 0.0 | % | | | | | $2,000,000 | |
| 32 | | | | Cassford Corporate Park | | | | | $21,560,000 | | | | | | 0.9 | % | | | | | 1.0 | % | | | | | 0.0 | % | | | | | $940,000 | |
| ||
| | |
|
| (1) | The Ten Penn Center subordinate note evidences repayment of future advances that may be made by the holder of that note in a maximum aggregate amount of up to $18,500,000 (referred to in this prospectus supplement as the Ten Penn Center subordinate companion loan). The obligations of the holder of the Ten Penn Center subordinate companion loan to make those future advances is subject to certain conditions specified in the related mortgage loan documents, and no funds have yet been advanced. The Ten Penn Center subordinate companion loan, when funded, will bear an interest rate based on LIBOR, and in connection with each funding, the borrower will be required to obtain an interest rate cap agreement in accordance with the terms of the related mortgage loan documents. |
| | |
| Each AB mortgage loan and its related companion loan(s) are subject to an intercreditor agreement. The intercreditor agreement generally allocates collections in respect of the related mortgage loan prior to a monetary event of default, or material non-monetary event of default to the mortgage loan in the trust fund and the related subordinate companion loan on a pro rata basis. After a monetary event of default or material non-monetary event of default, the intercreditor agreement generally allocates collections in respect of such mortgage loans first to the mortgage loan in the trust and second to the related subordinate companion loan. The master s ervicer and the special servicer will service and administer each AB mortgage loan and its companion loan(s) pursuant to the pooling and servicing agreement and the related intercreditor agreement so long as that AB mortgage loan is part of the trust fund. Amounts attributable to each companion loan will not be assets of the trust, and will be beneficially owned by the holder of the companion loan. See ‘‘Description of the Mortgage Pool—The Whole Loans—AB Whole Loans’’ in this prospectus supplement. The holder of each subordinate companion loan (in the case of the Ten Penn Center whole loan, only if that holder has funded a related future advance | |
S-30
| | |
| pursuant to the related mortgage loan documents and the related intercreditor agreement) will have the right to purchase the related AB mortgage loan under certain limited circumstances. In addition, the holder of each subordinate companion loan (in the case of the Ten Penn Center whole loan, only if that holder has funded a related future advance pursuant to the related mortgage loan documents and the related intercreditor agreement) will have the right to approve certain modifications to the related senior loan under certain circumstances. With respect to certain AB mortgage loans, the holder of the subordinate loan may have the right to replace the special servicer with respect to that AB mortgage loan. See ‘‘Description of the Mortgage Pool—The Whole Loans—AB Whole Loans’’ in this prospectus supplement. | |
| | |
| 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 supplement, information presented in this prospectus supplement (including loan-to-value ratios and debt service coverage ratios) with respect to a mortgage loan with one or more subordinate companion loans is calculated without regard to the related subordinate companion loan(s), and in the case of a mortgage loan with one or more pari passu companion loans in certain circumstances, such information, particularly as it relates to debt service coverage ratios and loan-to-value ratios, includes the principal balances and debt service payments of each of the related pari passu companion loan(s). | |
| | |
| The sum of the numerical data in any column may not equal the indicated total due to rounding. Unless otherwise indicated, all figures presented in this ‘‘Summary of Terms’’ are calculated as described under ‘‘Description of the Mortgage Pool—Additional Mortgage Loan Information’’ in this prospectus supplement and all percentages represent the indicated percentage of the aggregate principal balance of the pool of mortgage loans, the mortgage loans in lo an group 1 or the mortgage loans in loan group 2, in each case, 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 any mortgage loan on or prior to the cut-off date. Whenever percentages and other information in this prospectus supplement 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 | |
S-31
| | |
| based on allocated loan amounts as stated in Annex A-1 to this prospectus supplement. Whenever percentages are presented in this prospectus supplement in the format (x%, x%), those percentages represent, in order, the approximate percentage the indicated mortgage loans represent as of the cut-off date of: (i) the aggregate principal balance of the mortgage loans in loan group 1 and (ii) the aggregate principal balance of the mortgage loans in loan group 2. | |
S-32
The mortgage loans will have the following approximate characteristics as of the cut-off date:
Cut-Off Date Mortgage Loan Characteristics
| | | | | | | | | |
| | All Mortgage Loans | | | Loan Group 1 | | | Loan Group 2 | |
| Aggregate outstanding principal balance(1) | | | $2,504,667,937 | | | $2,217,368,430 | | | $287,299,508 |
| Number of mortgage loans | | | 163 | | | 129 | | | 34 |
| Number of mortgaged properties | | | 179 | | | 145 | | | 34 |
| Number of crossed loan pools | | | 2 | | | 1 | | | 1 |
| Crossed loan pools as a percentage | | | 1.3% | | | 1.0% | | | 4.0% |
| Range of mortgage loan principal balances | | | $669,500 to $162,000,000 | | | $800,000 to $162,000,000 | | | $669,500 to $25,000,000 |
| Average mortgage loan principal balances | | | $15,366,061 | | | $17,188,903 | | | $8,449,986 |
| Range of mortgage rates | | | 5.35000% to 7.10000% | | | 5.35000% to 7.10000% | | | 5.51000% to 6.82000% |
| Weighted average mortgage rate | | | 6.08595% | | | 6.09338% | | | 6.02866% |
| Range of original terms to maturity(2) | | | 60 months to 240 months | | | 60 months to 240 months | | | 60 months to 120 months |
| Weighted average original term to maturity(2) | | | 104 months | | | 104 months | | | 106 months |
| Range of remaining terms to maturity(2) | | | 51 months to 240 months | | | 51 months to 240 months | | | 58 months to 120 months |
| Weighted average remaining term to maturity(2) | | | 103 months | | | 102 months | | | 105 months |
| Range of original amortization term(3) | | | 120 months to 420 months | | | 120 months to 420 months | | | 240 months to 360 months |
| Weighted average original amortization term(3) | | | 354 months | | | 353 months | | | 359 months |
| Range of remaining amortization terms(3) | | | 120 months to 420 months | | | 120 months to 420 months | | | 239 months to 360 months |
| Weighted average remaining amortization term(3) | | | 354 months | | | 353 months | | | 359 months |
| Range of loan-to-value ratios(4) | | | 18.0% to 88.7% | | | 18.0% to 88.7% | | | 43.0% to 82.3% |
| Weighted average loan-to-value ratio(4)(5) | | | 71.9% | | | 71.9% | | | 71.7% |
| Range of loan-to-value ratios as of the maturity date(2)(4)(5) | | | 18.0% to 88.7% | | | 18.0% to 88.7% | | | 40.6% to 82.3% |
| Weighted average loan-to-value ratio as of the maturity date(2)(4)(5) | | | 69.5% | | | 69.6% | | | 68.5% |
| Range of debt service coverage ratios(6) | | | 1.10x to 3.89x | | | 1.10x to 3.89x | | | 1.15x to 2.13x |
| Weighted average debt service coverage ratio(6) | | | 1.40x | | | 1.41x | | | 1.30x |
| Percentage of aggregate outstanding principal balance consisting of: | | | | | | | |||
| Balloon mortgage loans | | | | | | | |||
| Interest Only | | | 59.7% | | | 61.1% | | | 49.0% |
| Partial Interest-Only | | | 29.3% | | | 27.6% | | | 42.4% |
| Balloon | | | 9.7% | | | 9.9% | | | 8.6% |
| Fully Amortizing Loans | | | 1.2% | | | 1.4% | | | 0.0% |
| |
| |
|
| (1) | Subject to a permitted variance of plus or minus 5%. |
| (2) | In the case of 1 mortgage loan with an anticipated repayment date (identified as Loan No. 23 on Annex A-1 to this prospectus supplement), as of the related anticipated repayment date. |
| (3) | Excludes the mortgage loans that pay interest-only to maturity. |
| (4) | In the case of 7 mortgage loans (identified as Loan Nos. 5, 7, 11, 28, 30, 71 and 137 on Annex A-1 to this prospectus supplement), the loan-to-value ratio was based on the ‘‘as-stabilized’’ values or portfolio valuation. In the case of certain mortgage loans, the appraised value includes income provided by a master lease from a borrower affiliate. See Annex A-1 to this prospectus supplement. |
| (5) | Excludes the mortgage loans that are fully amortizing. |
| (6) | For certain mortgage loans, the debt service coverage ratio was calculated taking into account various assumptions regarding the financial performance of the related mortgaged property on an ‘‘as-stabilized’’ basis or netting certain reserve or other amounts or other adjustments. See Annex A-1 to this prospectus supplement. In the case of certain mortgage loans, the debt service coverage ratio was calculated based on income from a master lease provided by a borrower affiliate. See Annex A-1, to this prospectus supplement. |
S-33
Interest Accrual Basis
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest Accrual Basis | | | Number of Mortgage Loans | | | Aggregate Principal Balance of Mortgage Loans | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | % of Initial Loan Group 2 Balance | |||||||||||||||
| Actual/360 | | | | | 160 | | | | | $ | 2,452,657,906 | | | | | | 97.9 | % | | | | | 98.4 | % | | | | | 94.3 | % |
| 30/360 | | | | | 3 | | | | | | 52,010,031 | | | | | | 2.1 | | | | | | 1.6 | | | | | | 5.7 | |
| Total: | | | | | 163 | | | | | $ | 2,504,667,937 | | | | | | 100.0 | % | | | | | 100.0 | % | | | | | 100.0 | % |
| | |
| See ‘‘Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans’’ in this prospectus supplement. | |
Amortization Types
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Type of Amortization | | | Number of Mortgage Loans | | | Aggregate Principal Balance of Mortgage Loans | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | % of Initial Loan Group 2 Balance | |||||||||||||||
| Interest Only | | | | | 53 | | | | | $ | 1,496,222,031 | | | | | | 59.7 | % | | | | | 61.1 | % | | | | | 49.0 | % |
| Partial Interest Only | | | | | 69 | | | | | | 734,670,746 | | | | | | 29.3 | | | | | | 27.6 | | | | | | 42.4 | |
| Balloon | | | | | 36 | | | | | | 243,783,605 | | | | | | 9.7 | | | | | | 9.9 | | | | | | 8.6 | |
| Fully Amortizing | | | | | 5 | | | | | | 29,991,555 | | | | | | 1.2 | | | | | | 1.4 | | | | | | 0.0 | |
| Total: | | | | | 163 | | | | | $ | 2,504,667,937 | | | | | | 100.0 | % | | | | | 100.0 | % | | | | | 100.0 | % |
| | |
| 1 mortgage loan (identified as Loan No. 23 on Annex A-1 to this prospectus supplement), representing approximately 1.2% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (1.3%, 0.0%), provides for an increase in the related interest rate after a certain date, referred to as the anticipated repayment date. The interest accrued in excess of the original rate, together with any interest on that accrued interest, will be deferred and will not be paid until the principal balance of the related mortgage loan has been paid, at which time the deferred interest will be paid to the Class S certificates. In addition, after the anticipated repayment date, cash flow in excess of that required for debt service and certain budgeted expenses with respect to the related mortgaged property will be applied towards the payment of principal (without payment of a yield maintenance charge) of the related mortgage loan until its principal balance has been reduced to zero. A substantial p rincipal payment would be required to pay off this mortgage loan on its anticipated repayment date. The amortization term for this mortgage loan is significantly longer than the period up to the related mortgage loans’ anticipated repayment dates. See ‘‘Description of the Mortgage Pool—ARD Loan’’ in this prospectus supplement. | |
S-34
| | |
| See ‘‘Description of the Mortgage Pool—Additional Mortgage Loan Information’’ and ‘‘—Certain Terms and Conditions of the Mortgage Loans’’ in this prospectus supplement. | |
| | |
| The following table contains general information regarding the prepayment provisions of the mortgage loans: | |
Overview of Prepayment Protection(1)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Prepayment Protection | | | Number of Mortgage Loans | | | Aggregate Principal Balance of Mortgage Loans | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | % of Initial Loan Group 2 Balance | |||||||||||||||
| Defeasance | | | | | 112 | | | | | $ | 1,833,010,047 | | | | | | 73.2 | % | | | | | 73.3 | % | | | | | 72.6 | % |
| Yield Maintenance | | | | | 26 | | | | | | 472,555,817 | | | | | | 18.9 | | | | | | 18.9 | | | | | | 18.4 | |
| Defeasance, Defeasance/Fixed Penalty | | | | | 1 | | | | | | 69,000,000 | | | | | | 2.8 | | | | | | 3.1 | | | | | | 0.0 | |
| Yield Maintenance/Fixed Penalty, Yield Maintenance | | | | | 1 | | | | | | 40,000,000 | | | | | | 1.6 | | | | | | 1.8 | | | | | | 0.0 | |
| Yield Maintenance, Defeasance/Yield Maintenance | | | | | 5 | | | | | | 27,340,000 | | | | | | 1.1 | | | | | | 1.2 | | | | | | 0.0 | |
| Defeasance, Fixed Penalty | | | | | 2 | | | | | | 26,050,000 | | | | | | 1.0 | | | | | | 0.0 | | | | | | 9.1 | |
| Yield Maintenance/Defeasance | | | | | 15 | | | | | | 24,012,074 | | | | | | 1.0 | | | | | | 1.1 | | | | | | 0.0 | |
| Defeasance, Defeasance/Yield Maintenance | | | | | 1 | | | | | | 12,700,000 | | | | | | 0.5 | | | | | | 0.6 | | | | | | 0.0 | |
| Total: | | | | | 163 | | | | | $ | 2,504,667,937 | | | | | | 100.0 | % | | | | | 100.0 | % | | | | | 100.0 | % |
| ||
| | |
|
| (1) | See Annex A-1 to this prospectus supplement for specific criteria applicable to the mortgage loans. |
| | |
| Defeasance permits the related borrower to substitute direct non-callable U.S. Treasury obligations or, in certain cases, other government securities for the related mortgaged property as collateral for the related mortgage loan. | |
| | |
| All of the mortgage loans (other than 23 mortgage loans, representing approximately 3.9% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (4.5%, 0.0%) contain provisions for a prepayment lock-out period that is currently in effect. A lock-out period is a period during which the principal balance of a mortgage loan may not be voluntarily prepaid in whole or in part. | |
| | |
| 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 or anticipated repayment date as follows: | |
S-35
Prepayment Open Periods
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Open Periods (Payments) | | | Number of Mortgage Loans | | | Aggregate Principal Balance of Mortgage Loans | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | % of Initial Loan Group 2 Balance | |||||||||||||||
| 1 | | | | | 16 | | | | | $ | 125,267,000 | | | | | | 5.0 | % | | | | | 4.8 | % | | | | | 6.5 | % |
| 2 | | | | | 3 | | | | | | 92,740,000 | | | | | | 3.7 | | | | | | 3.4 | | | | | | 6.1 | |
| 3 | | | | | 29 | | | | | | 465,790,434 | | | | | | 18.6 | | | | | | 19.7 | | | | | | 10.1 | |
| 4 | | | | | 80 | | | | | | 1,057,474,703 | | | | | | 42.2 | | | | | | 43.0 | | | | | | 36.5 | |
| 5 | | | | | 9 | | | | | | 192,288,246 | | | | | | 7.7 | | | | | | 8.7 | | | | | | 0.0 | |
| 6 | | | | | 4 | | | | | | 37,150,000 | | | | | | 1.5 | | | | | | 0.1 | | | | | | 11.9 | |
| 7 | | | | | 11 | | | | | | 270,636,000 | | | | | | 10.8 | | | | | | 9.6 | | | | | | 20.4 | |
| 8 | | | | | 1 | | | | | | 6,900,000 | | | | | | 0.3 | | | | | | 0.3 | | | | | | 0.0 | |
| 10 | | | | | 3 | | | | | | 148,000,000 | | | | | | 5.9 | | | | | | 6.7 | | | | | | 0.0 | |
| 13 | | | | | 2 | | | | | | 41,380,000 | | | | | | 1.7 | | | | | | 0.7 | | | | | | 8.7 | |
| 18 | | | | | 1 | | | | | | 40,000,000 | | | | | | 1.6 | | | | | | 1.8 | | | | | | 0.0 | |
| 25 | | | | | 4 | | | | | | 27,041,555 | | | | | | 1.1 | | | | | | 1.2 | | | | | | 0.0 | |
| Total: | | | | | 163 | | | | | $ | 2,504,667,937 | | | | | | 100.0 | % | | | | | 100.0 | % | | | | | 100.0 | % |
| | |
| See ‘‘Description of the Mortgage Pool—Additional Mortgage Loan Information’’ and ‘‘—Certain Terms and Conditions of the Mortgage Loans’’ in this prospectus supplement. | |
Current Uses of the Mortgaged Properties
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current Use | | | Number of Mortgaged Properties | | | Aggregate Principal Balance of Mortgage Loans | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | % of Initial Loan Group 2 Balance | |||||||||||||||
| Retail | | | | | 62 | | | | | $ | 897,296,051 | | | | | | 35.8 | % | | | | | 40.5 | % | | | | | 0.0 | % |
| Office | | | | | 32 | | | | | | 714,343,319 | | | | | | 28.5 | | | | | | 32.2 | | | | | | 0.0 | |
| Hotel | | | | | 18 | | | | | | 365,592,090 | | | | | | 14.6 | | | | | | 16.5 | | | | | | 0.0 | |
| Multifamily | | | | | 33 | | | | | | 301,491,856 | | | | | | 12.0 | | | | | | 1.0 | | | | | | 97.3 | |
| Industrial | | | | | 12 | | | | | | 82,796,969 | | | | | | 3.3 | | | | | | 3.7 | | | | | | 0.0 | |
| Senior Housing | | | | | 8 | | | | | | 68,310,000 | | | | | | 2.7 | | | | | | 3.1 | | | | | | 0.0 | |
| Self Storage | | | | | 6 | | | | | | 25,905,000 | | | | | | 1.0 | | | | | | 1.2 | | | | | | 0.0 | |
| Mixed Use | | | | | 3 | | | | | | 24,925,000 | | | | | | 1.0 | | | | | | 1.1 | | | | | | 0.0 | |
| Land | | | | | 2 | | | | | | 16,200,000 | | | | | | 0.6 | | | | | | 0.7 | | | | | | 0.0 | |
| Manufactured Housing | | | | | 3 | | | | | | 7,807,651 | | | | | | 0.3 | | | | | | 0.0 | | | | | | 2.7 | |
| Total: | | | | | 179 | | | | | $ | 2,504,667,937 | | | | | | 100.0 | % | | | | | 100.0 | % | | | | | 100.0 | % |
S-36
| | |
| The mortgaged properties are located in 32 states and the District of Columbia. The following tables list the states that have concentrations of mortgaged properties of 5% or more of the aggregate principal balance of the pool of mortgage loans or related loan group, as applicable, as of the cut-off date: | |
Geographic Distribution—All Loans
| | | | | | | | | | | | | | | | | | | | | | | | |
| Location | | | Number of Mortgaged Properties | | | Aggregate Principal Balance of Mortgage Loans | | | % of Initial Pool Balance | | | | | |||||||||||
| California | | | | | 19 | | | | | $ | 437,158,744 | | | | | | 17.5 | % | | | | | ||
| Florida | | | | | 15 | | | | | $ | 314,396,347 | | | | | | 12.6 | % | | | | | ||
| Texas | | | | | 28 | | | | | $ | 282,547,691 | | | | | | 11.3 | % | | | | | ||
| Georgia | | | | | 9 | | | | | $ | 227,464,792 | | | | | | 9.1 | % | | | | | ||
| Pennsylvania | | | | | 11 | | | | | $ | 194,432,640 | | | | | | 7.8 | % | | | | | ||
| Ohio | | | | | 13 | | | | | $ | 187,377,153 | | | | | | 7.5 | % | | | | | ||
| New York | | | | | 18 | | | | | $ | 164,331,802 | | | | | | 6.6 | % | | | | | ||
| District of Columbia | | | | | 4 | | | | | $ | 127,250,000 | | | | | | 5.1 | % | | | | | ||
Geographic Distribution—Loan Group 1
| | | | | | | | | | | | | | | | | | | | | | | | |
| Location | | | Number of Mortgaged Properties | | | Aggregate Principal Balance of Mortgage Loans | | | % of Loan Group 1 Balance | | | | | |||||||||||
| California | | | | | 16 | | | | | $ | 396,346,266 | | | | | | 17.9 | % | | | | | ||
| Florida | | | | | 11 | | | | | $ | 283,065,440 | | | | | | 12.8 | % | | | | | ||
| Texas | | | | | 20 | | | | | $ | 211,361,691 | | | | | | 9.5 | % | | | | | ||
| Pennsylvania | | | | | 10 | | | | | $ | 187,145,640 | | | | | | 8.4 | % | | | | | ||
| Georgia | | | | | 7 | | | | | $ | 186,614,792 | | | | | | 8.4 | % | | | | | ||
| Ohio | | | | | 11 | | | | | $ | 165,657,153 | | | | | | 7.5 | % | | | | | ||
| New York | | | | | 18 | | | | | $ | 164,331,802 | | | | | | 7.4 | % | | | | | ||
| District of Columbia | | | | | 4 | | | | | $ | 127,250,000 | | | | | | 5.7 | % | | | | | ||
Geographic Distribution—Loan Group 2
| | | | | | | | | | | | | | | | | | |
| Location | | | Number of Mortgaged Properties | | | Aggregate Principal Balance of Mortgage Loans | | | % of Loan Group 2 Balance | |||||||||
| Texas | | | | | 8 | | | | | $ | 71,186,000 | | | | | | 24.8 | % |
| North Carolina | | | | | 5 | | | | | $ | 46,959,125 | | | | | | 16.3 | % |
| Georgia | | | | | 2 | | | | | $ | 40,850,000 | | | | | | 14.2 | % |
| California | | | | | 3 | | | | | $ | 40,812,479 | | | | | | 14.2 | % |
| Florida | | | | | 4 | | | | | $ | 31,330,907 | | | | | | 10.9 | % |
| Ohio | | | | | 2 | | | | | $ | 21,720,000 | | | | | | 7.6 | % |
S-37
Additional Aspects of Certificates
| | |
| Denominations | | The offered certificates (other than the Class X certificates) will be offered in minimum denominations of $10,000 initial certificate balance. Investments in excess of the minimum denominations may be made in multiples of $1. The Class X certificates will be issued, maintained and transferred only in minimum denominations of authorized initial notional amounts of not less than $1,000,000, and in integral multiples of $1 in excess thereof. |
| | |
| 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 your 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. | |
| | |
| See ‘‘Description of the Certificates—Book-Entry Registration and Definitive Certificates’’ in this prospectus supplement and in the prospectus. | |
| | |
| Information Available to Certificateholders | | On each distribution date, the trustee will prepare and make available to each certificateholder of record, initially expected to be Cede & Co., 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 trust. See ‘‘Description of the Certificates—Reports to Certificateholders; Certain Available Information’’ in this prospectus supplement. |
| | |
| Deal Information/Analytics | | Certain information concerning the mortgage loans and the offered certificates may be available to subscribers through the following services: |
| | | |
| • | Bloomberg, L.P., Trepp, LLC and Intex Solutions, Inc.; and | |
S-38
| | | |
| • | the trustee’s website initially located at www.etrustee.net. | |
| | |
| Optional Termination | | On any distribution date on which the aggregate principal balance of the pool of mortgage loans remaining in the trust fund is less than 1% of the aggregate principal balance of the mortgage loans as of the cut-off date, certain entities specified in this prospectus supplement 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 supplement. Exercise of this option will terminate the trust and retire the then outstanding certificates. The trust may also be terminated in connection with a voluntary exchange of all the then outstanding certificates (other than the Class S, Class R and Class LR certificates), including the Class X certi ficates (provided, however, that the offered certificates (other than the Class X certificates) and the Class G, Class H, Class J and Class K certificates are no longer outstanding and there is only one holder of the outstanding certificates), for the mortgage loans remaining in the trust. |
| | |
| See ‘‘Description of the Certificates—Termination; Retirement of Certificates’’ in this prospectus supplement and ‘‘Description of the Certificates— Termination’’ in the prospectus. | |
| | |
| Required Repurchases or Substitutions of Mortgage Loans. | | Under certain circumstances, a mortgage loan seller may be obligated to repurchase an affected mortgage loan from the trust as a result of a material document defect or a material breach of the representations and warranties given by the mortgage loan seller with respect to the mortgage loan in the related purchase agreement. See ‘‘Description of the Mortgage Pool— Representations and Warranties; Repurchases and Substitutions’’ in this prospectus supplement. |
| | |
| Sale of Defaulted Loans | | Pursuant to the pooling and servicing agreement, (i) the holder of the certificates representing the greatest percentage interest in the controlling class, and (ii) the special servicer, in that order, has the option to purchase from the trust any defaulted mortgage loan. Notwithstanding the foregoing, with respect to a mortgage loan with one or more subordinate companion loans, the holders of the subordinate companion loan(s) may also have a purchase option with respect to the related defaulted mortgage loan and holders of mezzanine loans may have a purchase option on the related defaulted mortgage loan. See |
S-39
| | |
| ‘‘Servicing of the Mortgage Loans—Realization Upon Defaulted Mortgage Loans’’ in this prospectus supplement. | |
| | |
| Tax Status | | Elections will be made with respect to each Logan Portfolio loan pursuant to a separate REMIC declaration made on July 5, 2007 to treat each such mortgage loan as a REMIC (each, a ‘‘Loan REMIC’’). In addition, elections will be made to treat a portion of the trust (exclusive of the mortgage loans held by the Loan REMICs, the interest that is deferred after the anticipated repayment date on the mortgage loans that have anticipated repayment dates, the related distribution account for this deferred interest and the residual interests issued by the Loan REMICs) as two separate REMICs—a lower-tier REMIC and an upper-tier REMIC—for federal inc ome tax purposes. The portion of the trust representing the deferred interest described above will be treated as a grantor trust for federal income tax purposes, and the Class S certificates will represent undivided beneficial interests in such portion of the grantor trust. The grantor trust also will hold the residual interests issued by the Loan REMICs, and the Class LR Certificates will represent undivided beneficial interests in the related portions of the grantor trust. In the opinion of counsel, the portions of the trust referred to above will qualify for this treatment. |
| | |
| Pertinent federal income tax consequences of an investment in the offered certificates include: | |
| | | |
| • | Each class of offered certificates will represent ‘‘regular interests’’ in the upper-tier REMIC. | |
| | | |
| • | Each regular interest will be treated as a newly originated debt instrument for federal income tax purposes. | |
| | | |
| • | You will be required to report income on the regular interests represented by your certificates using the accrual method of accounting. | |
| | | |
| • | It is anticipated that the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB, Class A-1A and Class A-M certificates will be issued at a premium, that the Class X, Class B, Class C, Class D, Class E and Class F certificates will be issued with original issue discount and that the Class A-J certificates will be issued with a de minimis amount of original issue discount for federal income tax purposes. | |
| | |
| See ‘‘Certain Federal Income Tax Consequences’’ in this prospectus supplement and in the prospectus. | |
S-40
| | |
| Certain ERISA Considerations | | Subject to important considerations described under ‘‘Certain ERISA Considerations’’ in this prospectus supplement and in the prospectus, the offered certificates are eligible for purchase by persons investing assets of employee benefit plans or individual retirement accounts. |
| | |
| Legal Investment | | The offered certificates will not 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 offered certificates. You should consult your own legal advisors for assistance in determining the suitability of and consequences to you of the purchase, ownership, and sale of the offered certificates. |
| | |
| See ‘‘Legal Investment’’ in this prospectus supplement and in the prospectus. | |
| | |
| Ratings | | The offered certificates will not be issued unless each of the offered classes receives the following ratings from Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and Fitch, Inc.: |
| | | | | | |
| | Moody’s | | | S&P/Fitch | |
| Class A-1 | | | Aaa | | | AAA |
| Class A-2 | | | Aaa | | | AAA |
| Class A-3 | | | Aaa | | | AAA |
| Class A-4 | | | Aaa | | | AAA |
| Class A-SB | | | Aaa | | | AAA |
| Class A-1A | | | Aaa | | | AAA |
| Class X | | | Aaa | | | AAA |
| Class A-M | | | Aaa | | | AAA |
| Class A-J | | | NR | | | AAA |
| Class B | | | NR | | | AA+ |
| Class C | | | NR | | | AA |
| Class D | | | NR | | | AA− |
| Class E | | | NR | | | A+ |
| Class F | | | NR | | | A |
| | |
| A rating agency may downgrade, qualify or withdraw a security rating at any time. A rating agency not requested to rate the offered certificates may nonetheless issue a rating and, if one does, it may be lower than those stated above. The security ratings do not address the frequency of prepayments (whether voluntary or involuntary) of mortgage loans, the degree | |
S-41
| | |
| to which prepayments might differ from those originally anticipated, the likelihood of collection of excess interest, default interest or yield maintenance charges, or the tax treatment of the certificates. The ratings of Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and Fitch, Inc., do not address the application of net aggregate prepayment interest shortfalls to the certificates. Also, the security ratings do not represent any assessment of the yield to maturity that investors may experience or the possibility that the Class X certificateholders might not fully recover their investments in the event of rapid prepayments of the mortgage loans (including both voluntary and involuntary prepayments). See ‘‘Yield and Maturity Considerations,’’ &lsqu o;‘Risk Factors’’ and ‘‘Description of the Certificates—Advances’’ in this prospectus supplement and ‘‘Yield and Maturity Considerations’’ in the prospectus. | |
| | |
| See ‘‘Ratings’’ in this prospectus supplement and ‘‘Rating’’ in the prospectus for a discussion of the basis upon which ratings are given and the conclusions that may not be drawn from a rating. | |
S-42
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.
The risks and uncertainties described below are not the only ones relating to your certificates. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair your investment.
If any of the following events or circumstances identified as risks actually occur or materialize, your investment could be materially and adversely affected.
This prospectus supplement also contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this prospectus supplement.
In connection with the information presented in this prospectus supplement relating to risks that may relate to certain of the mortgage loans or the mortgage loans in general, examples are given with respect to a particular risk and a particular mortgage loan. However, the fact that examples are given should not be interpreted as meaning that such examples reflect all of the mortgage loans in the trust to which such risk is applicable.
Geographic Concentration Entails Risks
Mortgaged properties located in California, Florida, Texas, Georgia, Pennsylvania, Ohio, New York and the District of Columbia secure mortgage loans, representing approximately 17.5%, 12.6%, 11.3%, 9.1%, 7.8%, 7.5%, 6.6% and 5.1%, respectively, of the aggregate principal balance of the pool of mortgage loans as of the cut-off date.
Mortgaged properties located in California, Florida, Texas, Pennsylvania, Georgia, Ohio, New York and the District of Columbia secure mortgage loans, representing approximately 17.9%, 12.8%, 9.5%, 8.4%, 8.4%, 7.5%, 7.4% and 5.7% respectively, of the aggregate principal balance of the pool of mortgage loans in loan group 1 as of the cut-off date.
Mortgaged properties located in Texas, North Carolina, Georgia, California, Florida and Ohio secure mortgage loans, representing approximately 24.8%, 16.3%, 14.2%, 14.2%, 10.9% and 7.6%, respectively, by allocated loan amount, of the aggregate principal balance of the mortgage loans in loan group 2 as of the cut-off date.
With respect to the mortgaged properties located in California, 15 of the mortgaged properties, securing mortgage loans representing approximately 15.3% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, are in southern California (16.0%, 9.9%), and 4 of the mortgaged properties, securing mortgage loans representing approximately 2.1% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, are in northern California (1.9%, 4.4%). For purposes of determining whether a mortgaged property is in northern California or southern California, mortgaged properties located north of San Luis Obispo County, Kern County and San Bernardino County are included in northern California and mortgaged properties located in or south of those counties are included in southern California.
Concentrations of mortgaged properties in geographic areas may increase the risk that adverse economic or other developments or natural disasters affecting a particular region of the country could increase the frequency and severity of losses on mortgage loans secured by those properties. In recent periods, several regions of the United States have experienced significant real estate downturns. Regional economic declines or conditions in regional real estate markets could adversely affect the income from, and market value of, the mortgaged properties. Other regional factors—e.g., earthquakes, floods, forest fires or hurricanes or changes in governmental
S-43
rules or fiscal policies—also may adversely affect the mortgaged properties. For example, mortgaged properties located in California, Texas or Florida may be more susceptible to certain hazards (such as earthquakes, floods or hurricanes) than mortgaged properties in other parts of the country and mortgaged properties located in coastal states, including, but not limited to, Florida, Louisiana, Alabama and Mississippi, also may be more generally susceptible to hurricanes than properties in other parts of the country. Recent hurricanes in the Gulf Coast region and in Florida have resulted in severe property damage as a result of the winds and the associated flooding. The mortgage loans do not all require flood insurance on the related mortgaged properties. We cannot assure you that any hurricane damage would be covered by insurance. See
‘‘—Other Risks—Hurricanes May Cause Extensive Damage to Coastal Areas’’ below, ‘‘Servicing of the Mortgage Loans—Maintenance of Insurance’’ in this prospectus supplement and ‘‘Description of the Pooling Agreements—Hazard Insurance Policies’’ in the accompanying prospectus.
Risks Relating to Mortgage Loan Concentrations
The effect of mortgage pool loan losses will be more severe if the losses relate to mortgage loans that account for a disproportionately large percentage of the pool’s aggregate principal balance. In this regard:
| | |
| • | The largest mortgage loan (treating as a single mortgage loan all mortgage loans, if any, that are cross-collateralized with each other) represents approximately 6.5% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (the largest mortgage loan in loan group 1 (treating as a single mortgage loan all mortgage loans, if any, that are cross-collateralized with each other) represents approximately 7.3% of the aggregate principal balance of the mortgage loans in loan group 1 as of the cut-off date; and the largest mortgage loan in loan group 2 (treating as a single mortgage loan all mortgage loans, if any, that are cross-collateralized with each other) represents approximately 8.7% of the aggregate principal balance of the mortgage loans in loan group 2 as of the cut-off date). |
| | |
| • | The 3 largest mortgage loans (treating as a single mortgage loan all mortgage loans, if any, that are cross-collateralized with each other) represent, in the aggregate, approximately 16.1% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (the 3 largest mortgage loans in loan group 1 (treating as a single mortgage loan all mortgage loans, if any, that are cross-collateralized with each other) represent approximately 18.1% of the aggregate principal balance of the mortgage loans in loan group 1 as of the cut-off date, and the 3 largest mortgage loans in loan group 2 (treating as a single mortgage loan all mortgage loans, if any, that are cross-collateralized with each other) represent approximately 24.3 % of the aggregate principal balance of the mortgage loans in loan group 2 as of the cut-off date). |
| | |
| • | The 10 largest mortgage loans (treating as a single mortgage loan all mortgage loans, if any, that are cross-collateralized with each other) represent, in the aggregate, approximately 34.7% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (the 10 largest mortgage loans in loan group 1 (treating as a single mortgage loan all mortgage loans, if any, that are cross-collateralized with each other) represent approximately 39.2% of the aggregate principal balance of the mortgage loans in loan group 1 as of the cut-off date, and the 10 largest mortgage loans in loan group 2 (treating as a single mortgage loan all mortgage loans, if any, that are cross-collateralized with each other) represent approximately 6 1.2% of the aggregate principal balance of the mortgage loans in loan group 2 as of the cut-off date). |
See ‘‘Description of the Mortgage Pool—Top Fifteen Mortgage Loans’’ in this prospectus supplement.
Each of the other mortgage loans represents approximately no more than 2.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date. Each of the other mortgage loans in loan group 1 represents approximately no more than 2.2% of the
S-44
aggregate principal balance of the mortgage loans in loan group 1 as of the cut-off date. Each of the other mortgage loans in loan group 2 represents approximately no more than 3.9% of the aggregate principal balance of the mortgage loans in loan group 2 as of the cut-off date.
A concentration of mortgaged property types can pose increased risks. A concentration of mortgage loans secured by the same types of mortgaged property can increase the risk that a decline in a particular industry or business would have a disproportionately large impact on the pool of mortgage loans. In that regard, the following table lists the property type concentrations in excess of 5.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date:
Property Type Concentrations Greater Than 5%
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property Type | | | Number of Mortgaged Properties | | | Aggregate Principal Balance of Mortgage Loans | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | % of Initial Loan Group 2 Balance | |||||||||||||||
| Retail | | | | | 62 | | | | | $ | 897,296,051 | | | | | | 35.8 | % | | | | | 40.5 | % | | | | | 0.0 | % |
| Office | | | | | 32 | | | | | $ | 714,343,319 | | | | | | 28.5 | % | | | | | 32.2 | % | | | | | 0.0 | % |
| Hotel | | | | | 18 | | | | | $ | 365,592,090 | | | | | | 14.6 | % | | | | | 16.5 | % | | | | | 0.0 | % |
| Multifamily | | | | | 33 | | | | | $ | 301,491,856 | | | | | | 12.0 | % | | | | | 1.0 | % | | | | | 97.3 | % |
A concentration of mortgage loans with the same borrower or related borrowers can also impose increased risks.
| | |
| • | 18 groups of mortgage loans, representing approximately 39.6% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (38.6%, 47.8%), have borrowers related to each other, but the related mortgage loans are not cross-collateralized or cross-defaulted. No group of mortgage loans having borrowers that are related to each other represents more than approximately 11.9% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date. Mortgage loans with related borrowers are identified under ‘‘Related Borrower’’ on Annex A-1 to this pr ospectus supplement. |
| | |
| • | 2 groups of mortgage loans (comprised of 16 mortgage loans), representing approximately 1.3% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (1.0%, 4.0%), are cross-collateralized and cross-defaulted and have related borrowers. |
| | |
| • | 6 mortgage loans, representing approximately 8.4% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (9.4%, 0.0%), are secured by more than one mortgaged property. |
See ‘‘Description of the Mortgage Pool—Additional Mortgage Loan Information’’ in this prospectus supplement. Mortgaged properties owned by related borrowers are likely to:
| | |
| • | have common management, increasing the risk that financial or other difficulties experienced by the property manager could have a greater impact on the pool of mortgage loans; and |
| | |
| • | have common general partners or managing members, which could increase the risk that a financial failure or bankruptcy filing would have a greater impact on the pool of mortgage loans. |
Risks Relating to Enforceability of Cross-Collateralization
As described above and in Annex A-1 to this prospectus supplement, the mortgage loans in 2 groups of mortgage loans, comprised of 16 mortgage loans, representing approximately 1.3% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (1.0%,
S-45
4.0%), are cross-collateralized and cross-defaulted with each other. No group of cross-collateralized and cross-defaulted mortgage loans represents more than 0.8% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date. Each group of cross-collateralized and cross-defaulted mortgage loans is indicated on Annex A-1 to this prospectus supplement. 6 mortgage loans, representing in the aggregate approximately 8.4% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (9.4%, 0.0%) are secured by more than 1 mortgaged property. Such properties may be cross-collateralized and cross-defaulted with each other. Each multi-property mortgage loan is individually identified on Annex A-1 to this prospectus supplement. The multi-property mortgage loan that represents more than 2% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date is identified in the table below.
Portfolio Loan
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loan No. | | | Mortgage Loan | | | No. of Properties | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | % of Initial Loan Group 2 Balance | ||||||||||||
| 6 | | | Carespring Portfolio | | | | | 8 | | | | | | 2.7 | % | | | | | 3.1 | % | | | | | 0.0 | % |
Cross-collateralization arrangements may be terminated with respect to such mortgage loan groups in certain circumstances under the terms of the related mortgage loan documents. Cross-collateralization and multiple property arrangements involving more than one borrower could be challenged as fraudulent conveyances by creditors of the related borrower in an action brought outside a bankruptcy case or, if the borrower were to become a debtor in a bankruptcy case, by the borrower’s representative.
A lien granted by a borrower could be avoided if a court were to determine that:
| | |
| • | the borrower was insolvent when it granted the lien, was rendered insolvent by the granting of the lien, was left with inadequate capital when it allowed its mortgaged property or properties to be encumbered by a lien securing the entire indebtedness, or was not able to pay its debts as they matured when it granted the lien; and |
| | |
| • | the borrower did not receive fair consideration or reasonably equivalent value when it allowed its mortgaged property or properties to be encumbered by a lien securing the entire indebtedness. |
Among other things, a legal challenge to the granting of the liens may focus on the benefits realized by that borrower from the respective mortgage loan proceeds, as well as the overall cross-collateralization. If a court were to conclude that the granting of the liens was an avoidable fraudulent conveyance, that court could:
| | |
| • | subordinate all or part of the pertinent mortgage loan to existing or future indebtedness of that borrower; |
| | |
| • | recover payments made under that mortgage loan; or |
| | |
| • | take other actions detrimental to the holders of the certificates, including, under certain circumstances, invalidating the mortgage loan or the mortgages securing the cross-collateralization. |
The Borrower’s Form of Entity May Cause Special Risks
Most of the borrowers are legal entities rather than individuals. Mortgage loans made to legal entities may entail risks of loss greater than those of mortgage loans made to individuals. For example, a legal entity, as opposed to an individual, may be more inclined to seek legal protection from its creditors under the bankruptcy laws. Unlike individuals involved in bankruptcies, most of the entities generally, but not in all cases, do not have personal assets and
S-46
creditworthiness at stake. The terms of the mortgage loans generally, but not in all cases, require that the borrowers covenant to be single-purpose entities, although in many cases the borrowers are not required to observe all covenants and conditions that typically are required in order for them to be viewed under standard rating agency criteria as ‘‘single-purpose entities.’’ In general, but not in all cases, borrowers’ organizational documents or the terms of the mortgage loans limit their activities to the ownership of only the related mortgaged property or properties and limit the borrowers’ ability to incur additional indebtedness (other than trade payables). These provisions are designed to mitigate the possibility that the borrowers’ financial condition would be adversely impacted by factors unrelated to the mortgaged property and the mortgage loan in the pool. However, we cannot assure you that the related borrowers will comply with these requirements. See ‘‘Certain Legal Aspects of Mortgage Loans—Bankruptcy Laws’’ in the prospectus. Also, although a borrower may currently be a single purpose entity, in certain cases, that borrower was not originally a single-purpose entity, but at origination of the related mortgage loan its organizational documents were amended. That borrower may have previously owned property other than the related mortgaged property and may not have observed all covenants that typically are required to consider a borrower a ‘‘single-purpose entity.’’ The bankruptcy of a borrower, or a general partner or managing member of a borrower, may impair the ability of the lender to enforce its rights and remedies under the related mortgage. Borrowers that are not single-purpose entities structured to limit the possibility of becoming insolvent or ban krupt, may be more likely to become insolvent or the subject of a voluntary or involuntary bankruptcy proceeding because the borrowers may be:
| | |
| • | operating entities with a business distinct from the operation of the mortgaged property with the associated liabilities and risks of operating an ongoing business; or |
| | |
| • | individuals that have personal liabilities unrelated to the property. |
However, any borrower, even a single-purpose entity structured to be bankruptcy-remote, as an owner of real estate will be subject to certain potential liabilities and risks. We cannot assure you that any borrower will not file for bankruptcy protection or that creditors of a borrower or a corporate or individual general partner or managing member of a borrower will not initiate a bankruptcy or similar proceeding against the borrower or corporate or individual general partner or managing member.
Furthermore, with respect to any affiliated borrowers, creditors of a common parent in bankruptcy may seek to consolidate the assets of those borrowers with those of the parent. Consolidation of the assets of the 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 the prospectus.
With respect to 15 mortgage loans identified as Loan Nos. 22, 24, 37, 45, 47, 49, 60, 75, 78, 86, 92, 94, 103, 126, and 134 on Annex A-1 to this prospectus supplement), representing approximately 7.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (6.9%, 8.5%), the related borrowers own the related mortgaged property as tenants-in-common. As a result, if a borrower 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 s tay will be reinstated), a material impairment in property management and a substantial decrease in the amount recoverable upon the related mortgage loan. Not all tenants-in-common for the mortgage loans are single-purpose entities.
Ability to Incur Other Borrowings Entails Risk
When a borrower (or its constituent members) also has one or more other outstanding loans (even if they are subordinated or mezzanine loans), the trust is subjected to additional risk. The
S-47
borrower may have difficulty servicing and repaying multiple loans. The existence of another loan will generally also make it more difficult for the borrower to obtain refinancing of its mortgage loan and may thereby jeopardize repayment of the mortgage loan. Moreover, the need to service additional debt may reduce the cash flow available to the borrower to operate and maintain the mortgaged property.
Additionally, if a borrower (or its constituent members) defaults on its mortgage loan and/or any other loan, actions taken by other lenders such as a foreclosure or an involuntary petition for bankruptcy against the borrower could impair the security available to the trust, including the mortgaged property, or stay the trust’s ability to foreclose during the course of the bankruptcy case. The bankruptcy of another lender also may operate to stay foreclosure by the trust. The trust may also be subject to the costs and administrative burdens of involvement in foreclosure or bankruptcy proceedings or related litigation.
In this regard, the mortgage loans generally prohibit borrowers from incurring any additional debt secured by their mortgaged property without the consent of the lender. No investigations, searches or inquiries to determine the existence or status of any subordinate secured financing with respect to any of the mortgaged properties have been made at any time since origination of the related mortgage loan. We cannot assure you that any of the borrowers have complied with the restrictions on indebtedness in the related mortgage loan documents.
As of the cut-off date, the applicable mortgage loan sellers have informed us that they are aware that 4 mortgage loans (not including the Sawgrass Mills Mall loan) (referred to in this prospectus supplement as the AB mortgage loans) are each evidenced by the senior of two or more notes secured by a single mortgage on the related mortgaged property and a single assignment of leases, with the subordinate companion loan not being part of the trust fund. The AB mortgage loans are identified on Annex A-1 to this prospectus supplement as Loan Nos. 1, 5, 30 and 32, representing approximately 11.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (12.4%, 0.0%). Additionally, 1 mortgage loan, identified on Annex A-1 to this prospectus supplement as Loan No. 2, representing approximately 6.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (6.8%, 0.0%) is secured by one or more pari passu companion loans and one or more subordinate companion loans, none of which companion loans are included in the trust. In each case, one or more senior loans in the related mortgage loan group is an AB mortgage loan, which is included in the trust fund. In each case, at least one other loan in the split loan structure is a subordinate companion loan and is not included in the trust fund. However, the subordinate companion loan will be serviced under the pooling and servicing agreement, subject to the related intercreditor agreement. Subject to the restrictions described under ‘‘—Special Servicer May Be Directed to Take Actions’’ below, the holders of the subordinate companion loan (i n the case of the Ten Penn Center subordinate companion loan, only if that holder has funded a related future advance pursuant to the related mortgage loan documents and the related intercreditor agreement) will have the right, under certain conditions, to consent to or consult with respect to certain waivers or modifications proposed to be taken by the master servicer or the special servicer, as applicable, with respect to the related senior loan. The holder of each subordinate companion loan (in the case of the Ten Penn Center subordinate companion loan, only if that holder has funded a related future advance pursuant to the related mortgage loan documents and the related intercreditor agreement) will also have the right to purchase the related mortgage loan included in the trust under certain limited circumstances. In exercising such rights, the holder of the subordinate companion loan does not have any obligation to consider the interests of, or the impact of such exercise on, the trust or the certificat es. See ‘‘Description of the Mortgage Pool—The Sawgrass Mills Mall Whole Loan’’, ‘‘—Additional Debt’’ and ‘‘—AB Whole Loans’’ in this prospectus supplement. The subordinate companion loans are generally subordinate in right of payment to the related senior mortgage loans, subject to the terms of the related intercreditor agreement. See ‘‘Description of the Mortgage Pool—AB W hole Loans’’ in this prospectus supplement.
S-48
In addition to the AB mortgage loans, 16 mortgage loans (identified as Loan Nos. 2, 6, 143, 145, 146, 148, 149, 150, 151, 152, 153, 155, 156, 157, 159 and 161 on Annex A-1 to this prospectus supplement), representing in the aggregate approximately 9.6% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (10.8%, 0.0%), are each part of a split loan structure, in which the related mortgage loan and one or more pari passu companion loans are secured by the same mortgage instrument on the related mortgaged properties. See ‘‘Description of the Mortgage Pool—Pari Passu Whole Loans’’ in this prospectus supplement.
Although the pari passu companion loans and subordinate companion loans described above are not assets of the trust fund, each related borrower is still obligated to make interest and principal payments on these loans. As a result, the trust fund 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 related mortgaged property may decline as a result; and |
| | |
| • | the risk that it may be more difficult for the related borrower to refinance the split mortgage loans or to sell the related mortgaged property for purposes of making any balloon payment on the entire balance of both the senior obligations (including pari passu obligations, as applicable), and the subordinate obligations upon the maturity of those mortgage loans. |
See ‘‘Description of the Mortgage Pool—General,’’ ‘‘—Additional Debt,’’ ‘‘—The Whole Loans’’ in this prospectus supplement and ‘‘Certain Legal Aspects of Mortgage Loans— Subordinate Financing’’ in the prospectus.
The borrowers under certain of the mortgage loans have incurred or may incur in the future secured, subordinate debt. In addition, substantially all of the mortgage loans permit the related borrower to incur limited indebtedness in the ordinary course of business that is not secured by the related mortgaged property. In addition, the borrowers under certain of the mortgage loans have incurred, and/or may incur in the future, unsecured debt other than in the ordinary course of business. See ‘‘Description of the Mortgage Pool—Additional Debt’’ in this prospectus supplement for a description of certain permitted additional debt. Moreover, in general, any borrower that does not meet single-purpose entity criteria may not be restricted from incurring unsecured debt or debt secured by other pr operty of the borrower. See ‘‘Description of the Mortgage Pool—Additional Debt’’ in this prospectus supplement.
Additionally, the terms of certain mortgage loans permit or require the borrowers to post letters of credit and/or surety bonds for the benefit of the related mortgage loan, which may constitute a contingent reimbursement obligation of the related borrower or an affiliate. The issuing bank or surety will not typically agree to subordination and standstill protection benefiting the mortgagee.
The mortgage loans generally place certain restrictions on the transfer and/or pledging of general partnership and managing member equity interests in a borrower such as specific percentage or control limitations. The terms of the mortgage loans generally permit, subject to certain limitations, the transfer or pledge of less than a controlling portion of the limited partnership or non-managing member equity or other interests in a borrower. 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 the related borrower by imposing a specific percentage or control limitation or requiring the consent of the mortgagee to any such transfer (which consent in certain instances would consist of the mortgagee ascertaining that certain specific transfer conditions have been satisfied). Moreover, in general, mortgage loans with borrowers that do not meet single-purpose e ntity criteria may not restrict in any way the incurrence by the relevant borrower of mezzanine debt. See ‘‘—The Borrower’s Form of Entity May Cause Special Risks’’ above. In the case of 1 mortgage loan (identified as Loan No. 110 on
S-49
Annex A-1) representing approximately 0.2% of the aggregate principal balance of the pool of mortgage loan as of the cut-off date (0.2%, 0.0%), parent of the borrower has existing mezzanine debt. See ‘‘Description of the Mortgage Pool—Additional Debt’’ in this prospectus supplement.
34 mortgage loans representing approximately 44.7% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (48.7%, 14.2%) allow the borrower to incur future mezzanine debt. These mortgage loans are identified in the chart titled ‘‘Future Permitted Debt’’ in ‘‘Description of the Mortgage Pool—Additional Debt’’. Certain other mortgage loans have other existing or permitted additional indebtedness; for more information regarding this additional indebtedness, see ‘‘Description of the Mortgage Pool—Additional Debt’’ in this prospectus supplement.
Mezzanine debt is debt that is incurred by the owner of equity in one or more borrowers or an affiliate of such owner and is secured by a pledge of the equity ownership interests in such borrowers. Because mezzanine debt is secured by the obligor’s equity interest in the related borrowers, such financing effectively reduces the obligor’s economic stake in the related mortgaged property. The existence of mezzanine debt may reduce cash flow on the borrower’s mortgaged property after the payment of debt service or result in liquidity pressures if the mezzanine debt matures or becomes payable prior to the maturity of the mortgage loan, and may thus 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. In addition, t he current and any future mezzanine lender may have cure rights with respect to the related mortgage loan and/or an option to purchase the mortgage loan after a default pursuant to an intercreditor agreement.
Generally, upon a default under mezzanine debt, the holder of such mezzanine debt may be entitled to foreclose upon the equity in the related borrower, which has been pledged to secure payment of such mezzanine debt, if permitted pursuant to the terms of the related intercreditor agreement. Although such transfer of equity may not trigger the due on sale clause under the related mortgage loan, it could cause a change of control in the borrower and/or cause the obligor under such mezzanine debt to file for bankruptcy, which could negatively affect the operation of the related mortgaged property and such borrower’s ability to make payments on the related mortgage loan in a timely manner.
In the case of 6 mortgage loans (identified as Loan Nos. 12, 13, 26, 38, 55 and 57 on Annex A-1 to this prospectus supplement), representing approximately 1.9%, 1.9%, 1.1%, 0.7%, 0.5% and 0.5% of the aggregate principal balance of the pool of mortgage loans as of the cut off date (approximately 2.1%, 2.1%, 1.3%, 0.8%, 0.6% and 0.5% of the aggregate principal balance of the mortgage loans in loan group 1 as of the cut off date), the indirect interest in the borrowers and the excess cash flow distributions (after debt service and property expenses) received from the mortgaged properties securing the mortgage loans have been pledged to additionally secure other mortgage financing made to affiliates of the related borrowers.
In addition, borrowers under certain of the mortgage loans have issued or are permitted to issue preferred equity in such borrowers. See ‘‘Description of the Mortgage Pool—Additional Debt’’ in this prospectus supplement.
Additionally, 11 mortgage loans (identified as Loan Nos. 5, 34, 52, 70, 73, 74, 82, 107, 112, 113 and 116 on Annex A-1 to this prospectus supplement) representing approximately 6.1% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (4.2%, 20.3%) allow the borrower to incur future permitted debt (other than future mezzanine debt). In the case of 1 mortgage loan (identified as Loan No. 27 on Annex A-1), representing approximately 1.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (0.0%, 8.7%), one of the co-borrowers (the fee owner) has incurred unsecured debt in the amount of $1,252,509.02 and may incur unsecured debt in the future in the amount of the
S-50
difference between $2,100,000 and the outstanding principal balance of the existing unsecured loan (which is currently $1,252,509.02).
Borrower May Be Unable to Repay Remaining Principal Balance on Maturity Date or Anticipated Repayment Date
Mortgage loans with substantial remaining principal balances at their stated maturity, also known as balloon loans, or with substantial remaining principal balances at the anticipated repayment date of the related mortgage loan involve greater risk than fully amortizing loans. This is because the borrower may be unable to repay the mortgage loan at that time. In addition, fully amortizing mortgage loans that may pay interest on an ‘‘actual/360’’ basis but have fixed monthly payments may, in effect, have a small balloon payment due at maturity.
A borrower’s ability to repay a mortgage loan on its stated maturity date typically will depend upon its ability either to refinance the mortgage loan or to sell the mortgaged property at a price sufficient to permit repayment. A borrower’s ability to achieve either of these goals will be affected by a number of factors, including:
| | |
| • | the availability of, and competition for, credit for commercial real estate projects; |
| | |
| • | the prevailing interest rates; |
| | |
| • | the fair market value of the related mortgaged property; |
| | |
| • | the borrower’s equity in the related mortgaged property; |
| | |
| • | 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 |
| | |
| • | the prevailing general and regional economic conditions. |
The applicable mortgage loan sellers have informed us that substantially all of the mortgage loans are expected to have substantial remaining principal balances as of their respective anticipated repayment dates or stated maturity dates, including any mortgage loans that pay interest-only for their entire respective terms. This includes 69 mortgage loans, representing approximately 29.3% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (27.6%, 42.4%), which pay interest-only for the first 6 to 60 months of their respective terms and 53 mortgage loans, representing approximately 59.7% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (61.1%, 49.0%), which pay interest-only until their maturity dates.
The applicable mortgage loan seller has informed us that 128 of the mortgage loans, representing approximately 63.7% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (62.2%, 75.8%), mature or have an anticipated repayment date in the year 2017.
We cannot assure you that each borrower will have the ability to repay the remaining principal balances on the pertinent date.
See ‘‘Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans’’ in this prospectus supplement and ‘‘Risk Factors—Borrowers May Be Unable to Make Balloon Payments’’ in the prospectus.
The Prospective Performance of the Commercial, Multifamily and Manufactured Housing Community Mortgage Loans Included in the Trust Fund Should Be Evaluated Separately from the Performance of the Mortgage Loans in Any of Our Other Trusts
While there may be certain common factors affecting the performance and value of income-producing real properties in general, those factors do not apply equally to all
S-51
income-producing real properties and, in many cases, there are unique factors that will affect the performance and/or value of a particular income-producing real property. Moreover, the effect of a given factor on a particular real property will depend on a number of variables, including but not limited to property type, geographic location, competition, sponsorship and other characteristics of the property and the related mortgage loan. Each income-producing real property represents a separate and distinct business venture and, as a result, each of the multifamily, manufactured housing community and commercial mortgage loans included in one of the depositor’s trusts requires a unique underwriting analysis. Furthermore, economic and other conditions affecting real properties, whether worldwide, national, regional or local, vary over time. The performance of a pool of mortgage loans originated and outstanding under a given set of economic conditions may vary significantly from the performance of an othe rwise comparable mortgage pool originated and outstanding under a different set of economic conditions. Accordingly, investors should evaluate the mortgage loans underlying the offered certificates independently from the performance of mortgage loans underlying any other series of offered certificates.
As a result of the distinct nature of each pool of commercial mortgage loans, and the separate mortgage loans within the pool, this prospectus supplement does not include disclosure concerning the delinquency and loss experience of static pools of periodic originations or acquisitions by the sponsor of assets of the type to be securitized (known as ‘‘static pool data’’). Because of the highly heterogeneous nature of the assets in commercial mortgage backed securities transactions, static pool data for prior securitized pools, even those involving the same asset types (e.g., hotels or office buildings), may be misleading, because the economics of the properties and terms of the loans may be materially different. In particular, static pool data showing a low level of delinquencies and defaults w ould not be indicative of the performance of this pool or any other pools of mortgage loans originated or acquired by the same sponsor or sponsors. Therefore, investors should evaluate this offering on the basis of the information set forth in this prospectus supplement with respect to the mortgage loans, and not on the basis of any successful performance of other pools of securitized commercial mortgage loans.
Commercial and Multifamily Lending Is Dependent Upon Net Operating Income
The mortgage loans are secured by various income-producing commercial and multifamily properties. Commercial and multifamily lending are generally thought to expose a lender to greater risk than residential one-to-four family lending because they typically involve larger mortgage loans to a single borrower or groups of related borrowers.
The repayment of a commercial or multifamily loan is typically dependent upon the ability of the related mortgaged property to produce cash flow through the collection of rents. Even the liquidation value of a commercial property is determined, in substantial part, by the capitalization of the property’s cash flow. However, net operating income can be volatile and may be insufficient to cover debt service on the mortgage 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; |
| | |
| • | the characteristics of the neighborhood where the property is located; |
| | |
| • | the proximity and attractiveness of competing properties; |
| | |
| • | the adequacy of the property’s management and maintenance; |
| | |
| • | increases in interest rates, real estate taxes and other operating expenses at the mortgaged property and in relation to competing properties; |
| | |
| • | an increase in the capital expenditures needed to maintain the properties or make improvements; |
S-52
| | |
| • | dependence upon a single tenant, or a concentration of tenants in a particular business or industry; |
| | |
| • | a decline in the financial condition of a major tenant; |
| | |
| • | 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, regional or local economic conditions, including plant closings, military base closings, industry slowdowns and unemployment rates; |
| | |
| • | local real estate conditions, such as an oversupply of competing properties, retail space, office space or multifamily housing or hotel capacity; |
| | |
| • | demographic factors; |
| | |
| • | consumer confidence; |
| | |
| • | consumer tastes and preferences; |
| | |
| • | retroactive changes in building codes; |
| | |
| • | changes or continued weakness in specific industry segments; 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; |
| | |
| • | the 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. |
A decline in the real estate market or in the financial condition of a major tenant will tend to have a more immediate effect on the net operating income of properties with short-term revenue sources, such as short-term or month-to-month leases, and may lead to higher rates of delinquency or defaults.
Tenant Concentration Entails Risk
A deterioration in the financial condition of a tenant can be particularly significant if a mortgaged property is wholly or significantly owner-occupied or leased to a single tenant or if any tenant makes up a significant portion of the rental income. Mortgaged properties that are wholly or significantly owner-occupied or that are leased to a single tenant or tenants that make up a significant portion of the rental income also are more susceptible to interruptions of cash flow if the owner-occupier’s business operations are negatively impacted or if that single tenant or those tenants fail to renew their leases. This is so because the financial effect of the absence of operating income or 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. In this respect, 38 mortgage loans, representing approximately 7.4% of the aggregate principa l balance of the pool of mortgage loans as of the cut-off date (8.4%, 0.0%), are secured solely by properties that are wholly or significantly owner-occupied or by properties that are leased to a single tenant or affiliated tenants. With respect to certain of these mortgage
S-53
loans which are leased to a single tenant, leases at the mortgaged properties will expire prior to the maturity date of the mortgage loans. For example, with respect to 7 mortgaged properties securing mortgage loans, representing approximately 3.7% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (4.2%, 0.0%), the mortgaged properties are leased to single tenant under leases that will expire between 1 and 65 months before the related maturity date.
Additionally, certain of the mortgaged properties may be leased in whole or in part to an affiliate or affiliates of the related borrower. See ‘‘—Mortgaged Properties Leased to Borrowers or Borrower Affiliated Entities Also Have Risks’’ below. The underwriting of the single-tenant mortgage loans is based primarily upon the monthly rental payments due from the tenant under the lease of the related mortgaged property. Where the primary lease term expires before the scheduled maturity date of the related mortgage loan, the mortgage loan sellers considered the incentives for the primary tenant to re-lease the premises and the anticipated rental value of the premises at the end of the primary lease term or took additional reserves or required letters of credit in connection with the lease exp iration. There are a significant number of mortgage loans secured by mortgaged properties with single tenant leases or material leases that expire within a short period of time prior to, at or soon after the maturity dates or anticipated repayment dates of those mortgage loans. See Annex A-1 to this prospectus supplement for the lease expiration date of each single tenant loan or the three largest tenants for each other mortgage loan. We cannot assure you that any material or sole tenant will re-lease the premises or that the premises will be relet to another tenant or that the space will be relet at the same rent per square foot during the term of, or at the expiration of, the primary lease term, or that the related mortgaged property will not suffer adverse economic consequences in this regard. Additionally, the underwriting of certain of these mortgage loans leased to single tenants may have taken into account the creditworthiness of the tenants under the related leases and consequently may have high er loan-to-value ratios and lower debt service coverage ratios than other types of mortgage loans.
Retail and office properties also may be adversely affected if there is a concentration of particular tenants among the mortgaged properties or of tenants in a particular business or industry. In this regard, see ‘‘—Retail Properties Have Special Risks’’ and ‘‘—Office Properties Have Special Risks’’ below.
Certain Additional Risks Relating to Tenants
The income from, and market value of, the mortgaged properties leased to various tenants would be adversely affected if:
| | |
| • | space in the mortgaged properties could not be leased or re-leased; |
| | |
| • | 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; |
| | |
| • | substantial re-leasing costs were required and/or the cost of performing landlord obligations under existing leases materially increased; |
| | |
| • | tenants were unwilling or unable to meet their lease obligations; |
| | |
| • | 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. |
Repayment of the mortgage loans secured by retail, office and industrial properties will be affected by the expiration of leases and the ability of the respective borrowers to renew the leases or relet the space on comparable terms and on a timely basis. Additionally, mortgaged
S-54
properties may have concentrations of leases expiring at varying rates in varying percentages including single-tenant mortgaged properties, during the term of the related mortgage loans. Certain of the mortgaged properties are and/or may be leased in whole or in part by government-sponsored tenants who have the right to rent reductions or to cancel their leases at any time or for lack of appropriations or for damage to the leased premises caused by casualty or condemnation. Certain of the mortgaged properties may have tenants that sublet a portion of their space or may intend to sublet out a portion of their space in the future. In addition, with respect to certain of these spaces that are sublet, the rents with respect to the related mortgage loan may have been underwritten at the amount of rent paid by the direct tenant although the rent being paid by the sublessee is lower.
The mortgaged properties related to many of the mortgage loans will experience substantial (50.0% of gross leasable area or more) lease rollover prior to the maturity date, and in many cases relatively near, or soon after, the maturity dates of the mortgage loans. With respect to the mortgage loans described above and certain other mortgage loans in the trust fund, many of the related loan documents require tenant improvement and leasing commission reserves (including trapping excess cash flow after notice of lease termination), and in many cases, the leases contain lessee extension options extending the term of such leases for a specified term. However, there can be no assurance that any such extension options will be exercised or that the amount of any such reserves will be adequate to mitigate the lack of rental income associated with these rollovers. Also, certain of the mortgaged properties may be subject to tenant termination rights prior to the maturity d ate of the related mortgage loan.
In addition, certain properties may have tenants that are paying rent but are not in occupancy or may have vacant space that is not leased. See ‘‘Description of the Mortgage Pool— Top Fifteen Mortgage Loans’’ in this prospectus supplement. Also, certain properties have tenants who have leases on a month-to-month basis. Any ‘‘dark’’ space may cause the property to be less desirable to other potential tenants or the related tenant may be more likely to default in its obligations under the lease. We cannot assure you that those tenants will continue to fulfill their lease obligations or that the space will be relet. Additionally, certain tenants may have a right to a rent abatement or the right to cancel their lease if certain major tenants at the mortgaged prop erty vacate or go dark. Also, certain properties may require tenants to pay rent only during certain months of the year.
Even if vacated space is successfully relet, the costs associated with reletting, including tenant improvements and leasing commissions, could be substantial and could reduce cash flow from the mortgaged properties. Moreover, if a tenant defaults in its obligations to a borrower, the borrower may incur substantial costs and experience significant delays associated with enforcing its rights and protecting its investment, including costs incurred in renovating and reletting the related mortgaged property.
Additionally, in certain jurisdictions, if tenant leases are subordinated to the liens created by the mortgage but do not contain attornment provisions (provisions requiring the tenant to recognize as landlord under the lease a successor owner following foreclosure), the leases may terminate 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.
With respect to certain of the mortgage loans, the related borrower has given to certain tenants or others an option to purchase, a right of first refusal 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. Additionally, the exercise of a purchase option may result in the related mortgage loan being prepaid during a period when
S-55
voluntary prepayments are otherwise prohibited. See ‘‘—Risks Relating to Prepayments and Repurchases’’ below and ‘‘Description of the Mortgage Pool—Top Fifteen Mortgage Loans’’ in this prospectus supplement.
Risks Related to Redevelopment and Renovation at the Mortgaged Properties
Certain of the mortgaged properties are properties that are currently undergoing or are expected to undergo in the future redevelopment or renovation. There can be no assurance that current or planned redevelopment or renovation will be completed, that such redevelopment or renovation will be completed in the time frame contemplated, or that when and if redevelopment or renovation is completed, such redevelopment or renovation will improve the operations at, or increase the value of, the subject property. Failure of any of the foregoing to occur could have a material negative impact on the related mortgage loan, which could affect the ability of the related borrower to repay the related mortgage loan.
In the event the related borrower fails to pay the costs of work completed or material delivered in connection with such ongoing redevelopment 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 make such mortgaged property less attractive to tenants or their customers, and accordingly could have a negative effect on net operating income.
If the special servicer forecloses on behalf of the trust on a mortgaged property that is being redeveloped or renovated, pursuant to the REMIC provisions, the special servicer will only be permitted to arrange for completion of the redevelopment or renovation if at least 10.0% of the costs of construction were incurred at the time the default on the related mortgage loan became imminent. As a result, the trust fund may not realize as much proceeds upon disposition of a foreclosure property as it would if it were permitted to complete construction.
Mortgaged Properties Leased to Borrowers or Borrower Affiliated Entities Also Have Risks
If a mortgaged property is leased in whole or substantial part to the borrower under the mortgage loan or to an affiliate of the borrower, there may be conflicts. For instance, it is more likely a landlord will waive lease conditions for an affiliated tenant than it would for an unaffiliated tenant. We cannot assure you that the conflicts arising where a borrower is affiliated with a tenant at a mortgaged property will not adversely impact the value of the related mortgage loan. In some cases this affiliated lessee is physically occupying space related to its business; in other cases, the affiliated lessee is a tenant under a master lease with the borrower, under which the tenant may be obligated to make rent payments but does not occupy any space at the mortgaged property. These master leases are generally used to bring occupancy to a ‘‘stabilized’’ level but may not provide additional economic support for the mortgage loan. We cannot as sure you the space ‘‘leased’’ by a borrower affiliate will eventually be occupied by third-party tenants and consequently, a deterioration in the financial condition of the borrower or its affiliates can be particularly significant to the borrower’s ability to perform under the mortgage loan as it can directly interrupt the cash flow from the mortgaged property if the borrower’s or its affiliate’s financial condition worsens. These risks may be mitigated when mortgaged properties are leased to unrelated third parties. See Annex A-1 to the prospectus supplement for more information with respect to mortgaged properties subject to master leases.
In the case of 1 mortgage loan (identified as Loan No. 27 on Annex A-l to this prospectus supplement), representing approximately 1.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (0.0%, 8.7%), the mortgaged property is subject to a master lease and a sub-master lease for tax credit purposes, each of which is subordinated to the related mortgage. Such master lease and sub-master lease were not used to bring occupancy to a stabilized level. Additionally, each of the related borrower and the affiliated sub-master lessee
S-56
are special purpose entities. The related borrower and the affiliated sub-master lessee have directed that all rents collected from the mortgaged property shall be paid into a lockbox for the benefit of the mortgagee. Further, one of the co-borrowers (the fee owner) is the lender under a line of credit facility for an aggregate principal amount of up to $6,000,000 to the affiliated master lessee at the property, of which $332,003 is currently outstanding under such line of credit facility. Such line of credit facility is secured by, among other things, a pledge of membership interests in one of the co-borrowers (the ground lessee). The line of credit documents direct the master lessee, to the extent that such master lessee receives funding from the line of credit facility, to invest those funds into the ground lessee’s rehabilitation of the building located at the related mortgaged property. There can be no guarantee that (i) the fee owner will be able to meet its payment obligations under the mortgage loan and its obligations to lend money to the affiliated master lessee or (ii) that the affiliated master lessee will invest the funds it receives under the line of credit facility into the ground lessee’s rehabilitation of the building located at the related mortgaged property.
Tenant Bankruptcy Entails Risks
The bankruptcy or insolvency of a major tenant, or a number of smaller tenants, in retail, office and industrial properties may adversely affect the income produced by a mortgaged property. Under the federal bankruptcy code a tenant has the option of assuming or rejecting any unexpired lease. If the tenant rejects the lease, the landlord’s claim for breach of the lease would be a general unsecured claim against the tenant (absent collateral securing the claim). The claim would be limited to the unpaid rent reserved under the lease for the periods prior to the bankruptcy petition (or earlier surrender of the leased premises) that are unrelated to the rejection, plus the greater of one year’s rent or 15% of the remaining reserved rent (but not more than three years’ rent).
In the case of 1 mortgage loan (identified as Loan No. 133 on Annex A-1 to this prospectus supplement), representing approximately 0.1% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (0.1%, 0.0%), the second-largest tenant at the mortgaged property emerged from bankruptcy protection in June 2006 and has recently signed a new one-year lease effective through June 30, 2008. The borrower deposited $55,000 into TI/LC reserve and $120,000 into an interest reserve account in case the tenant vacates the premises.
Mortgage Loans Are Nonrecourse and Are Not Insured or Guaranteed
The mortgage loans are not insured or guaranteed by any person or entity, governmental or otherwise.
Investors should treat each mortgage loan as a nonrecourse loan. If a default occurs, recourse generally may be had only against the specific properties and other assets that have been pledged to secure the 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 is primarily dependent upon the market value of the mortgaged property or the borrower’s ability to refinance the mortgaged property for an amount sufficient to repay the mortgage loan.
Retail Properties Have Special Risks
62 of the mortgaged properties, representing approximately 35.8% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date by allocated loan amount (40.5%, 0.0%), are retail properties.
The quality and success of a retail property’s tenants significantly affect the property’s market value and the related borrower’s ability to refinance such property. For example, if the sales revenues of retail tenants were to decline, rents tied to a percentage of gross sales revenues may decline and those tenants may be unable to pay their rent or other occupancy costs.
S-57
The presence or absence of an ‘‘anchor tenant’’ or a ‘‘shadow anchor’’ in or near a shopping center also can be important because anchors play a key role in generating customer traffic and making a shopping center desirable for other tenants. An ‘‘anchor tenant’’ is usually proportionately larger in size than most other tenants in the mortgaged property, is vital in attracting customers to a retail property and is located on or adjacent to the related mortgaged property. A ‘‘shadow anchor’’ is usually proportionally larger in size than most tenants in the mortgaged property, is important in attracting customers to a retail property and is located sufficiently close and convenient to the mortgaged property, but not on the mortgaged property, so as to influence and attract potential customers. The economic performance of an anchored or shadow anchored retail property wi ll consequently be adversely affected by:
| | |
| • | an anchor tenant’s or shadow anchor tenant’s failure to renew its lease; |
| | |
| • | termination of an anchor tenant’s or shadow anchor tenant’s lease; or if the anchor tenant or shadow anchor tenant owns its own site, a decision to vacate; |
| | |
| • | the bankruptcy or economic decline of an anchor tenant, shadow anchor or self-owned anchor; |
| | |
| • | the cessation of the business of an anchor tenant, a shadow anchor tenant or of a self-owned anchor (notwithstanding its continued payment of rent); or |
| | |
| • | health club properties, a sub-type of retail properties, have unique risks, which may adversely affect the value of any successful operation of a health club facility, including (i) the physical attributes of the health club facility (e.g., its age, appearance and layout), (ii) the reputation, safety, convenience and attractiveness of the facility to users and (iii) management’s ability to control membership growth and attrition. |
26 of the mortgaged properties, securing mortgage loans representing approximately 28.6% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (32.3%, 0.0%), are retail properties that are considered by the applicable mortgage loan seller to have an ‘‘anchor tenant.’’ 10 of the mortgaged properties, securing mortgage loans representing approximately 4.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (4.5%, 0.0%), are retail properties that are considered by the applicable mortgage loan seller to be ‘‘shadow anchored.’’ 26 of the mortgaged properties, securing mortgage loans representing approximately 3.2% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (3.6%, 0.0%), are retail properties that are considered by the applicable mortgage loan seller to be ‘‘unanchored.’’
If anchor stores in a mortgaged property were to close, the related borrower may be unable to replace those anchors in a timely manner or without suffering adverse economic consequences. Certain of the tenants or anchor stores of the retail properties may have co-tenancy clauses and/or operating covenants in their leases or operating agreements that permit those tenants or anchor stores to cease operating under certain conditions, including, without limitation, certain other stores not being open for business at the mortgaged property or a subject store not meeting the minimum sales requirement under its lease, thereby leaving its space unoccupied even though it continues to own or pay rent on the vacant or dark space. In addition, in the event that an ‘‘anchor’’ or a ‘‘shadow anchor’’ fails to renew its lease, terminates its lease or otherwise ceases to conduct business within a close proximity to the mortgaged pr operty, customer traffic at the mortgaged property may be substantially reduced. We cannot assure you that such space would be occupied or that the related mortgaged property would not suffer adverse economic consequences if any anchor tenant failed to renew its lease. In this regard, see ‘‘—Tenant Bankruptcy Entails Risks’’ and ‘‘—Certain Additional Risks Relating to Tenants’’ above.
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
S-58
retail markets (which often have lower operating costs) could adversely affect the rents collectible at the retail properties included in the pool of mortgage loans, as well as the income from, and market value of, the mortgaged properties and the related borrower’s ability to refinance such property.
Moreover, additional competing retail properties may be built in the areas where the retail properties are located.
Certain of the retail properties, including, for example, the mortgaged property securing 1 mortgage loan, identified as Loan No. 2 on Annex A-1 to this prospectus supplement, representing approximately 6.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (6.8%, 0.0%), has a movie theater as part or all of the mortgaged property. These types of retail properties are exposed to certain unique risks. Aspects of building site design and adaptability affect the value of a movie theater. In addition, decreasing attendance at a movie theater could adversely affect revenue of the movie theater, which may, in turn, cause the tenant to experience financial difficulties. See ‘‘—Tenant Bankruptcy Entails Risks’’ above. In addition, because of unique construction requirements of movie theaters, any vacant movie theater space would not easily be converted to other uses.
Certain retail properties securing mortgage loans in the pool may have gas stations and/or convenience stores as part of the retail mix. Demand for gas stations and the related convenience stores depends on location of the station and volume of car driving, which in turn depends on cost of gas and general economic conditions. Profitability is impacted by the cost of gasoline, the product mix at the convenience store, credit card fees (which have been escalating) and the addition of pay-at-the-pump technology at stations (which has been cited as a potential cause of revenue loss in the related convenience store). This property type also raises environmental concerns because gasoline, motor oil and other hazardous products are sold at these properties.
Office Properties Have Special Risks
32 of the mortgaged properties, representing approximately 28.5% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date by allocated loan amount (32.2%, 0.0%), are office properties.
A large number of factors may adversely affect the value of office properties, including:
| | |
| • | the quality of an office building’s tenants; |
| | |
| • | an economic decline in the business operated by the tenants; |
| | |
| • | the physical attributes of the building in relation to competing buildings (e.g., age, condition, design, appearance, location, access to transportation and ability to offer certain amenities, such as sophisticated building systems and/or business wiring requirements); |
| | |
| • | the physical attributes of the building with respect to the technological needs of the tenants, including the adaptability of the building to changes in the technological needs of the tenants; |
| | |
| • | the diversity of an office building’s tenants (or reliance on a single or dominant tenant); |
| | |
| • | the desirability of the area as a business location; |
| | |
| • | the strength and nature of the local economy, including labor costs and quality, tax environment and quality of life for employees; |
| | |
| • | an adverse change in population, patterns of telecommuting or sharing of office space, and employment growth (all of which affect the demand for office space); and |
| | |
| • | in the case of medical office properties, the performance of a medical office property may depend on (i) the proximity of such property to a hospital or other health care establishment and (ii) reimbursements for patient fees from private or government-sponsored insurers. Issues related to reimbursement (ranging from non-payment to delays in payment) from such insurers could adversely impact cash flow at such mortgaged property. |
S-59
Moreover, the cost of refitting office space for a new tenant is often higher than the cost of refitting other types of properties for new tenants. See ‘‘—Risks Relating to Mortgage Loan Concentrations’’ above.
Hotel Properties Have Special Risks
18 of the mortgaged properties, representing approximately 14.6% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date by allocated loan amount (16.5%, 0.0%), are hotel properties.
Various factors may adversely affect the economic performance of a hotel, 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); |
| | |
| • | the construction of competing hotels or resorts; |
| | |
| • | continuing expenditures for modernizing, refurbishing and maintaining existing facilities prior to the expiration of their anticipated useful lives; |
| | |
| • | a deterioration in the financial strength or managerial capabilities of the owner and operator of a hotel; and |
| | |
| • | changes in travel patterns caused by changes in access, energy prices, strikes, relocation of highways, the construction of additional highways, concerns about travel safety or other factors. |
Because hotel rooms generally are rented for short periods of time, the financial performance of hotels tends to be affected by adverse economic conditions and competition more quickly than other commercial properties. Additionally, terrorist attacks in September 2001 and the potential for future terrorist attacks may have adversely affected and may continue to so affect the occupancy rates, and accordingly, the financial performance of hotel properties. See ‘‘Risk Factors—Risks to the Mortgaged Properties Relating to Terrorist Attacks and Foreign Conflicts’’ in the prospectus.
Moreover, the hotel and lodging industry is generally seasonal in nature and different seasons affect different hotels depending on type and location. This seasonality can be expected to cause periodic fluctuations in a hotel property’s room and restaurant revenues, occupancy levels, room rates and operating expenses.
Limited-service hotels may subject a lender to more risk than full-service hotels as they generally require less capital for construction than full-service hotels. In addition, as limited-service hotels generally offer fewer amenities than full-service hotels, they are less distinguishable from each other. As a result, it is easier for limited-service hotels to experience increased or unforeseen competition.
The liquor licenses for most of the hotel mortgaged properties are held by affiliates of the borrowers, unaffiliated managers or operating lessees. The laws and regulations relating to liquor licenses generally prohibit the transfer of such licenses to any person. In the event of a foreclosure of a hotel property that holds a liquor license, the special servicer on behalf of the trust or a purchaser in a foreclosure sale would likely have to apply for a new license, which might not be granted or might be granted only after a delay that could be significant. There can be no assurance that a new license could be obtained promptly or at all. The lack of a liquor license in a full-service hotel could have an adverse impact on the revenue from the related mortgaged property or on the hotel’s occupancy rate.
Risks Relating to Affiliation with a Franchise or Hotel Management Company
Most of the hotel properties that secure the mortgage loans are affiliated with a franchise or hotel management company. The performance of a hotel property affiliated with a franchise or hotel management company depends in part on:
S-60
| | |
| • | the continued existence and financial strength of the franchise or hotel management company; |
| | |
| • | the public perception of the franchise or hotel chain service mark; and/or |
| | |
| • | the duration of the franchise licensing or management agreements. |
The continuation of a franchise agreement or management agreement is subject to specified operating standards and other terms and conditions set forth in such agreements. The failure of a borrower to maintain such standards or adhere to other applicable terms and conditions could result in the loss or cancellation of their rights under the franchise agreement or management agreement. There can be no assurance that a replacement franchise could be obtained in the event of termination. In addition, replacement franchises may require significantly higher fees as well as the investment of capital to bring the hotel into compliance with the requirements of the replacement franchisor. Any provision in a franchise agreement or management agreement providing for termination because of a bankruptcy of a franchisor or manager generally will not be enforceable.
In the case of 1 mortgage loan (identified as Loan No. 21 on Annex A-1 to this prospectus supplement), representing approximately 1.3% of the aggregate principal balance of the pool of mortgage loans as of the cut off date (1.5%, 0,0%), the borrower’s current franchise agreement with Hilton expires on October 31, 2007 and the borrower intends to sign a new franchise agreement for the mortgaged property with another full service hotel brand. The related mortgage loan seller will hold back $4,000,000 until the new franchise agreement is signed for the mortgaged property. In the event such franchise agreement is not signed by October 31, 2007, the borrower is required to post a $5,000,000 letter of credit as additional collateral for the loan.
The transferability of franchise license agreements is restricted. In the event of a foreclosure, the lender or its agent would not have the right to use the franchise license without the franchisor’s consent. Conversely, in the case of certain mortgage loans, the lender may be unable to remove a franchisor or a hotel management company that it desires to replace following a foreclosure.
Multifamily Properties Have Special Risks
33 of the mortgaged properties, representing approximately 12.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date by allocated loan amount (1.0%, 97.3%), are multifamily properties. A large number of factors may adversely affect the value and successful operation of a multifamily property, including:
| | |
| • | the physical attributes of the apartment building such as its age, condition, design, appearance, access to transportation and construction quality; |
| | |
| • | the location of the property, for example, if there is a change in the neighborhood over time; |
| | |
| • | 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 presence of competing properties; |
| | |
| • | the tenant mix, such as the tenant population being predominantly students or being heavily dependent on workers from a particular business or personnel from a local military base; |
| | |
| • | In the case of student housing facilities, the reliance on the financial well-being of the colleges or universities to which they relate, as well as the physical layouts (which may not be readily convertible to traditional multifamily uses) may also affect the viability of the multifamily property. |
S-61
| | |
| • | 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 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 |
| | |
| • | government assistance/rent subsidy programs. |
Certain states regulate the relationship of an owner and its tenants. Commonly, these laws require a written lease, good cause for eviction, disclosure of fees, and notification to residents of changed land use, while prohibiting unreasonable rules, retaliatory evictions, and restrictions on a resident’s choice of unit vendors. Apartment building owners have been the subject of suits under state unfair and deceptive practices acts and other general consumer protection statutes for coercive, abusive or unconscionable leasing and sales practices. A few states offer more significant protection. For example, there are provisions that limit the basis on which a landlord may terminate a tenancy or increase its rent or prohibit a landlord from terminating a tenancy solely by reason of the sale of the owner’s building.
In addition to state regulation of the landlord-tenant relationship, numerous counties and municipalities impose rent control on apartment buildings. These ordinances may limit rent increases to fixed percentages, to percentages of increases in the consumer price index, to increases set or approved by a governmental agency, or to increases determined through mediation or binding arbitration. Any limitations on a borrower’s ability to raise property rents may impair such borrower’s ability to repay its multifamily loan from its net operating income or the proceeds of a sale or refinancing of the related multifamily property. In the case of 1 mortgage loan identified as Loan No. 49 on Annex A-1 to this prospectus supplement) representing approximately 0.5% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (0.6%, 0.0%), certain of the units are subject to New York City rent control laws and other units are subject to rent stabilization laws.
Multifamily properties located in certain areas of the United States have experienced increased occupancy levels as a result of relocations related to hurricanes Katrina, Rita and Wilma. However, there can be no assurance that such increased occupancy levels will continue as the areas affected by the hurricanes in the Southeastern United States become habitable. See ‘‘—Other Risks—Hurricanes May Cause Extensive Damage to Coastal Areas’’ below.
Certain of the mortgage loans are secured or may be secured in the future by mortgaged properties that are subject to certain affordable housing covenants, in respect of various units within the mortgaged properties.
Industrial Properties Have Special Risks
12 of the mortgaged properties, representing approximately 3.3% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date by allocated loan amount (3.7%, 0.0%), are industrial properties. Significant factors determining the value of industrial properties are:
| | |
| • | the quality of tenants; |
| | |
| • | reduced demand for industrial space because of a decline in a particular industry segment; |
| | |
| • | the property becoming functionally obsolete; |
| | |
| • | building design and adaptability; |
| | |
| • | unavailability of labor sources; |
S-62
| | |
| • | changes in access, energy prices, strikes, relocation of highways, the construction of additional highways or other factors; |
| | |
| • | changes in proximity of supply sources; |
| | |
| • | the expenses of converting a previously adapted space to general use; and |
| | |
| • | the location of the property. |
Concerns about the quality of tenants, particularly major tenants, are similar in both office properties and industrial properties, although industrial properties may be more frequently dependent on a single or a few tenants.
Industrial properties may be adversely affected by reduced demand for industrial space occasioned by a decline in a particular industry segment (for example, a decline in defense spending), and a particular industrial or warehouse property that suited the needs of its original tenant may be difficult to relet to another tenant or may become functionally obsolete relative to newer properties. In addition, lease terms with respect to industrial properties are generally for shorter periods of time and may result in a substantial percentage of leases expiring in the same year at any particular industrial property. In addition, mortgaged properties used for many industrial purposes are more prone to environmental concerns than other property types.
Aspects of building site design and adaptability affect the value of an industrial property. Site characteristics that are generally desirable to a warehouse/industrial property include high clear ceiling heights, wide column spacing, a large number of bays (loading docks) and large bay depths, divisibility, a layout that can accommodate large truck minimum turning radii and overall functionality and accessibility.
In addition, because of unique construction requirements of many industrial properties, any vacant industrial property space may not be easily converted to other uses. Thus, if the operation of any of the industrial properties becomes unprofitable due to competition, age of the improvements or other factors such that the borrower becomes unable to meet its obligations on the related mortgage loan, the liquidation value of that industrial property may be substantially less, relative to the amount owing on the related mortgage loan, than would be the case if the industrial property were readily adaptable to other uses.
Location is also important because an industrial property requires the availability of labor sources, proximity to supply sources and customers and accessibility to rail lines, major roadways and other distribution channels.
Senior Housing Facilities Have Special Risks
8 mortgaged properties securing mortgage loans (identified as Loan No. 6 on Annex A-1 to this prospectus supplement), representing approximately 2.7% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (3.1%, 0.0%), are senior living properties.
Residential healthcare facilities pose risks not associated with other types of income-producing real estate. Providers of long-term nursing care, assisted living and other medical services are subject to federal and state laws that relate to the adequacy of medical care, distribution of pharmaceuticals, rate setting, equipment, personnel, operating policies and additions to and maintenance of facilities and services. Providers also are affected by the reimbursement policies of private insurers to the extent that providers are dependent on patients whose fees are reimbursed by such insurers.
The failure of a borrower to maintain or renew any required license or regulatory approval could prevent it from continuing operations at a mortgaged property (in which case no revenues would be received from such property or portion thereof requiring licensing) or, if applicable, bar it from participation in government reimbursement programs.
In the event of foreclosure, we cannot ensure that the trustee or any other purchaser at a foreclosure sale would be entitled to the rights under such licenses and such party may have to apply in its own right for such a license.
S-63
We also cannot provide assurance that a new license could be obtained or that the related mortgaged property would be adaptable to other uses following a foreclosure.
To the extent any residential healthcare facility receives a significant portion of its revenues from government reimbursement programs, primarily Medicaid and Medicare, such revenue may be subject to statutory and regulatory changes, retroactive rate adjustments, administrative rulings, policy interpretations, delays by fiscal intermediaries and government funding restrictions.
Governmental payors have employed cost containment measures that limit payments to healthcare providers, and there are currently under consideration various proposals in the United States Congress that could materially change or curtail those payments. Accordingly, we can give no assurance that payments under government reimbursement programs will, in the future, be sufficient to fully reimburse the cost of caring for program beneficiaries. If such payments are reduced or eliminated, net operating income of the mortgaged properties that receive substantial revenues from those sources, and consequently the ability of the related borrowers to meet their mortgage loan obligations, could be adversely affected.
Under applicable federal and state laws and regulations, including those that govern Medicare and Medicaid programs, only the provider who actually furnished the related medical goods and services may sue for or enforce its right to reimbursement. Accordingly, in the event of foreclosure, none of the trustee, the master servicer or a subsequent lessee or operator of the property would generally be entitled to obtain from federal or state governments any outstanding reimbursement payments relating to services furnished at the respective properties prior to such foreclosure.
Other factors that may adversely affect the value and successful operation of a residential healthcare property include:
| | |
| • | increasing governmental regulation and supervision; |
| | |
| • | a decline in the financial health, skill or reputation of the operator; |
| | |
| • | increased operating expenses; and |
| | |
| • | competing facilities owned by non-profit organizations or government agencies supported by endowments, charitable contributions, tax revenues, or other sources. |
Self Storage Properties Have Special Risks
6 of the mortgaged properties, representing approximately 1.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date by allocated loan amount (1.2%, 0.0%), are self storage properties.
The self storage facilities market contains low barriers to entry. In addition, due to the short-term nature of self storage leases, self storage properties also may be subject to more volatility in terms of supply and demand than loans secured by other types of properties.
Because of the construction utilized in connection with certain self storage facilities, it might be difficult or costly to convert such a facility to an alternative use. Thus, liquidation value of self storage properties may be substantially less than would be the case if the same were readily adaptable to other uses.
In addition, it is difficult to assess the environmental risks posed by such facilities due to tenant privacy, anonymity and unsupervised access to such facilities. Therefore, such facilities may pose additional environmental risks to investors. The environmental site assessments discussed in this prospectus supplement did not include an inspection of the contents of the self storage units included in the self storage properties. We therefore cannot provide assurance that all of the units included in the self storage properties are free from hazardous substances or other pollutants or contaminants, or that they will remain so in the future.
Mixed-Use Facilities Have Special Risks
3 of the mortgaged properties, representing approximately 1.0% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date by allocated loan amount (1.1%,
S-64
0.0%), are mixed-use properties. Mixed-use mortgaged properties consist of either (i) office and retail components, (ii) retail and multifamily components, (iii) multifamily and office components, (iv) parking garage, retail and office components or (v) office and industrial components, and as such, mortgage loans secured by mixed-use properties will share the risks associated with such underlying components. In addition, a mixed-use property may be managed by a manager that is not experienced in managing all property types comprising a mortgaged property.
Manufactured Housing Community Properties Have Special Risks
3 of the mortgaged properties, representing approximately 0.3% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date of the allocated loan amount (0.0%, 2.7%), are manufactured housing community properties.
Mortgage loans secured by liens on manufactured housing community properties pose risks not associated with mortgage loans secured by liens on other types of income-producing real estate. The successful operation of a manufactured housing community property may depend upon the number of other competing residential developments in the local market, such as:
| | |
| • | other manufactured housing community properties; |
| | |
| • | apartment buildings; and |
| | |
| • | site-built single family homes. |
Other factors may also include:
| | |
| • | the physical attributes of the community, including its age and appearance; |
| | |
| • | location of the manufactured housing community property; |
| | |
| • | the ability of management to provide adequate maintenance and insurance; |
| | |
| • | the types of services or amenities it provides; |
| | |
| • | the property’s reputation; and |
| | |
| • | state and local regulations, including rent control and rent stabilization. |
The manufactured housing community properties 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.
Risks Relating to Certain Assistance Programs
With respect to certain of the mortgage loans, the borrowers or investors in such borrowers may receive tax abatements, subsidies or other assistance from government programs. Generally, the related mortgaged property must satisfy certain requirements, the borrower must observe certain leasing practices and/or the tenant(s) must regularly meet certain income requirements or the borrower or mortgaged property must have certain other characteristics consistent with the government policy related to the applicable program.
Certain of the mortgaged properties are secured by mortgage loans that are eligible (or may become eligible in the future) for and have received low-income or affordable housing tax credits
S-65
or other similar governmental benefits pursuant to certain governmental programs such as Section 42 of the Internal Revenue Code in respect to various units within the mortgaged property or have a material concentration of tenants that rely on rent subsidies under various government funded programs, including the Section 8 Tenant Based Assistance Rental Certificate Program of the United States Department of Housing and Urban Development. Certain of the mortgage loans are secured by, or may be secured in the future by, mortgaged properties that are subject to certain affordable housing covenants, in respect to various units within such mortgaged properties. With respect to certain of the mortgage loans, the borrower may receive tax abatements, subsidies or other assistance from government programs. Generally, the mortgaged property must satisfy certain requirements, the borrower must observe certain leasing practices and/or the tenant(s) must regularly meet certain income requirements or the bo rrower or mortgaged property must have certain other characteristics consistent with the government policy. We can give you no assurance that any government or other assistance programs will be continued in their present form during the terms of the related mortgage loans, that the borrower will continue to comply with the requirements of the programs to enable the borrower to receive the subsidies or assistance in the future, or for the investors in such borrower to continue to receive their tax benefits, or that the level of assistance provided will be sufficient to generate enough revenues for the related borrower to meet its obligations under the related mortgage loans. The related mortgage loan seller may have underwritten the related mortgage loan on the assumption that such assistance will continue. Loss of any applicable assistance could have an adverse effect on the ability of the related borrowers to make timely payments of debt service. In addition, the restrictions described above relating to the use of the related mortgaged property could reduce the market value of the related mortgaged property.
Lack of Skillful Property Management Entails Risks
The successful operation of a real estate project depends upon the property manager’s performance and viability. The property manager is responsible for:
| | |
| • | responding to changes in the local market; |
| | |
| • | planning and implementing the rental structure; |
| | |
| • | operating the property and providing building services; |
| | |
| • | managing operating expenses; and |
| | |
| • | assuring that maintenance and capital improvements are carried out in a timely fashion. |
Properties deriving revenues primarily from short-term sources, such as short-term or month-to-month leases, are generally more management intensive than properties leased to creditworthy tenants under long-term leases.
We make no representation or warranty as to the skills of any present or future managers. In many cases, the property manager is the borrower or an affiliate of the borrower and may not manage properties for non-affiliates. Additionally, we cannot assure you that the property managers will be in a financial condition to fulfill their management responsibilities throughout the terms of their respective management agreements.
Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses
Some of the mortgaged properties securing the mortgage loans included in the trust fund may not be readily convertible (or convertible at all) to alternative uses if those properties were to become unprofitable. Certain of the mortgaged properties are part of a condominium regime, may not be readily convertible due to use and other restrictive covenants imposed by the condominium declaration and other related documents, especially in a situation where a mortgaged property does not represent the entire condominium regime.
Additionally, any vacant movie theater space or other performing arts space would not easily be converted to other uses due to the unique construction requirements of such theaters. In
S-66
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 mortgaged properties. Furthermore, certain mortgaged properties may be subject to certain use restrictions and/or low-income housing restrictions in order to remain eligible for low-income housing tax credits or governmental subsidized rental payments that could prevent the conversion of the mortgaged property to alternative uses. The liquidation value of any mortgaged property, subject to limitations of the kind described above or other limitations on convertibility of use, may be substantially less than would be the case if the mortgaged property were readily adaptable to other uses.
Zoning or other restrictions may also prevent alternative uses. See ‘‘—Zoning Compliance and Use Restrictions May Adversely Affect Property Value’’ below. See also ‘‘—Industrial Properties Have Special Risks,’’ ‘‘—Self Storage Properties Have Special Risks’’ and ‘‘—Manufactured Housing Community Properties Have Special Risk s’’ above.
Mortgage Loans Secured by Leasehold Interests May Expose Investors to Greater Risks of Default and Loss
4 mortgaged properties, securing mortgage loans (identified as Loan Nos. 30, 121, 124 and 138 on Annex A-1 to this prospectus supplement) representing approximately 1.3% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (1.4%, 0.9%), are secured in whole or in part by a first mortgage lien on a leasehold interest under a ground lease on the related mortgaged property, and in some cases not by any mortgage lien on the corresponding fee interest. In addition, 2 mortgaged properties, securing mortgage loans (identified as Loan Nos. 19 and 125 on Annex A-1 to this prospectus supplement) representing approximately 1.5% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (1.7%, 0.0%), are secured by a first mortgage lien on both a fee parcel and a leasehold interest in a separate adjacent parcel.
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 was to be terminated upon a lease default, the lender would lose its security in the leasehold interest. Generally, each related ground lease 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.
Upon the bankruptcy of a lessor or a lessee under a ground lease, the debtor has the right to assume or reject the lease. If a debtor lessor rejects the lease, the lessee has the right to remain in possession of its leased premises for the rent otherwise payable under the lease for the term of the ground lease (including renewals). If a debtor lessee/borrower rejects the lease, the leasehold lender could succeed to the lessee/borrower’s position under the lease only if the lessor specifically grants the lender such right. If both the lessor and the lessee/borrowers are involved in bankruptcy proceedings, the bankrupt lessee/borrower’s right to refuse to treat a ground lease rejected by a bankrupt lessor as terminated may not be enforceable. In such circumstances, a ground lease could be terminated notwithstanding lender protection provisions contained in the ground lease or in the mortgage.
Some of the ground leases securing the mortgaged properties may provide that the ground rent payable under the related ground lease increases during the term of the mortgage loan. These increases may adversely affect the cash flow and net income of the related borrower.
Further, in a 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 Section 363(f) of the Bankruptcy Code (11 U.S.C. Section 363(f)) upon the bankruptcy of a landlord, such sale terminates a lessee’s possessory interest in the property, and
S-67
the purchaser assumes title free and clear of any interest, including any leasehold estates. Pursuant to Section 363(e) of the Bankruptcy Code (11 U.S.C. Section 363(e)), a lessee may request the bankruptcy court to prohibit or condition the statutory sale of the property so as to provide adequate protection of the leasehold interest; however, the court ruled that this provision does not ensure continued possession of the property, but rather entitles the lessee to compensation for the value of its leasehold interest, typically from the sale proceeds. While there are certain circumstances under which a ‘‘free and clear’’ sale under Section 363(f) of the Bankruptcy Code would not be authorized (including that the lessee could not be compelled in a legal or equitable proceeding to accept a monetary satisfaction of his possessory interest, and that none of the other conditions of Section 363(f)(1)(4) of the Bankruptcy Code otherwise permits the sal e), we cannot provide assurances that those circumstances would be present in any proposed sale of a leased premises. As a result, we cannot provide assurances that, in the event of a statutory sale of leased property pursuant to Section 363(f) of the Bankruptcy Code, the lessee may be able to maintain possession of the property under the ground lease. In addition, we cannot assure you that the lessee and/or the lender (to the extent it can obtain standing to intervene) will be able to recoup the full value of the leasehold interest in bankruptcy court.
See ‘‘Certain Legal Aspects of Mortgage Loans—Foreclosure—Leasehold Risks’’ and ‘‘Certain Legal Aspects of Mortgage Loans—Bankruptcy Laws’’ in the prospectus.
Limitations of Appraisals
Appraisals were obtained with respect to each of the mortgaged properties at or about the time of the origination or acquisition of the applicable mortgage loan. In general, appraisals represent the analysis and opinion of qualified appraisers, but appraisals are not guarantees of present or future value. One appraiser may reach a different conclusion than the conclusion that would be reached if a different appraiser were appraising that property. Moreover, the values of the mortgaged properties may have fluctuated significantly since the appraisals were performed. Moreover, 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. That amount could be significantly higher than the amount obtained from the sale of a mortgaged property under a distress or liquidation sale. In certain cases, appraisals may reflect both ‘‘as stabilized’’ and ‘‘as-is’’ values although the appraised value reflected herein with respect to the related mortgaged property may reflect only the ‘‘as-stabilized’’ value. In certain cases, appraisals may reflect only ‘‘as-stabilized’’ values reflecting certain assumptions, such as future construction completion, projected re-tenanting or increased tenant occupancies. For example, with respect to 7 mortgage loans (identified as Loan Nos. 5, 7, 11, 28, 30, 71 and 137 on Annex A-1 to this prospectus supplement), representing approximately 9.8% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (11.0%, 0.0%), the appraised value represented is the ‘‘as-stabilized’’ value or portfolio valuation and the related loan-to-value ratio is based on the ‘‘as-stabilized’’ value. See Annex A-1 to this prospectus supplement. We cannot assure you that the information set forth in this prospectus supplement regarding appraised values or loan-to-value ratios accurately reflects past, present or future market values of the mortgaged properties. 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.
Risks Relating to Underwritten Net Cash Flow
As described under ‘‘Description of the Mortgage Pool—Additional Mortgage Loan Information’’ in this prospectus supplement, underwritten net cash flow means cash flow (including any cash flow from master leases, interest reserves or interest guarantees) as adjusted based on a number of assumptions used by the mortgage loan sellers. No representation is made that the underwritten net cash flows set forth in this prospectus supplement as of the cut-off date or any other date represents actual current net cash flows or that the underwritten net cash
S-68
flows set forth in this prospectus supplement are indicative of future net cash flows. In certain 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. Each originator of commercial mortgage loans has its own underwriting criteria and no assurance can be given that adjustments or calculations made by one originator would be made by other lenders.
In addition, net cash flow reflects calculations and assumptions used by the mortgage loan sellers and should not be used as a substitute for, and may vary (perhaps substantially) from, cash flow as determined in accordance with GAAP as a measure of the results of a mortgaged property’s operation or for cash flow from operating activities determined in accordance with GAAP as a measure of liquidity.
The debt service coverage ratios set forth in this prospectus supplement for the mortgage loans and the mortgaged properties vary, and may vary substantially, from the debt service coverage ratios for the mortgage loans and the mortgaged properties as calculated pursuant to the definition of such ratios as set forth in the related mortgage loan documents. See ‘‘Description of the Mortgage Pool—Additional Mortgage Loan Information’’ for a discussion of the assumptions used in determining net cash flow. The underwriters express no opinion as to the accuracy of the determination of, or the appropriateness or reasonableness of the assumptions used in determining, net cash flow.
Shari’ah Compliant Loans
1 mortgage loan (identified as Loan No. 42 on Annex A-1 to this prospectus supplement), representing approximately 0.7% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (0.7%, 0.0%), is structured to comply with Islamic law (Shari’ah). Title to the mortgaged property is held by the related borrower, which is owned by a corporate service company. The borrower has master leased the related mortgaged property to a master lessee, which is owned by certain Muslim investors. The rent payable pursuant to the master lease is intended to cover the debt service payments required under the related mortgage loan. By its terms, the master lease is expressly subordinate to the related mortgage loan. There is a risk that in a bankruptcy case of the master lessee, the master lease could be recharacterized as a financing lease. If such recharacterization occurred, the master lessee could own the fee interest in the related mortga ged property and the master lease would be viewed as a loan. To mitigate the effect of such recharacterization, the master tenant has been formed as a special purpose entity and a title endorsement was obtained.
Potential Conflicts of Interest
The pooling and servicing agreement provides that the mortgage loans are required to be administered in accordance with the servicing standards without regard to ownership of any certificate by a servicer or any of its affiliates. See ‘‘Servicing of the Mortgage Loans—General’’ in this prospectus supplement.
Notwithstanding the foregoing, the master servicer, the special servicer or any of their respective affiliates may have interests when dealing with the mortgage loans that are in conflict with those of holders of the offered certificates, especially if the master servicer, the special servicer or any of their respective affiliates holds Series 2007-LDP12 non-offered certificates, or has financial interests in or other financial dealings with a borrower under any of the mortgage loans. JER Investors Trust Inc., which we anticipate will be the initial directing certificateholder, is an affiliate of the special servicer. Each of these relationships may create a conflict of interest. For instance, a special servicer or its affiliate that holds Series 2007-LDP12 non-offered certificates might seek to reduce the potential for losses allocable to those certificates from a troubled mortgage loan by deferring acceleration in hope of maximizing future proceeds. However, that action could result in less proceeds to the trust than would be realized if earlier action had been taken. In general, no servicer is required to act in a manner more favorable to the offered
S-69
certificates or any particular class of offered certificates than to the Series 2007-LDP12 non-offered certificates. See ‘‘—Special Servicer May Be Directed to Take Actions’’ below.
Each servicer services and will, in the future, 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 that will be included in the trust. 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 trust. Consequently, personnel of any of the servicers may perform services, on behalf of the trust, with respect to the mortgage loans at the same time as they are performing services, on behalf of other persons, with respect to other mortgage loans secured by properties that compete with the mortgaged properties securing the mortgage loans. This may pose inherent conflicts for the master servicer or the special servicer.
Conflicts may arise because a mortgage loan seller and its 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 respective mortgage loan sellers and their affiliates may acquire, sell or lease properties, or finance loans secured by properties which may include the mortgaged properties securing the pooled mortgage loans or properties that are in the same markets as those mortgaged properties. In addition, certain of the mortgage loans included in the trust may have been refinancings of debt previously held by a mortgage loan seller or an affiliate of a mortgage loan seller and the mortgage loan sellers or 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 trust. Each of the mortgage loan sellers and their affiliates have made and/or may make loans to, or equity investments in, affiliates of the borrowers under the mortgage loans. In the circumstances described above, the interests of those mortgage loan sellers and their affiliates may differ from, and compete with, the interests of the trust fund. For example, with respect to 1 mortgage loan (identified as Loan No. 110 on Annex A-1 to this prospectus supplement), representing approximately 0.2% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (0.2%, 0.0%), the interests in the related borrower secure mezzanine debt that is held by the related mortgage loan seller. In addition, with respect to 18 mortgage loans (identified as Loan Nos. 88, 111, 118, 132, 143, 145, 146, 148, 149, 150, 151, 152, 153, 155, 156, 157, 159 and 161 on Annex A-1 to this prospectus supplement), representing approximately 1.6% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (1.8%, 0.0%), an a ffiliate of the related mortgage loan seller has a direct or indirect ownership interest in the related borrower. In the circumstances described above, the interests of those mortgage loan sellers and their affiliates may differ from, and compete with, the interests of the trust fund. Additional financial interests in, or other financial dealings with, a borrower or its affiliates under any of the mortgage loans may create conflicts of interest.
Each mortgage loan seller is obligated to repurchase or substitute for a mortgage loan sold by it under the circumstances described under ‘‘Description of the Mortgage Pool— Representations and Warranties; Repurchases and Substitutions’’ in this prospectus supplement.
JPMorgan Chase Bank, N.A. is one of the mortgage loan sellers and is an affiliate of each of J.P. Morgan Chase Commercial Mortgage Securities Corp., the depositor, and J.P. Morgan Securities Inc., one of the underwriters. UBS Real Estate Securities Inc. is one of the mortgage loan sellers and is an affiliate of UBS Securities LLC, one of the underwriters. Natixis Real Estate Capital Inc. is one of the mortgage loan sellers and is an affiliate of Natixis Securities North America Inc., one of the underwriters.
Each of the foregoing relationships should be considered carefully by prospective investors.
The managers of the mortgaged properties and the borrowers may experience conflicts of interest in the management and/or ownership of the mortgaged properties because:
| | |
| • | a substantial number of the mortgaged properties are managed by property managers affiliated with the respective borrowers; |
S-70
| | |
| • | 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. |
20 mortgage loans identified under ‘‘Description of the Mortgage Pool—The Whole Loans’’ in this prospectus supplement, representing approximately 20.6% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (23.3%, 0.0%), are each evidenced by one of two or more notes secured by a single mortgage and a single assignment of leases. With respect to 1 of these mortgage loans (identified as Loan No. 5 on Annex A-1 to this prospectus supplement), representing approximately 2.8% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (3.1%, 0.0%), the related subordinate companion loan is evidenced by a B note that secures repayment of future advances that may be made by the holder of that note; however, the obligations of t he holder of that note to make those future advances is subject to certain conditions, and no funds have yet been advanced. Each related companion loan, in each case, will not be included as an asset of the trust fund. However, each mortgage loan included in the trust and its companion loan(s), other than the Carespring Portfolio loan and the Logan Portfolio loans, will be serviced under the pooling and servicing agreement, subject to the related intercreditor agreement. The Carespring Portfolio loan and the Logan Portfolio loans and the related pari passu companion loans are being serviced under the JPMCC 2007-LDP11 pooling and servicing agreement. The holders of the pari passu companion loans relating to the Carespr ing Portfolio loan and the Logan Portfolio loans may have certain rights with respect to these mortgage loans, which may include the right, under certain conditions, to consent to, or provide advice with respect to, various modifications and waivers or other matters affecting those mortgage loans. In the case of each of the AB mortgage loans and the Sawgrass Mills Mall loan, the holders of the related subordinate companion loan(s) will also have certain rights with respect to the related mortgage loan included in the trust fund, which may include the right, under certain conditions, to consent to, or provide advice with respect to, various modifications and waivers or other matters affecting that mortgage loan and certain actions proposed by the special servicer with respect to the related mortgaged property, to make cure payments on that mortgage loan or to purchase that mortgage loan if that mortgage loan is in default. See ‘‘Description of the Mortgage Pool—The Whole Loans’’ in this prospectus supplement. In exercising the rights described above, no holder of any companion loan has any obligation to consider the interests of, or impact on, the trust or the holders of the certificates. The holder of any companion loan may have interests in conflict with, and its decisions or other actions may adversely affect, the certificateholders.
Special Servicer May Be Directed to Take Actions
In connection with the servicing of the specially serviced mortgage loans under the pooling and servicing agreement, the special servicer may, at the direction of the directing certificateholder (or, with respect to certain AB mortgage loans, in certain circumstances, the holder of a related AB subordinate companion loan, or with respect to the Sawgrass Mills Mall loan, certain holders of the related subordinate companion loans) take actions with respect to the specially serviced mortgage loans that could adversely affect the holders of some or all of the classes of offered certificates. The directing certificateholder will be controlled by the controlling class certificateholders. Each of the directing certificateholder, the operating advisor, the holders of the subordinate companion loans and the holders of the pari passu companion loans may have interests in conflict with those of the certificateholders of the classes of offered certificates. As a result, it is possible that the directing certificateholder, the operating advisor, the holders of the subordinate companion loans or the holders of the pari passu companion loans may direct the special servicer to take actions that conflict with the interests of certain classes of the offered certificates. However, the special servicer is not permitted to take actions that are prohibited by law or violate the servicing standards or the terms of the mortgage loan documents. In addition, the special servicer may be removed without cause by the directing certificateholder as described
S-71
in this prospectus supplement. It is expected that an affiliate of the special servicer will be the initial directing certificateholder for the offered certificates. See ‘‘Description of the Mortgage Pool—The Whole Loans,’’ ‘‘Servicing of the Mortgage Loans—General’’ and ‘‘Transaction Parties—The Special Servicer’’ in this prospectus supplement.
In the case of the Carespring Portfolio loan and the Logan Portfolio loans that are being serviced under the JPMCC 2007-LDP11 pooling and servicing agreement, the special servicer under that pooling and servicing agreement, may, at the direction of the directing certificateholder under that pooling and servicing agreement, take actions with respect to the applicable mortgage loan that could adversely affect the holders of some or all of the classes of the offered certificates. The directing certificateholder for each of the Carespring Portfolio loan and the Logan Portfolio loans under the JPMCC 2007-LDP11 pooling and servicing agreement will exercise its rights pursuant to that pooling and servicing agreement and may have interests in conflict with those of the certificateholders of the classes of offered certificate s. As a result, it is possible that the directing certificateholder for each of the Carespring Portfolio loan and the Logan Portfolio loans under the JPMCC 2007-LDP11 pooling and servicing agreement may direct the related special servicer to take actions that conflict with the interests of certain classes of the offered certificates. However, the special servicer for the Carespring Portfolio loan and the Logan Portfolio loans under the JPMCC 2007-LDP11 pooling and servicing agreement is not permitted to take actions that are prohibited by law or violate the servicing standards or the terms of the mortgage loan documents. In addition, the special servicer for the Carespring Portfolio loan and the Logan Portfolio loans may be removed without cause by the directing certificateholder under the JPMCC 2007-LDP11 pooling and servicing agreement as described in this prospectus supplement. See ‘‘Description of the Mortgage Pool—The Whole Loans,’’ ‘‘Servicing of the Mortgage Loans—General’’ and ‘‘Transaction Parties—The Special Servicer’’ in this prospectus supp lement.
Bankruptcy Proceedings Entail Certain Risks
Under federal bankruptcy law, the filing of a petition in bankruptcy by or against a borrower will stay the sale of the mortgaged property owned by that borrower, as well as the commencement or continuation of a foreclosure action. In addition, even if a court determines that the value of the mortgaged property is less than the principal balance of the mortgage loan it secures, the court may prevent a lender from foreclosing on the mortgaged property (subject to certain protections available to the lender). As part of a restructuring plan, a court also may reduce the amount of secured indebtedness to the then-current value of the mortgaged property, which would make the lender a general unsecured creditor for the difference between the then-current value and the amount of its outstanding mortgage indebtedness. A bankruptcy court also may: (1) grant a debtor a reasonable time to cure a payment default on a mortgage loan; (2) reduce periodic payments due under a mortgage loan; (3) change the rate of interest due on a mortgage loan; or (4) otherwise alter the mortgage loan’s repayment schedule.
Moreover, the filing of a petition in bankruptcy by, or on behalf of, a junior lienholder may stay the senior lienholder from taking action to foreclose on the junior lien. Additionally, the borrower’s trustee or the borrower, as debtor-in-possession, has certain special powers to avoid, subordinate or disallow debts. In certain circumstances, the claims of the trustee may be subordinated to financing obtained by a debtor-in-possession subsequent to its bankruptcy.
Under federal bankruptcy law, the lender will be stayed from enforcing a borrower’s assignment of rents and leases. Federal bankruptcy law also may interfere with the master servicer’s or the special servicer’s ability to enforce lockbox requirements. The legal proceedings necessary to resolve these issues can be time consuming and costly and may significantly delay or diminish the receipt of rents. Rents also may escape an assignment to the extent they are used by the borrower to maintain the mortgaged property or for other court authorized expenses.
Additionally, pursuant to subordination agreements for certain of the mortgage loans, the subordinate lenders may have agreed that they will not take any direct actions with respect to
S-72
the related subordinated debt, including any actions relating to the bankruptcy of the borrower, and that the holder of the mortgage loan will have all rights to direct all such actions. There can be no assurance that in the event of the borrower’s bankruptcy, a court will enforce such restrictions against a subordinated lender.
In its decision in In re 203 North LaSalle Street Partnership, 246 B.R. 325 (Bankr. N.D. Ill. March 10, 2000), the United States Bankruptcy Court for the Northern District of Illinois refused to enforce a provision of a subordination agreement that allowed a first mortgagee to vote a second mortgagee’s claim with respect to a Chapter 11 reorganization plan on the grounds that prebankruptcy contracts cannot override rights expressly provided by the Bankruptcy Code. This holding, which at least one court has already followed, potentially limits the ability of a senior lender to accept or reject a reorganization plan or to control the enforcement of remedies against a common borrower over a subordinated lender’s objections.
As a result of the foregoing, the trust’s recovery with respect to borrowers in bankruptcy proceedings may be significantly delayed, and the aggregate amount ultimately collected may be substantially less than the amount owed.
Certain of the mortgage loans may have sponsors that have previously filed for bankruptcy protection, which in some cases may have involved the same property which currently secures the mortgage loan. In each case, the related entity or person has emerged from bankruptcy.
Risks Relating to Prepayments and Repurchases
The yield to maturity on your certificates will depend, in significant part, upon the rate and timing of principal payments on the mortgage loans. For this purpose, principal payments include both voluntary prepayments, if permitted, and involuntary prepayments, such as prepayments resulting from casualty or condemnation, defaults and liquidations or repurchases upon breaches of representations and warranties.
In addition, because the amount of principal that will be distributed to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A Certificates will generally be based upon the particular loan group in which the related mortgage loan is deemed to be a part, the yield on the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-SB certificates will be particularly sensitive to prepayments on mortgage loans in loan group 1 and the yield on the Class A-1A certificates will be particularly sensitive to prepayments on mortgage loans in loan group 2.
The yield on each class of Certificates with a pass-through rate equal to, based on, or limited by the WAC Rate could be adversely affected if mortgage loans with higher interest rates pay faster than the mortgage loans with lower interest rates. The pass-through rates on those classes of certificates may be adversely affected as a result of a decrease in the WAC Rate even if principal prepayments do not occur. See ‘‘Yield and Maturity Considerations’’ in this prospectus supplement.
The Class X certificates will not be entitled to distributions of principal but instead will accrue interest on their notional amount. Because the notional amount of the Class X certificates is based upon the outstanding certificate balances of certain classes of the other certificates, the yield to maturity on the Class X certificates will be extremely sensitive to the rate and timing of prepayments of principal, liquidations and principal losses on the mortgage loans. Also, 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 certificates. Investors in the Class X 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 inves tments.
The investment performance of your certificates may vary materially and adversely from your expectations if the actual rate of prepayment on the mortgage loans is higher or lower than you anticipate.
Any changes in the weighted average lives of your certificates may adversely affect your yield. Prepayments resulting in a shortening of weighted average lives of your certificates may be
S-73
made at a time of low interest rates when you may be unable to reinvest the resulting payment of principal on your certificates at a rate comparable to the effective yield anticipated by you in making your investment in the certificates, while delays and extensions resulting in a lengthening of those weighted average lives may occur at a time of high interest rates when you may have been able to reinvest principal payments that would otherwise have been received by you at higher rates.
Although most of the mortgage loans have prepayment protection in the form of lockout periods with defeasance provisions or with yield maintenance or prepayment premium provisions, we cannot assure you that the related borrowers will refrain from prepaying their mortgage loans due to the existence of yield maintenance charges or prepayment premiums or that involuntary prepayments will not occur.
Voluntary prepayments, if permitted, generally require the payment of a yield maintenance charge or a prepayment premium unless the mortgage loan is prepaid within a 3-month period prior to the stated maturity date as the case may be. However, certain of the mortgage loans permit voluntary prepayment without payment of a yield maintenance charge at any time or without payment of a yield maintenance charge or prepayment premium for a longer open period of up to 24 months prior to the stated maturity date or anticipated repayment date, or after the anticipated repayment date. See ‘‘Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans’’ in this prospectus supplement for an overview of the open periods. Additionally, none of the mortgage loans with anticipated repayment dates require a yield maintenance charge after the related anticipated repayment date. See ‘‘Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans’’ in this prospectus supplement. In any case, we cannot assure you that the related borrowers will refrain from prepaying their mortgage loans due to the existence of yield maintenance charges or prepayment premiums or that involuntary prepayments will not occur.
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; |
| | |
| • | the length of any prepayment lockout period; |
| | |
| • | the level of prevailing interest rates; |
| | |
| • | the availability of mortgage credit; |
| | |
| • | the applicable yield maintenance charges and prepayment premiums; |
| | |
| • | the master servicer’s or the special servicer’s ability to enforce those charges or 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. |
Generally, no yield maintenance charge or prepayment premium will be required for prepayments in connection with a casualty or condemnation unless, in the case of some of the mortgage loans, an event of default has occurred and is continuing. We cannot assure you that the obligation to pay any yield maintenance charge or prepayment premium will be enforceable. See ‘‘Risk Factors—Risks Relating to Enforceability of Yield Maintenance Charges, Prepayment Premiums or Defeasance Provisions’’ in the prospectus. In addition, certain of the mortgage loans permit the related borrower, after a 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 balanc e of the mortgage loan), which may in certain cases not be accompanied by any prepayment consideration; provided that the prepayment of the remaining balance is made within a specified period of time following the date of the application of proceeds or award.
S-74
Certain shortfalls in interest as a result of involuntary prepayments may reduce the available distribution amount. In addition, if a mortgage loan seller repurchases any mortgage loan from the trust due to breaches of representations or warranties, the repurchase price paid will be passed through to the holders of the certificates with the same effect as if the mortgage loan had been prepaid in part or in full, and no yield maintenance charge or prepayment premium will be payable. Mezzanine lenders and holders of subordinate companion loans may have the option to purchase the related mortgage loan after certain defaults, and the purchase price may not include any yield maintenance payments or prepayment charges. In addition, certain of the mortgage loans are secured by mortgaged properties that have tenants or a master lessee that has an option to purchase the mortgaged property. Generally, such options are subject to and subordinate to the related mortgage loa n. A repurchase or the exercise of a purchase option may adversely affect the yield to maturity on your certificates.
Certain of the mortgage loans are secured in part by letters of credit and/or cash reserves that in each such case:
(i) will be released to the related borrower, in whole or in part, upon satisfaction by that borrower of certain performance related conditions, which may include, in some cases, meeting debt service coverage ratio levels and/or satisfying leasing conditions; and
(ii) if not so released, may, at the discretion of the lender, prior to loan maturity (or earlier loan default or loan acceleration), be drawn on and/or applied to prepay or defease the subject mortgage loan if such performance related conditions are not satisfied within specified time periods.
In addition, with respect to certain of the mortgage loans, if the borrower does not satisfy the performance conditions and does not qualify for the release of the related cash reserve, the reserve, less, in some cases, a yield maintenance charge or prepayment premium (which, in some cases, may be paid out of the related additional collateral), may be applied to reduce the principal balance of the mortgage loan and the remaining unpaid balance of the mortgage loan may be re-amortized over the remaining amortization term. If such amount is used to prepay or defease the mortgage loan as described in paragraph (ii) above, there is no obligation on the part of the related borrower to replenish such cash reserves.
Optional Early Termination of the Trust Fund May Result in an Adverse Impact on Your Yield or May Result in a Loss
The certificates will be subject to optional early termination by means of the purchase of the mortgage loans in the trust fund. We cannot assure you that the proceeds from a sale of the mortgage loans and/or REO properties will be sufficient to distribute the outstanding certificate balance plus accrued interest and any undistributed shortfalls in interest accrued on the certificates that are subject to the termination. Accordingly, the holders of offered certificates affected by such a termination may suffer an adverse impact on the overall yield on their certificates, may experience repayment of their investment at an unpredictable and inopportune time or may even incur a loss on their investment. See ‘‘Description of the Certificates— Termination; Retirement of Certificates’’ in this prospectus supplement.
Mortgage Loan Sellers May Not Be Able to Make a Required Repurchase or Substitution of a Defective Mortgage Loan
Each mortgage loan seller is the sole warranting party in respect of the mortgage loans sold by such mortgage loan seller to us. Neither we nor any of our affiliates (except, in certain circumstances, for JPMorgan Chase Bank, N.A. solely in its capacity as a mortgage loan seller) are obligated to repurchase or substitute any mortgage loan in connection with either a material breach of any mortgage loan seller’s representations and warranties or any material document defects, if such mortgage loan seller defaults on its obligation to do so. We cannot provide assurances that the mortgage loan sellers will have the financial ability to effect such repurchases
S-75
or substitutions. Any mortgage loan that is not repurchased or substituted and that is not a ‘‘qualified mortgage’’ for a REMIC may cause the trust fund to fail to qualify as one or more REMICs or cause the trust fund to incur a tax. See ‘‘Transaction Parties—The Mortgage Loan Sellers’’ and ‘‘Description of the Mortgage Pool—Representations and Warranties; Repurchases and Substitutions’’ in this prospectus supplement and ‘‘Description of the Pooling Agreements— Representations and Warranties; Repurchases’’ in the prospectus.
Risks Relating to Interest on Advances and Special Servicing Compensation
To the extent described in this prospectus supplement, the master servicer, the special servicer or the trustee, as applicable, will be entitled to receive interest on unreimbursed advances at the ‘‘Prime Rate’’ as published in The Wall Street Journal. This interest will generally accrue from the date on which the related advance is made or the related expense is incurred to the date of reimbursement. In addition, under certain circumstances, including delinquencies in the payment of principal and/or interest, a mortgage loan will be specially serviced and the special servicer is entitled to compensation for special servicing activities. The right to receive interest on advances or special servicing compensation is generally senior to the rights of certificateholders to receive distributions o n 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.
Risks of Limited Liquidity and Market Value
Your certificates will not be listed on any national securities exchange or traded on any automated quotation systems of any registered securities association, and there is currently no secondary market for your certificates. While we have been advised by the underwriters that one or more of them, through one or more of their affiliates, currently intend to make a market in the offered certificates, none of the underwriters has any obligation to do so, any market making may be discontinued at any time, and there can be no assurance that an active secondary market for the offered certificates will develop. Additionally, one or more purchasers may purchase substantial portions of one or more classes of offered certificates. Accordingly, you may not have an active or liquid secondary market for your certificates. Lack of liquidity could result in a substantial decrease in the market value of your certificates. The market value of your certificates also may be affec ted by many other factors, including the then-prevailing interest rates and market perceptions of risks associated with commercial mortgage lending. See ‘‘Risk Factors— Your Ability to Resell Certificates May Be Limited Because of Their Characteristics’’ in the prospectus. Certain certificates may be sold to affiliates of underwriters and underwriters may retain certain certificates for investment purposes.
Different Timing of Mortgage Loan Amortization Poses Certain Risks
As principal payments or prepayments are made on a mortgage loan that is part of a pool or group of mortgage loans, the pool or group will be subject to more concentration risks with respect to the diversity of mortgaged properties, types of mortgaged properties and number of borrowers, as described in this prospectus supplement. Classes that have a later sequential designation or a lower payment priority are more likely to be exposed to this concentration risk than are classes with an earlier sequential designation or a higher priority. This is so because principal on the offered certificates (or offered certificates entitled to payments from a particular loan group) is generally payable in sequential order, and no class entitled to distribution of principal generally receives principal until the certificate balance of the preceding class or classes entitled to receive principal has been reduced to zero.
Subordination of Subordinate Offered Certificates
As described in this prospectus supplement, unless your certificates are Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB, Class A-1A or Class X certificates, your right to receive distributions of amounts collected or advanced on or in respect of the mortgage loans will be subordinated to those of the holders of the offered certificates with an earlier sequential designation.
S-76
See ‘‘Description of the Certificates—Distributions’’ and ‘‘Description of the Certificates— Subordination; Allocation of Collateral Support Deficit’’ in this prospectus supplement.
Limited Information Causes Uncertainty
Some of the mortgage loans that we intend to include in the trust are mortgage loans that were made to enable the related borrower to acquire the related mortgaged property.
Accordingly, for certain of these mortgage loans, limited or no historical operating information is available with respect to the related mortgaged properties. As a result, you may find it difficult to analyze the historical performance of those mortgaged properties.
Environmental Risks Relating to the Mortgaged Properties
The trust could become liable for a material adverse environmental condition at an underlying mortgaged property. Any such potential liability could reduce or delay payments on the offered certificates.
Each of the mortgaged properties was either (i) subject to environmental site assessments prior to the time of origination of the related mortgage loan (or in certain limited cases, after origination), including Phase I site assessments or updates of previously performed Phase I site assessments, or (ii) subject to a lender’s environmental insurance policy. In some cases, Phase II site assessments also have been performed. Although assessments were made on the majority of the mortgaged properties and these involved site visits and other types of review, we cannot assure you that all environmental conditions and risks were identified.
Except as described below, none of the environmental assessments revealed any material adverse environmental condition or circumstance at any mortgaged property except for those:
| | |
| • | that will be remediated or abated in all material respects by the closing date; |
| | |
| • | for which an escrow or letter of credit for the remediation was established; |
| | |
| • | for which an environmental insurance policy was obtained from a third party insurer; |
| | |
| • | for which the consultant recommended an operations and maintenance plan with respect to the applicable mortgaged property or periodic monitoring of nearby properties, which recommendations are consistent with industry practice; |
| | |
| • | for which the borrower, the principal of the borrower or another financially responsible party has provided an indemnity or is required to take, or is liable for the failure to take, such actions, if any, with respect to such matters as have been required by the applicable governmental authority or recommended by the environmental assessments; |
| | |
| • | for which such conditions or circumstances were investigated further and the environmental consultant recommended no further action or remediation; |
| | |
| • | as to which the borrower or other responsible party obtained a ‘‘no further action’’ letter or other evidence that governmental authorities are not requiring further action or remediation (or as to which the borrower or other responsible party will be obtaining such ‘‘no further action’’ or remediation letter and a holdback or other assurance was made to secure the receipt of such letter); or |
| | |
| • | that would not require substantial cleanup, remedial action or other extraordinary response under environmental laws. |
In certain cases, the identified condition was related to the presence of asbestos-containing materials, lead-based paint, mold and/or radon. Where these substances were present, the environmental consultant generally recommended, and the related mortgage loan documents, with certain exceptions, generally required, the establishment of an operation and maintenance plan to address the issue or, in some cases involving asbestos-containing materials and lead-based
S-77
paint, a containment, abatement or removal program. Other identified conditions could, for example, include leaks from storage tanks and on-site spills. Corrective action, as required by the regulatory agencies, has been or is currently being undertaken and, in some cases, the related borrowers have made deposits into environmental reserve accounts. However, we cannot assure you that any environmental indemnity, insurance, letter of credit or reserve amounts will be sufficient to remediate the environmental conditions or that all environmental conditions have been identified or that operation and maintenance plans will be put in place and/or followed. Additionally, we cannot assure you that actions of tenants at mortgaged properties will not adversely affect the environmental condition of the mortgaged properties.
At the mortgaged property securing the mortgage loan identified as Loan No. 1 on Annex A-1 to this prospectus supplement, representing approximately 6.5% (7.3%, 0.0%) of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, a Phase I, dated July 6, 2007, reported that the mortgaged property was occupied from the early 1960’s until 2003 by a chemical manufacturing and processing facility operated by Allied Chemical Corporation (later Honeywell International) and that these past uses have resulted in releases of volatile organic compounds to soil and groundwater underlying the mortgaged property. Honeywell International is conducting remediation under the oversight of the California Regional Water Quality Control Board, Los Angeles Region. A ‘‘restricted no further action determination’’ for shallow soils was issued by the California Regional Water Quality Control Board, Los Angeles Region, in 2005. The ‘‘restricted no further action determination’’ pertains only to soils ranging in depth from 0 to 10 feet and requires that the portion of the mortgaged property covered by the ‘‘restricted no further action determination’’ may only be used for industrial or commercial uses. Soil vapor, soil at depths greater than 10 feet, and groundwater at the mortgaged property remain impacted with volatile organic compounds. Honeywell International plans to address these conditions through implementation of a soil vapor extraction system, vapor barrier and passive venting system, and groundwater remediation under the continued oversight of the California Regional Water Quality Control Board, Los Angeles Region. There can be no assurance that Honeywell International or any responsible party will complete the required remediation, or that additional investigation or remediation will not be required.
In the case of 1 mortgage loan (identified as Loan No. 99 on Annex A-1 to this prospectus supplement, representing approximately 0.2% of the aggregate principal balance of the pool of mortgage loans as of the cut off date (0.2%, 0.0%), the Steelite Building and the Newspaper Holdings Building mortgaged properties securing the mortgage loan are subject to the consent orders and agreement with the Commonwealth of Pennsylvania Department of Environmental Protection (‘‘PDEP’’), dated February 21, 2006 and June 18, 2002 respectively, relating to the remediation of lead-impacted surface soil and pond sediments by non-borrower responsible parties, restricting the use of the mortgaged properties to industrial use and granting access to PDEP to monitor the re-development of the mortgaged properties.
See ‘‘Transaction Parties—The Sponsors’’ and ‘‘Servicing of the Mortgage Loans—Realization Upon Defaulted Mortgage Loans’’ in this prospectus supplement and ‘‘Risk Factors—Failure to Comply with Environmental Law May Result in Additional Losses’’ and ‘‘Certain Legal Aspects of Mortgage Loans—Environmental Risks’’ in the prospectus.
Tax Considerations Relating to Foreclosure
If the trust acquires a mortgaged property pursuant to a foreclosure or deed in lieu of foreclosure, the special servicer must retain an independent contractor to operate the property. Among other items, the independent contractor generally will not be able to perform construction work other than repair, maintenance or certain types of tenant build-outs, unless the construction was at least 10.0% completed when the mortgage loan defaulted or the default of the mortgage loan becomes imminent. Any net income from the operation of the property (other than qualifying ‘‘rents from real property’’), or any rental income based on the net profits of a tenant or sub-tenant or allocable to a non-customary service, will subject the lower-tier REMIC to federal tax on that income at the highest marginal corporate tax rate (currently 35%)
S-78
and possibly state or local tax. In that event, the net proceeds available for distribution to certificateholders will be reduced. The special servicer may permit the lower-tier REMIC to earn ‘‘net income from foreclosure property’’ that is subject to tax if it determines that the net after-tax benefit to certificateholders is greater than under another method of operating or net leasing the mortgaged property. In addition, if the trust were to acquire one or more mortgaged properties pursuant to a foreclosure or deed in lieu of foreclosure, upon acquisition of those mortgaged properties, the trust 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.
Risks Associated with One Action Rules
The ability to realize upon the mortgage loans may be limited by the application of state and federal laws. For example, several states (including California) have laws that prohibit more than one ‘‘judicial action’’ to enforce a mortgage obligation, and some courts have construed the term ‘‘judicial action’’ broadly. Accordingly, the special servicer is required to obtain advice of counsel prior to enforcing any of the trust fund’s rights under any of the mortgage loans that include mortgaged properties where a ‘‘one action’’ rule could be applicable. In the case of a multi-property mortgage loan that 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 properti es located in states where judicial foreclosure is the only permitted method of foreclosure. The application of other state and federal laws may delay or otherwise limit the ability to realize on defaulted mortgage loans. See ‘‘Certain Legal Aspects of Mortgage Loans— Foreclosure’’ in the prospectus.
Potential Absence of Attornment Provisions Entails Risks
In some jurisdictions, if tenant leases are subordinate to the liens created by the mortgage and do not contain attornment provisions (i.e., provisions requiring the tenant to recognize a successor owner following foreclosure as landlord under the lease), the leases may terminate upon the transfer of the property to a foreclosing lender or purchaser at foreclosure. Not all leases were reviewed to ascertain the existence of attornment or subordination provisions. Accordingly, if a mortgaged property is located in such a jurisdiction and is leased to one or more desirable tenants under leases that are subordinate to the mortgage and do not contain attornment provisions, such mortgaged property could experience a further decline in value if such tenants’ leases were terminated. This is particularly likely if such tenants were paying above-market rents or could not be replaced.
If a lease is not subordinate to a mortgage, the trust will not possess the right to dispossess the tenant upon foreclosure of the mortgaged property (unless otherwise agreed to with the tenant). If the lease contains provisions inconsistent with the mortgage (e.g., provisions relating to application of insurance proceeds or condemnation awards) or which could affect the enforcement of the lender’s rights (e.g., a right of first refusal to purchase the property), the provisions of the lease will take precedence over the provisions of the mortgage.
Property Insurance, Including Terrorism Insurance, May Not Be Sufficient
All of the mortgage loans require the related borrower to maintain, or cause to be maintained, property insurance (which, in some cases, is provided by allowing a tenant to self-insure). However, the mortgaged properties may suffer casualty losses due to risks that were not covered by insurance or for which insurance coverage is inadequate. Specifically, certain of the mortgage loans may have insurance coverage that specifically excludes coverage for losses due to mold, certain acts of nature, terrorism activities or other comparable conditions or events. In addition, approximately 17.5%, 12.6%, 11.3% and 0.1% of the mortgaged properties, by aggregate principal balance of the pool of mortgage loans as of the cut-off date (approximately
S-79
17.9%, 12.8%, 9.5% and 0.1%, respectively, of the aggregate principal balance of the mortgage loans in loan group 1 as of the cut-off date, and approximately 14.2%, 10.9%, 24.8%, and 0.0%, respectively, of the aggregate principal balance of the mortgage loans in loan group 2 as of the cut-off date) by allocated loan amount, are located in California, Florida, Texas and Louisiana, respectively, and certain of the mortgage loans are located in coastal areas of certain other states. These states and areas have historically been at greater risk regarding acts of nature (such as earthquakes, floods and hurricanes) than other states. The mortgage loans generally do not expressly require borrowers to maintain insurance coverage for earthquakes, hurricanes or floods and we cannot assure you that borrowers will attempt or be able to obtain adequate insurance against such risks. Moreover, if reconstruction or any major repairs are required, changes in laws may materially affect the borrower’s ability t o effect any reconstruction or major repairs or may materially increase the costs of the reconstruction or repairs. Certain mortgage loans are secured by improvements for which coverage for acts of terrorism have been waived, are not required or are required only if certain conditions (such as availability at reasonable rates or maximum cost limits) are satisfied.
Following the September 11, 2001 terrorist attacks in the New York City area and in the Washington, D.C. area, many reinsurance companies (which assume some of the risk of policies sold by primary insurers) eliminated coverage for acts of terrorism from their reinsurance policies. Without that reinsurance coverage, primary insurance companies would have to assume that risk themselves, which may cause them to eliminate such coverage in their policies, increase the amount of the deductible for acts of terrorism or charge higher premiums for such coverage. In order to offset this risk, Congress passed the Terrorism Risk Insurance Act of 2002, which established the Terrorism Insurance Program.
The Terrorism Insurance Program was originally scheduled to expire on December 31, 2005. However, on December 22, 2005, the Terrorism Risk Insurance Extension Act of 2005 was enacted, which extended the duration of the Terrorism Insurance Program until December 31, 2007.
The Terrorism Insurance Program is administered by the Secretary of the Treasury and through December 31, 2007 will provide some financial assistance from the United States Government to insurers in the event of another terrorist attack that results in an insurance claim. The program applies to United States risks only and to acts that are committed by an individual or individuals acting on behalf of a foreign person or foreign interest as an effort to influence or coerce United States civilians or the United States Government.
In addition, no compensation will be paid under the Terrorism Insurance Program unless the aggregate industry losses relating to such act of terror exceed $100 million. As a result, unless the borrowers obtain separate coverage for events that do not meet these thresholds (which coverage may not be required by the respective loan documents and may not otherwise be obtainable), such events would not be covered.
The Treasury Department has established procedures for the program under which the federal share of compensation will be equal to 85% of that portion of insured losses that exceeds an applicable insurer deductible required to be paid during each program year. The federal share in the aggregate in any program year may not exceed $100 billion (and the insurers will be liable for any amount that exceeds this cap).
Through December 2007, insurance carriers are required under the program to provide terrorism coverage in their basic policies providing ‘‘special’’ form coverage. Any commercial property and casualty terrorism insurance exclusion that was in force on November 26, 2002 is automatically voided to the extent that it excludes losses that would otherwise be insured losses. Any state approval of such types of exclusions in force on November 26, 2002 is also voided.
The various forms of insurance maintained with respect to any of the mortgaged properties, including casualty insurance, environmental insurance and earthquake insurance, may be provided under a blanket insurance policy. That blanket insurance policy will also cover other real properties, some of which may not secure mortgage loans in the trust. As a result of total limits
S-80
under any of those blanket policies, losses at other properties covered by the blanket insurance policy may reduce the amount of insurance coverage with respect to a property securing one of the mortgage loans in the trust fund.
Some of the mortgage loans specifically require terrorism insurance, but this insurance may be required only to the extent it can be obtained for premiums less than or equal to a ‘‘cap’’ amount specified in the related mortgage loan documents, only if it can be purchased at commercially reasonable rates, only with a deductible at a certain threshold and/or other similar conditions.
With respect to 1 mortgage loan (identified as Loan No. 1) on Annex A-1 to this prospectus supplement, representing approximately 6.5% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (7.3%, 0.0%), all risk insurance and loss of rents or business income insurance policies required under the mortgage will be required to cover perils of terrorism and acts of terrorism, provided, however, upon the initial expiration and renewal of such policies following the origination date of the related mortgage loan (and each expiration and renewal thereafter), terrorism insurance coverage is only required in an amount equal to the lesser of (i) one hundred fifty percent (150%) of the cost of the first year premium of the all risk hazard policy and (2) two hundred percent (200%) of the cost of the first year stand-alone terrorism policy premium.
With respect to 1 mortgage loan (identified as Loan No. 4 on Annex A-1 to this prospectus supplement), representing approximately 2.8% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (3.1%, 0.0%), terrorism insurance is only required to the extent that such insurance can be purchased for an annual premium not in excess of $175,000.
With respect to 1 mortgage loan (identified as Loan No. 5 on Annex A-1 to this prospectus supplement), representing approximately 2.8% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (3.1%, 0.0%), terrorism insurance is only required to the extent that such insurance can be purchased for an annual premium that is not in excess of $150,000, which dollar amount may be adjusted to reflect any increase during the preceding year in the consumer price index.
With respect to 1 mortgage loan (identified as Loan No. 10 on Annex A-1 to this prospectus supplement), representing approximately 2.5% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (2.8%, 0.0%), terrorism insurance is only required to the extent that such insurance can be purchased for an annual premium that is not in excess of $75,000.
See ‘‘Description of Top Fifteen Mortgage Loans or Groups of Cross-Collateralized Mortgage Loans’’ in Annex A-3 to this prospectus supplement for more information regarding the mortgage loans described above.
Other mortgage loans may have similar limitations to those described above that limit the related borrower obligation to obtain terrorism insurance. With respect to certain of the mortgage loans, the related mortgage loan documents generally provide that the borrowers are required to maintain comprehensive casualty insurance providing ‘‘special’’ form coverage but may not specify the nature of the specific risks required to be covered by such insurance policies. With respect to certain mortgage loans in the trust, the related borrower is not required to maintain any terrorism insurance coverage either as part of its policy providing ‘‘special’’ form coverage or under a stand-alone policy.
Even if the mortgage loan documents specify that the related borrower must maintain casualty insurance providing ‘‘special’’ form coverage 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, based on inquiry consistent with the servicing standards, that either (a) such insurance is not available at any rate or (b) such insurance is not available at commercially reasonable rates and that such hazards are not at the time commonly insured
S-81
against for properties similar to the related mortgaged property and located in or around the region in which such related mortgaged property is located. Additionally, if the related borrower fails to maintain such insurance, the master servicer or the special servicer, as applicable, will not be required to maintain such terrorism insurance coverage if the special servicer determines, in accordance with the servicing standards, that such insurance is not available for the reasons set forth in (a) or (b) of 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 estate properties such as the mortgaged properties are subject to renewal on an annual basis. If such coverage is not currently in effect, is not adequate or is ultimately not continued with respect to some of the mortgaged properties and one of those properties suffers a casualty loss as a result of a terrorist act, then the resulting casualty loss could reduce the amount available to make distributions on your certificates.
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.
Zoning Compliance and Use Restrictions May Adversely Affect Property Value
Certain of the mortgaged properties may not comply with current zoning laws, including density, use, parking, height and set back requirements, due to changes in zoning requirements after such mortgaged properties were constructed. These properties, as well as those for which variances or special permits were issued or for which non-conformity with current zoning laws are 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 use or structure to comply with the existing or new law; however, the borrower may not be able to continue the non-conforming use or rebuild the non-conforming 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 addition, certain of the mortgaged properties may be subject to certain restrictions imposed pursuant to restrictive covenants, reciprocal easement agreements or operating agreements or historical landmark designations 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 use or character of the improvements or the properties, limitations affecting noise and parking requirements, among other things, and limitations on the borrowers’ right to operate certain types of facilities within a prescribed radius. These limitations could adversely affect the ability of the related borrower to lease the mortgaged property on favorable terms, thus adversely affecting the borrower’s ability to f ulfill its obligations under the related mortgage loan.
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, such as
S-82
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’’ in the prospectus. The expenditure of these costs or the imposition of injunctive relief, penalties or fines in connection with the borrower’s noncompliance could negatively impact the borrower’s cash flow and, consequently, its ability to pay its mortgage loan.
No Reunderwriting of the Mortgage Loans
We have not reunderwritten the mortgage loans. Instead, we have relied on the representations and warranties made by the mortgage loan sellers, and the applicable mortgage loan seller’s obligation to repurchase, substitute or cure a mortgage loan in the event that a representation or warranty was not true when made and such breach materially and adversely affects the value of the mortgage loan or the interests of the certificateholders. These representations and warranties do not cover all of the matters that we would review in underwriting a mortgage loan and you should not view them as a substitute for reunderwriting the mortgage loans. If we had reunderwritten the mortgage loans, it is possible that the reunderwriting process may have revealed problems with a mortgage loan not covered by a representation or warranty. In addition, we can give no assurance that the applicable mortgage loan seller will be able to repurchase a mortgage loan if a representat ion or warranty has been breached. See ‘‘Description of the Mortgage Pool—Representations and Warranties; Repurchases and Substitutions’’ in this prospectus supplement.
Litigation or Other Legal Proceedings Could Adversely Affect the Mortgage Loans
There may be pending or threatened legal proceedings against, or other past or present adverse regulatory circumstances experienced by, the borrowers, their sponsors and managers of the mortgaged properties and their respective affiliates arising out of the ordinary business of the borrowers, sponsors, managers and affiliates. In certain cases, principals and/or affiliates of the borrowers are involved or may have been involved in prior litigation or property foreclosures or deed-in-lieu of foreclosures. We cannot assure you that any litigation, other legal proceedings, or other adverse situations will not have a material adverse effect on your investment.
In the case of 1 mortgage loan (identified as Loan No. 3 on Annex A-1 to this prospectus supplement), representing approximately 3.6% of the aggregate principal balance of the pool of mortgage loans as of the cut off date (4.1%, 0.0%), Douglas Jemal, the principal owner of the borrower, and a leasing director of Douglas Development Corporation, the property manager of the mortgaged property and a borrower affiliate, were convicted of one count of wire fraud in October 2006 in the United States District Court for the District of Columbia in connection with the prosecution and guilty plea of a former Washington, D.C. official on bribery charges. Mr. Jemal and his employee were found innocent on related bribery charges. The leasing director and another official of Douglas Development Corporation were found or pled guilty to certain felony personal tax evasion counts in connection with the bribery prosecution. On April 16, 2007, Mr. Jemal wa s sentenced to 5 years probation and $175,000 fine for wire fraud. There can be no assurance that the foregoing will not have an adverse effect on the mortgage loans, the borrowers or the mortgaged properties.
In the case of 1 mortgage loan (identified as Loan No. 67 on Annex A-1 to this prospectus supplement), representing approximately 0.4% of the aggregate principal balance of the pool of mortgage loans as of the cut off date (0.0%, 3.2%), Steven Leoni, a sponsor of the borrower, is currently involved in a foreclosure proceeding by a non-lender bank with respect to a property unrelated to the mortgage loan attributable to construction defects on that property that resulted in unexpected costs and rent loss.
Risks Relating to Book-Entry Registration
Your certificates will be initially represented by one or more certificates registered in the name of Cede & Co., as the nominee for DTC, and will not be registered in your name. As a result,
S-83
you will not be recognized as a certificateholder, or holder of record of your certificates. See ‘‘Risk Factors—Book-Entry System for Certain Classes May Decrease Liquidity and Delay Payment’’ in the prospectus for a discussion of important considerations relating to not being a certificateholder of record.
Risks Relating to Inspections of Properties
Licensed engineers or consultants inspected the mortgaged properties at or about the time of the origination of the mortgage loans to assess items such as structural integrity of the buildings and other improvements on the mortgaged property, including exterior walls, roofing, interior construction, mechanical and electrical systems and general condition of the site, buildings and other improvements. However, we cannot assure you that all conditions requiring repair or replacement were identified. No additional property inspections were conducted in connection with the closing of the offered certificates.
Certain of the Mortgage Loans Lack Customary Provisions
Certain of the mortgage loans lack one or more features that are customary in mortgage loans intended for securitization. Generally, the borrowers with respect to these mortgage loans are either not required to make payments to lockboxes or to maintain reserves for certain expenses, such as taxes, insurance premiums, capital expenditures, tenant improvements and leasing commissions, or the lenders under these mortgage loans do not have the right to terminate the related property manager upon the occurrence of certain events or require lender approval of a replacement property manager. However, mortgage loans originated for securitization are generally originated in accordance with the lender’s underwriting guidelines. For more information, see ‘‘Transaction Parties—The Sponsors’’ i n this prospectus supplement.
Mortgage Electronic Registration Systems (MERS)
The mortgages or assignments of mortgages for some of the mortgage loans have been or may be recorded in the name of MERS, solely as nominee for the related mortgage loan seller and its successor and assigns. Subsequent assignments of those mortgages are registered electronically through the MERS system.
The recording of mortgages in the name of MERS is a new practice in the commercial mortgage lending industry. Public recording officers and others have limited, if any, experience with lenders seeking to foreclose mortgages, assignments of which are registered with MERS. Accordingly, delays and additional costs in commencing, prosecuting and completing foreclosure proceedings and conducting foreclosure sales of the mortgaged properties could result. Those delays and the additional costs could in turn delay the distribution of liquidation proceeds to certificateholders and increase the amount of losses on the loans.
Other Risks
Hurricanes May Cause Extensive Damage to Coastal Areas. In late August, September and October 2005, hurricanes Katrina, Rita and Wilma and related windstorms, floods and tornadoes caused extensive and catastrophic physical damage to coastal and inland areas located in the Gulf Coast region of the United States (parts of Texas, Louisiana, Mississippi, Alabama and Florida) and certain other parts of the southeastern United States (including offshore facilities in the Gulf of Mexico) consisting of severe flooding, wind and water damage, forced evacuations, contamination, gas leaks and fire and environmental damage. That damage, and the national, regional and local economic and other effects of that damage, are not yet fully assessed or known. Economic effects appear to include nationwide decreases in oil supplies and refining capacity, nationwide increases in gas prices and regional interruptions in travel and transportation, tourism and economic activity generally in some of the affected areas. It is not possible to determine how long these effects may last. These effects could lead to a general
S-84
economic downturn, including increased oil prices, loss of jobs, regional disruptions in travel, transportation and tourism and a decline in real-estate related investments, in particular, in the areas most directly damaged by the storm. Other temporary and/or long-term effects on national, regional and local economies, securities, financial and real estate markets, government finances, and spending or travel habits may subsequently arise or become apparent in connection with the hurricanes and their aftermath. Furthermore, there can be no assurance that displaced residents of the affected areas will return, that the economies in the affected areas will recover sufficiently to support income producing real estate at pre-storm levels or that the costs of clean-up will not have a material adverse effect on the national economy. Because standard hazard insurance policies generally do not provide coverage for damage arising from floods and windstorms, property owners in the affected areas may not be insured for the damage to their properties and, in the aggregate, this may affect the timing and extent of local and regional economic recovery.
See ‘‘Risk Factors’’ in the prospectus for a description of certain other risks and special considerations that may be applicable to your certificates.
S-85
Description of the Mortgage Pool
General
The trust will consist primarily of 163 fixed rate mortgage loans secured by 179 commercial, multifamily and manufactured housing community Mortgaged Properties with an aggregate principal balance of approximately $2,504,667,937 as of the Cut-off Date (the ‘‘Initial Pool Balance’’). The ‘‘Cut-off Date’’ is the due date in August 2007 or, with respect to those mortgage loans that have their first due date after August 2007, the origination date of that mortgage loan. 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 supplement without further description are approxima te percentages by Initial Pool Balance.
The pool of mortgage loans will be deemed to consist of two loan groups (‘‘Loan Group 1’’ and ‘‘Loan Group 2’’ and, collectively, the ‘‘Loan Groups’’) for the purpose of principal and interest distributions on the Certificates (as described in this prospectus supplement). Loan Group 1 will consist of 129 mortgage loans, representing approximately 88.5% of the Initial Pool Balance (the ‘‘Initial Loan Group 1 Balance’’ ). Loan Group 2 will consist of 34 mortgage loans, representing approximately 11.5% of the Initial Pool Balance (the ‘‘Initial Loan Group 2 Balance’’). Annex A-1 to this prospectus supplement sets forth the Loan Group designation with respect to each mortgage loan.
The ‘‘Cut-off Date Balance’’ of any mortgage loan will be the unpaid principal balance of that mortgage loan as of the Cut-off Date for such mortgage loan, after application of all payments due on or before that date, whether or not received. Unless otherwise noted, all numerical and statistical information presented herein, including Cut-off Date Balances, loan-to-value ratios (‘‘LTV Ratios’’) and debt service coverage ratios (‘‘DSCR’’) with respect to each Whole Loan with one or more Subordinate Companion Loans is calculated without regard to the rela ted Subordinate Companion Loan(s), and with respect to each Whole Loan with one or more Pari Passu Companion Loans, such numbers are calculated including the related Pari Passu Companion Loan(s).
Whenever percentages and other information in this prospectus supplement 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 to this prospectus supplement. Whenever percentages are presented in this prospectus supplement in the format (x%, x%), those percentages represent, in order, the approximate percentage the indicated mortgage loans represent as of the Cut-off Date of: (i) the Initial Loan Group 1 Balance and (ii) the Initial Loan Group 2 Balance.
The mortgage loans included in this transaction were selected for this transaction from mortgage loans specifically originated for securitizations of this type by or on behalf of each Mortgage Loan Seller taking into account, among other factors, rating agency criteria and anticipated feedback, anticipated subordinate investor feedback, property type and geographic location.
Each mortgage loan is evidenced by one or more promissory notes (each, a ‘‘Mortgage Note’’) and secured by one or more mortgages, deeds of trust or other similar security instruments (each, a ‘‘Mortgage’’) that creates a first mortgage lien:
(1) on a fee simple estate in one or more commercial, multifamily and manufactured housing community mortgaged properties;
(2) with respect to 4 mortgaged properties securing mortgage loans (identified as Loan Nos. 30, 121, 124 and 138 on Annex A-1 to this prospectus supplement), representing approximately 1.3% of the Initial Pool Balance (1.4%, 0.9%), on a leasehold estate in one or more commercial properties but not on the corresponding fee interest with respect to such properties; and
(3) with respect to 2 mortgaged properties securing mortgage loans (identified as Loan Nos. 19 and 125 on Annex A-1 to this prospectus supplement), representing approximately
S-86
1.5% of the Initial Pool Balance (1.7%, 0.0%), on a fee simple estate in a portion of the related property and a leasehold estate in the remaining portion of one or more commercial properties (each of the fee and/or leasehold estates described in clauses (1) through (3), a ‘‘Mortgaged Property’’).
Mortgage loans secured by ground leases present certain bankruptcy and foreclosure risks not present with mortgage loans secured by fee simple estates. See ‘‘Certain Legal Aspects of Mortgage Loans—Foreclosure—Leasehold Risks’’ and ‘‘Certain Legal Aspects of Mortgage Loans—Bankruptcy Laws’’ in the prospectus.
On or about August 30, 2007 (the ‘‘Closing Date’’), J.P. Morgan Chase Commercial Mortgage Securities Corp. (the ‘‘Depositor’’) will acquire the mortgage loans from JPMorgan Chase Bank, N.A., UBS Real Estate Securities Inc., Nomura Credit & Capital, Inc. and Natixis Real Estate Capital Inc. (collectively, the ‘‘Mortgage Loan Sellers’’) pursuant to four separate mortgage loan purchase agreements (collectively, the ‘‘Purchase Agreements’’), each between the Depositor and the applicable Mortgage Loan Seller. The Depositor will then assign its interests in the mortgage loans, without recourse, to La Salle Bank National Association, as trustee (in such capacity, the ‘‘Trustee’’), for the benefit of the holders of the Certificates (the ‘‘Certificateholders’’). In addition, on the Closing Date, each of the applicable Mortgage Loan Sellers will be required to remit to the Trustee an amount that will be sufficient to cover the interest shortfalls that would otherwise occur on the first Distribution Date as a result of certain mortgage loans not having their first due date until a month occurring after September 2007. This amount will be distributed to Certificateholders on the first Distribution Date as part of their regular interest distribution.
The mortgage loans were originated in the period between October 2006 and August 2007. 54 of the mortgage loans, representing approximately 33.1% of the Initial Pool Balance (34.3%, 23.3%), will not have made any scheduled debt service payments as of the related Cut-off Date.
The mortgage loans are not insured or guaranteed by the Mortgage Loan Sellers or any other person or entity. 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 a mortgage loan.
Additional Debt
General. Substantially all of the mortgage loans permit the related borrower to incur limited indebtedness in the ordinary course of business that is not secured by the related Mortgaged Property. Moreover, in general, any borrower that does not meet single purpose entity criteria may not be restricted from incurring unsecured debt.
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.
Other Secured Subordinate Indebtedness. As of the Cut-off Date, the applicable Mortgage Loan Sellers have informed us that, in addition to the Companion Loans discussed under ‘‘Description of the Mortgage Pool—The Whole Loans’’ below and Loan No. 27 discussed under ‘‘Mortgaged Properties Leased to Borrowers or Borrower Affiliated Entities Also Have Risks’’, they are aware of the following existing or specifically permitted future secured indebtedness with respect to the mortgage loans:
| |
| • | In the case of 6 mortgage loans (identified as Loan Nos. 52, 70, 74, 82, 107 and 113 on Annex A-1 to this prospectus supplement), representing approximately 1.8% of the Initial Pool Balance (0.0%, 16.0%), the borrower may obtain a subordinate loan secured by a lien on the mortgaged property subject to satisfaction of certain conditions including, but not limited to, the following: (i) a loan-to-value ratio not greater than 90% of the outstanding balance of the mortgage loan and the subordinate loan; (ii) a combined minimum debt |
S-87
| |
| service coverage ratio of not less than 1.07x of the outstanding balance of the mortgage loan and the subordinate loan as of the last day of the month immediately preceding the funding of the subordinate loan; (iii) an intercreditor agreement satisfactory to the mortgagee and any applicable rating agencies; (iv) all principal payments and accrued interest due under the related mortgage loan shall have been paid, including, without limitation, all costs and expenses; and (v) a rating agency confirmation. |
Mezzanine Debt. Although the mortgage loans generally place certain restrictions on incurring mezzanine debt by the pledging of general partnership and managing member equity interests in a borrower, such as specific percentage or control limitations, the terms of the mortgages generally permit, subject to certain limitations, the pledge of less than a controlling portion of the limited partnership or non-managing membership equity interests in a borrower. However, certain of the mortgage loans do not restrict the pledging of ownership interests in the 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, if a borrower does not meet single-purpose entity criteria, those with ownership interests in t he borrower may not be restricted in any way from incurring mezzanine debt.
As of the Cut-off Date, the related Mortgage Loan Seller has informed us that it is aware of the mezzanine indebtedness in the initial principal amount of $18,000,000 with respect to the mortgage loan identified as Loan No. 110 on Annex A-1 to this prospectus supplement), representing approximately 0.2% of the Initial Pool Balance (0.2%, 0.0%).
The holders of certain of the mezzanine loans may have the right to cure certain defaults occurring on the related mortgage loan and the right to purchase the related mortgage loan if certain defaults on the related mortgage loan occur. The purchase price generally required to be paid in connection with such a purchase would equal the outstanding principal balance of the related mortgage loan, together with accrued and unpaid interest on, and unpaid servicing expenses, advances and interest on advances related to, such mortgage loan. The lenders for this mezzanine debt generally are not affiliates of the related mortgage loan borrower. Upon a default under the mezzanine debt, the holder of the mezzanine debt may foreclose upon the ownership interests in the related borrower subject to the terms of the related intercreditor agreement, which typically require either confirmation from each Rating Agency that the transfer would not result in the downgrade, withdrawa l or qualification of the then-current ratings assigned to any Class of Certificates or that the holder of the ownership interests is an entity which meets certain financial and other tests under the intercreditor agreement.
With respect to the Mortgage Loans listed in the following chart, the applicable Mortgage Loan Sellers have informed us that the direct and indirect equity owners of the borrower are permitted to incur future mezzanine debt, subject to the satisfaction of conditions contained in the related loan documents, including, among other things, the combined maximum loan-to-value ratio, the combined minimum debt service coverage ratio and the maximum mezzanine debt permitted, as listed in the following chart. The applicable Mortgage Loan Sellers have informed us that equity owners of the borrowers under certain Mortgage Loans are permitted to incur future mezzanine debt, as described in the table below.
S-88
Future Mezzanine Debt
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mortgage Loan | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | % of Initial Loan Group 2 Balance | | | Combined Maximum LTV Ratio | | | Combined Minimum DSCR | |||||||||||||||
| Plaza El Segundo | | | | | 6.5 | % | | | | | 7.3 | % | | | | | 0.0 | % | | | | | 80 | % | | | | | 1.10x | |
| Sawgrass Mills Mall | | | | | 6.0 | % | | | | | 6.8 | % | | | | | 0.0 | % | | | | | 85 | % | | | | | 1.05x | |
| 111 Massachusetts Avenue | | | | | 3.6 | % | | | | | 4.1 | % | | | | | 0.0 | % | | | | | 85 | % | | | | | 1.05x | |
| Hard Rock Hotel - Chicago | | | | | 2.8 | % | | | | | 3.1 | % | | | | | 0.0 | % | | | | | 85 | % | | | | | 1.15x | |
| Summit Mall | | | | | 2.6 | % | | | | | 2.9 | % | | | | | 0.0 | % | | | | | 80 | % | | | | | 1.05x | |
| Marriott Overland Park | | | | | 2.0 | % | | | | | 2.2 | % | | | | | 0.0 | % | | | | | 85 | % | | | | | 1.25x | |
| St. Joe – Windward Plaza | | | | | 1.9 | % | | | | | 2.1 | % | | | | | 0.0 | % | | | | | 85 | % | | | | | 1.10x | |
| St. Joe – 150 W. Main | | | | | 1.9 | % | | | | | 2.1 | % | | | | | 0.0 | % | | | | | 85 | % | | | | | 1.10x | |
| Liberty Plaza | | | | | 1.7 | % | | | | | 1.9 | % | | | | | 0.0 | % | | | | | 85 | % | | | | | 1.05x | |
| Valle Vista Mall | | | | | 1.6 | % | | | | | 1.8 | % | | | | | 0.0 | % | | | | | 80 | % | | | | | 1.05x | |
| Comfort Inn – San Diego Zoo | | | | | 1.3 | % | | | | | 1.5 | % | | | | | 0.0 | % | | | | | 75 | % | | | | | 1.20x | |
| Hilton Fort Lee | | | | | 1.3 | % | | | | | 1.5 | % | | | | | 0.0 | % | | | | | 80 | % | | | | | 1.35x | |
| Bentley Mall | | | | | 1.2 | % | | | | | 1.3 | % | | | | | 0.0 | % | | | | | 90 | % | | | | | 1.05x | |
| St. Joe – Millenia Park One | | | | | 1.1 | % | | | | | 1.3 | % | | | | | 0.0 | % | | | | | 85 | % | | | | | 1.10x | |
| Camelot Buckhead Apartments | | | | | 0.9 | % | | | | | 0.0 | % | | | | | 8.3 | % | | | | | 90 | % | | | | | 1.10x | |
| 1140 19th Street Northwest | | | | | 0.8 | % | | | | | 0.9 | % | | | | | 0.0 | % | | | | | 80 | % | | | | | 1.20x | |
| Market Square | | | | | 0.8 | % | | | | | 0.9 | % | | | | | 0.0 | % | | | | | 90 | % | | | | | 1.07x | |
| St. Joe – Southhall Center | | | | | 0.7 | % | | | | | 0.8 | % | | | | | 0.0 | % | | | | | 85 | % | | | | | 1.10x | |
| Camelot on Sweetwater Apartments | | | | | 0.7 | % | | | | | 0.0 | % | | | | | 6.0 | % | | | | | 90 | % | | | | | 1.10x | |
| 1450 Infinite Drive | | | | | 0.7 | % | | | | | 0.7 | % | | | | | 0.0 | % | | | | | 75 | % | | | | | 1.12x | |
| 1146 19th Street Northwest | | | | | 0.5 | % | | | | | 0.6 | % | | | | | 0.0 | % | | | | | 80 | % | | | | | 1.15x | |
| Broome Street Apartments | | | | | 0.5 | % | | | | | 0.6 | % | | | | | 0.0 | % | | | | | 90 | % | | | | | 1.05x | |
| Kennerly Medical Office | | | | | 0.5 | % | | | | | 0.6 | % | | | | | 0.0 | % | | | | | 80 | % | | | | | 1.15x | |
| Bayside Retail Center | | | | | 0.5 | % | | | | | 0.6 | % | | | | | 0.0 | % | | | | | 90 | % | | | | | 1.05x | |
| St. Joe – Beckrich | | | | | 0.5 | % | | | | | 0.6 | % | | | | | 0.0 | % | | | | | 85 | % | | | | | 1.10x | |
| St. Joe – Southwood One | | | | | 0.5 | % | | | | | 0.5 | % | | | | | 0.0 | % | | | | | 85 | % | | | | | 1.10x | |
| Willow Oaks Apartments | | | | | 0.3 | % | | | | | 0.4 | % | | | | | 0.0 | % | | | | | 85 | % | | | | | 1.10x | |
| CVS Haverhill | | | | | 0.3 | % | | | | | 0.3 | % | | | | | 0.0 | % | | | | | 90 | % | | | | | 1.00x | |
| Shop ’N Save – St. Louis | | | | | 0.2 | % | | | | | 0.3 | % | | | | | 0.0 | % | | | | | 90 | % | | | | | 1.00x | |
| Owego Fairgrounds | | | | | 0.2 | % | | | | | 0.2 | % | | | | | 0.0 | % | | | | | 80 | % | | | | | 1.20x | |
| National Cup Building | | | | | 0.2 | % | | | | | 0.2 | % | | | | | 0.0 | % | | | | | 60 | % | | | | | 1.40x | |
| CVS Douglasville | | | | | 0.2 | % | | | | | 0.2 | % | | | | | 0.0 | % | | | | | 90 | % | | | | | 1.00x | |
| Walgreens – Johnson City | | | | | 0.2 | % | | | | | 0.2 | % | | | | | 0.0 | % | | | | | 90 | % | | | | | 1.00x | |
| All Storage Self Storage Facility | | | | | 0.2 | % | | | | | 0.2 | % | | | | | 0.0 | % | | | | | 80 | % | | | | | 1.10x | |
Unsecured Subordinate Indebtedness. The applicable Mortgage Loan Seller is aware of the following existing or permitted unsecured debt with respect to each mortgage loan:
| | |
| • | In the case of 1 mortgage loan (identified as Loan No. 5 on Annex A-1 to this prospectus supplement), representing approximately 2.8% of the Initial Pool Balance (3.1%, 0.0%), the related borrower is permitted to obtain future unsecured subordinate debt from its partners in an amount not to exceed 2% principal amount of the related mortgage loan provided that the proceeds of such loans are used for the operation or improvement of the Mortgaged Property. |
S-89
| | |
| • | In the case of 6 mortgage loans (identified as Loan Nos. 52, 70, 74, 82, 107 and 113 on Annex A-1 to this prospectus supplement), representing approximately 1.8% of the Initial Pool Balance (0.0%, 16.0%), the related borrowers are permitted to obtain future unsecured debt from its members in an amount not to exceed the greater of $100,000 or 3 times the monthly interest due in connection with the related mortgage loan. |
| | |
| • | In the case of 1 mortgage loan (identified as Loan No. 34 on Annex A-1 to this prospectus supplement), representing approximately 0.8% of the Initial Pool Balance (0.9%, 0.0%), the related borrower is permitted to obtain future unsecured subordinate debt from its members. |
| | |
| • | In the case of 1 mortgage loan (identified as Loan No. 73 on Annex A-1 to this prospectus supplement), representing approximately 0.3% (0.0%, 2.8%), the related borrower is permitted to obtain unsecured subordinate debt from its general partner in an amount not to exceed $250,000 (plus accrued interest) for expenses incurred in operating the related mortgaged property, subject to the conditions set forth in the related loan documents. |
| | |
| • | In the case of 1 mortgage loan (identified as Loan No. 112 on Annex A-1 to this prospectus supplement), representing approximately 0.2% of the Initial Pool Balance (0.0%, 1.5%), the related borrower is permitted to obtain future unsecured subordinate debt from its members and affiliates in an amount up to $200,000 to fund expenses related to the mortgaged property. |
| | |
| • | In the case of 6 mortgage loans (identified as Loan Nos. 12, 13, 26, 38, 55 and 57 on Annex A-1 to this prospectus supplement), representing approximately 1.9%, 1.9%, 1.1%, 0.7%, 0.5% and 0.5% of the aggregate principal balance of the pool of mortgage loans as of the cut off date (approximately 2.1%, 2.1%, 1.3%, 0.8%, 0.6% and 0.5% of the aggregate principal balance of the mortgage loans in loan group 1 as of the cut off date), the indirect interest in the borrowers and the excess cash flow distributions (after debt service and property expenses) received from the Mortgaged Properties securing the mortgage loans have been pledged to additionally secure other mortgage financing made to affiliates of the related borrowers. |
| | |
| • | In the case of 1 mortgage loan (identified as Loan No. 27 on Annex A-1 to this prospectus supplement), representing approximately 1.0% of the Initial Pool Balance (0.0%, 8.7%), one of the related co-borrowers (the fee owner) may obtain unsecured loans in the aggregate principal amount of $2,100,000 from its partners, of which approximately $1,252,509.02 is currently outstanding. That co-borrower is also permitted to obtain, with the lender’s consent, unsecured debt in an amount equal to the difference between $2,100,000 and the then outstanding aggregate principal balance of those loans described in the preceding sentence; provided that at any time the total outstanding principal balance of unsecured debt does not exceed $2,100,000. Such unsecured debt is subject to a subordination and standstill agreement in favor of the mortgagee. |
| | |
| • | In the case of 1 mortgage loan (identified as Loan No. 116 on Annex A-1 to this prospectus supplement), representing approximately 0.2% of the Initial Pool Balance (0.2%, 0.0%), the related loan documents permit the related borrowers to incur unsecured subordinated debt in the aggregate amount not to exceed 80% of the value of the mortgaged property provided that (i) no default or event of default exists or is continuing; (ii) the unsecured lender enters into an intercreditor agreement with the lender; and (iii) the terms of the unsecured debt are less restrictive than the terms of the mortgage loan. |
In addition to the provisions noted above, in general, any borrower that does not meet single-purpose entity criteria may not be restricted from incurring unsecured debt.
Certain risks relating to additional debt are described in ‘‘Risk Factors—Ability to Incur Other Borrowings Entails Risk’’ in this prospectus supplement and ‘‘Certain Legal Aspects of Mortgage Loans—Subordinate Financing’’ in the prospectus.
S-90
The Whole Loans
One mortgage loan (the ‘‘Sawgrass Mills Mall Loan’’) (identified as Loan No. 2 on Annex A-1 to this prospectus supplement), representing approximately 6.0% of the Initial Pool Balance (6.8%, 0.0%), is part of a split loan structure with (i) multiple pari passu companion loans (the ‘‘Sawgrass Mills Mall Pari Passu Companion Loans’’), which are pari passu with the Sawgrass Mills Mall Loan and are not included in the trust, and (ii) multiple subordinate companion loans (the ‘‘Sawgrass Mills Mall Subordinate Companion Loans’’ and together with the Sawgrass Mills Mall Loan and the Sawgrass Mills Mall Pari Passu Companion Loans, the ‘‘Sawgrass Mills Mall Whole Loan’’), which are subordinate in right of payment to the Sawgrass Mills Mall Loan and Sawgrass Mills Mall Pari Passu Companion Loans and are not included in the trust.
16 mortgage loans (the ‘‘Pari Passu Mortgage Loans’’) (identified as Loan Nos. 2, 6, 143, 145, 146, 148, 149, 150, 151, 152, 153, 155, 156, 157, 159 and 161 on Annex A-1 to this prospectus supplement), representing approximately 9.6% of the Initial Pool Balance (10.8%, 0.0%), are each part of a split loan structure with one or more related pari passu companion loans (such pari passu companion loans, together with the related Pari Passu Mortgage Loan, a ‘‘Pari Passu Whole Loan’’), which are pari passu with the related Pari Passu Mortgage Lo an and are not included in the trust. Each of the pari passu companion loans relating to the Pari Passu Mortgage Loans and the Sawgrass Mills Mall Pari Passu Companion Loans is referred to in this prospectus supplement as a ‘‘Pari Passu Companion Loan.’’
In addition to the Sawgrass Mills Loan, 4 mortgage loans (each, an ‘‘AB Mortgage Loan’’) (identified as Loan Nos. 1, 5, 30 and 32 on Annex A-1 to this prospectus supplement), representing approximately 11.0% of the Initial Pool Balance (12.4%, 0.0%), are each one or more senior loans in a split loan structure with a subordinate companion loan (with respect to each AB Mortgage Loan, the ‘‘AB Subordinate Companion Loan’’ and, together with the related AB Mortgage Loan, an ‘‘AB Whole Loan’’). No AB Subordinate Companion Loan is an asset of the tr ust. Each such AB Whole Loan is evidenced by one or more separate senior notes and a subordinate note, all of which are secured by a single mortgage instrument on the related Mortgaged Property. Each of the AB Subordinate Companion Loans and the Sawgrass Mills Mall Subordinate Companion Loans is referred to in this prospectus supplement as a ‘‘Subordinate Companion Loan.’’
S-91
Whole Loans Summary
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loan No. | | | Mortgage Loan | | | Mortgage Loan Cut-off Date Principal Balance | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 or 2 Balance | | | Pari Passu Companion Loan Original Balance | | | AB Subordinate Companion Original Loan Balance | | | Mortgage Loan DSCR | | | Combined DSCR | | | Mortgage Loan Cut-off Date LTV | | | Combined Cut-off Date LTV | |||||||||||||||||||||||||||
| 1 | | | Plaza El Segundo | | | | $ | 162,000,000 | | | | | | 6.5 | % | | | | | 7.3 | % | | | | $ | 0 | | | | | $ | 13,000,000 | | | | | | 1.30x | | | | | | 1.18x | | | | | | 78.6 | % | | | | | 85.0 | % |
| 2 | | | Sawgrass Mills Mall | | | | $ | 150,000,000 | | | | | | 6.0 | % | | | | | 6.8 | % | | | | $ | 670,000,000 | | | | | $ | 30,000,000 | | | | | | 1.20x | | | | | | 1.16x | | | | | | 80.0 | % | | | | | 82.9 | % |
| 5 | | | Ten Penn Center | | | | $ | 69,000,000 | | | | | | 2.8 | % | | | | | 3.1 | % | | | | $ | 0 | | | | | $ | 0 | (1) | | | | | 1.60x | | | | | | 1.60x | | | | | | 62.7 | % | | | | | 62.7 | % |
| 6 | | | Carespring Portfolio | | | | $ | 68,310,000 | | | | | | 2.7 | % | | | | | 3.1 | % | | | | $ | 34,155,000 | | | | | $ | 0 | | | | | | 2.75x | | | | | | 2.75x | | | | | | 60.7 | % | | | | | 60.7 | % |
| 30 | | | Hotel Pacific | | | | $ | 23,500,000 | | | | | | 0.9 | % | | | | | 1.1 | % | | | | $ | 0 | | | | | $ | 2,000,000 | | | | | | 1.25x | | | | | | 1.09x | | | | | | 77.8 | % | | | | | 84.4 | % |
| 32 | | | Cassford Corporate Park | | | | $ | 21,560,000 | | | | | | 0.9 | % | | | | | 1.0 | % | | | | $ | 0 | | | | | $ | 940,000 | | | | | | 1.16x | | | | | | 1.07x | | | | | | 80.0 | % | | | | | 83.5 | % |
| 143 | | | Logan Portfolio- Beavercreek, OH | | | | $ | 1,915,000 | | | | | | 0.1 | % | | | | | 0.1 | % | | | | $ | 1,915,000 | | | | | $ | 0 | | | | | | 1.18x | | | | | | 1.18x | | | | | | 77.1 | % | | | | | 77.1 | % |
| 145 | | | Logan Portfolio- Decatur, AL | | | | $ | 1,755,000 | | | | | | 0.1 | % | | | | | 0.1 | % | | | | $ | 1,755,000 | | | | | $ | 0 | | | | | | 1.18x | | | | | | 1.18x | | | | | | 77.1 | % | | | | | 77.1 | % |
| 146 | | | Logan Portfolio- Huntsville, AL | | | | $ | 1,750,000 | | | | | | 0.1 | % | | | | | 0.1 | % | | | | $ | 1,750,000 | | | | | $ | 0 | | | | | | 1.18x | | | | | | 1.18x | | | | | | 77.1 | % | | | | | 77.1 | % |
| 148 | | | Logan Portfolio- Flowood, MS | | | | $ | 1,655,000 | | | | | | 0.1 | % | | | | | 0.1 | % | | | | $ | 1,655,000 | | | | | $ | 0 | | | | | | 1.18x | | | | | | 1.18x | | | | | | 77.1 | % | | | | | 77.1 | % |
| 149 | | | Logan Portfolio- Bowling Green, KY | | | | $ | 1,630,000 | | | | | | 0.1 | % | | | | | 0.1 | % | | | | $ | 1,630,000 | | | | | $ | 0 | | | | | | 1.18x | | | | | | 1.18x | | | | | | 77.1 | % | | | | | 77.1 | % |
| 150 | | | Logan Portfolio- Savannah, GA | | | | $ | 1,555,000 | | | | | | 0.1 | % | | | | | 0.1 | % | | | | $ | 1,555,000 | | | | | $ | 0 | | | | | | 1.18x | | | | | | 1.18x | | | | | | 77.1 | % | | | | | 77.1 | % |
| 151 | | | Logan Portfolio- Murfreesboro, TN | | | | $ | 1,545,000 | | | | | | 0.1 | % | | | | | 0.1 | % | | | | $ | 1,545,000 | | | | | $ | 0 | | | | | | 1.18x | | | | | | 1.18x | | | | | | 77.1 | % | | | | | 77.1 | % |
| 152 | | | Logan Portfolio-West Monroe, LA | | | | $ | 1,540,000 | | | | | | 0.1 | % | | | | | 0.1 | % | | | | $ | 1,540,000 | | | | | $ | 0 | | | | | | 1.18x | | | | | | 1.18x | | | | | | 77.1 | % | | | | | 77.1 | % |
| 153 | | | Logan Portfolio- Gallatin, TN | | | | $ | 1,475,000 | | | | | | 0.1 | % | | | | | 0.1 | % | | | | $ | 1,475,000 | | | | | $ | 0 | | | | | | 1.18x | | | | | | 1.18x | | | | | | 77.1 | % | | | | | 77.1 | % |
| 155 | | | Logan Portfolio- Canton, MI | | | | $ | 1,365,000 | | | | | | 0.1 | % | | | | | 0.1 | % | | | | $ | 1,365,000 | | | | | $ | 0 | | | | | | 1.18x | | | | | | 1.18x | | | | | | 77.1 | % | | | | | 77.1 | % |
| 156 | | | Logan Portfolio-Ft. Oglethorpe, GA | | | | $ | 1,305,000 | | | | | | 0.1 | % | | | | | 0.1 | % | | | | $ | 1,305,000 | | | | | $ | 0 | | | | | | 1.18x | | | | | | 1.18x | | | | | | 77.1 | % | | | | | 77.1 | % |
| 157 | | | Logan Portfolio- Oxford, AL | | | | $ | 1,280,000 | | | | | | 0.1 | % | | | | | 0.1 | % | | | | $ | 1,280,000 | | | | | $ | 0 | | | | | | 1.18x | | | | | | 1.18x | | | | | | 77.1 | % | | | | | 77.1 | % |
| 159 | | | Logan Portfolio- Evansville, IN | | | | $ | 1,245,000 | | | | | | 0.0 | % | | | | | 0.1 | % | | | | $ | 1,245,000 | | | | | $ | 0 | | | | | | 1.18x | | | | | | 1.18x | | | | | | 77.1 | % | | | | | 77.1 | % |
| 161 | | | Logan Portfolio- Austin, TX | | | | $ | 1,165,000 | | | | | | 0.0 | % | | | | | 0.1 | % | | | | $ | 1,165,000 | | | | | $ | 0 | | | | | | 1.18x | | | | | | 1.18x | | | | | | 77.1 | % | | | | | 77.1 | % |
| |
| |
|
| (1) | The Ten Penn Center subordinate note evidences repayment of future advances that may be made by the holder of that note in a maximum aggregate amount of up to $18,500,000 (referred to in this prospectus supplement as the Ten Penn Center subordinate companion loan). The obligations of the holder of the Ten Penn Center subordinate companion loan to make those future advances is subject to certain conditions, and no funds have yet been advanced. The Ten Penn Center subordinate companion loan, when funded, will bear an interest rate equal to LIBOR plus 2.25. |
Each of the Subordinate Companion Loans and Pari Passu Companion Loans are referred to as a ‘‘Companion Loan’’ in this prospectus supplement. Each of the Sawgrass Mills Mall Whole Loan, Pari Passu Whole Loans and AB Whole Loans are referred to in this prospectus supplement as a ‘‘Whole Loan.’’
The table above sets forth for each of the Whole Loans both the DSCR and LTV Ratios taking into account any related Pari Passu Companion Loan but without taking into account the related Subordinate Companion Loans and the combined DSCR and LTV Ratios taking into account the related Subordinate Companion Loan, as applicable.
The Sawgrass Mills Mall Whole Loan
The Sawgrass Mills Mall Loan. The Sawgrass Mills Mall Loan (identified as Loan No. 2 on Annex A-1 to this prospectus supplement), representing approximately 6.0% of the Initial Pool
S-92
Balance (6.8%, 0.0%), is part of a split loan structure comprised of the Sawgrass Mills Mall Loan, the Sawgrass Mills Mall Pari Passu Companion Loans and the Sawgrass Mills Mall Subordinate Companion Loans, each of which is secured by the same mortgage instrument on the same underlying Mortgaged Property (the ‘‘Sawgrass Mills Mall Mortgaged Property’’). Only the Sawgrass Mills Mall Loan, which is evidenced by multiple notes, is included in the Trust Fund. The Sawgrass Mills Mall Pari Passu Companion Loans, which are evidenced by the multiple notes, having an aggregate principal balance as of the cut-off date of $670,000,000, and are not included in the Trust Fund. The Sawgrass Mills Mall Pari Passu Companion Loans are expected to be deposited into one or more future securitizations. The Sawgrass Mills Mall Pari Passu Subordinate Companion Loans, which are evidenced b y multiple notes, having an aggregate principal balance as of the cut-off date of $30,000,000 are not included in the Trust Fund. The Sawgrass Mills Mall Loan, the Sawgrass Mills Mall Pari Passu Companion Loans and the Sawgrass Mills Mall Subordinate Companion Loans are secured by a single mortgage instrument on the related Mortgaged Property. The Sawgrass Mills Mall Loan, the Sawgrass Mills Mall Pari Passu Companion Loans and Sawgrass Mills Mall Subordinate Companion Loans are collectively referred to in this prospectus supplement as the ‘‘Sawgrass Mills Mall Whole Loan.’’
The Sawgrass Mills Mall Loan, the Sawgrass Mills Mall Pari Passu Companion Loans and the Sawgrass Mills Mall Subordinate Companion Loans are subject to an intercreditor agreement that sets forth the respective rights of the Sawgrass Mills Mall Senior Noteholders and the Sawgrass Mills Mall Subordinate Noteholders (the ‘‘Sawgrass Mills Mall Intercreditor Agreement’’). Pursuant to the terms of the Sawgrass Mills Mall Intercreditor Agreement, the Sawgrass Mills Mall Whole Loan will be serviced and administered pursuant to the Pooling and Servicing Agreement. The Sawgrass Mills Mall Intercreditor Agreement provides that expenses, losses and shortfalls relating to the Sawgrass Mills Mall Whole Loan will be allocated first, to the holders of the Sawgrass Mills Mall Subordinate Companion Loans, on a pro rata basis, and thereafter, to the Sawgrass Mills Mall Senior Noteholders, pro rata and pari passu. The holders of the Sawgrass Mills Mall Loan and the Sawgrass Mills Mall Pari Passu Companion Loans are referred to in this prospectus supplement as the ‘‘Sawgrass Mills Mall Senior Noteholders’’, and the holders of the Sawgrass Mills Mall Subordinate Companion Loans are referred to in this prospectus supplement as the ‘‘Sawgrass Mills Mall Subordinate Noteholders’’.
As described under ‘‘Servicing of the Mortgage Loans—Directing Certificateholder’’ in this prospectus supplement, prior to a Sawgrass Mills Mall Control Appraisal Event, a majority of the holders of the Sawgrass Mills Mall Subordinate Companion Loans by the principal balance will have the right to consult with and advise the Special Servicer; following the occurrence and during the continuance of a Sawgrass Mills Mall Control Appraisal Event, the Directing Certificateholder will have such rights. A ‘‘Sawgrass Mills Mall Control Appraisal Event’’ will exist if, and for so long as, the initial principal balance of the Sawgrass Mills Mall Subordinate Companion (minus the sum of (i) any principal payments (whether as scheduled amortization, principal prepayments or otherwise) allocated to, and receiv ed on, the Sawgrass Mills Mall Subordinate Companion Loans after the cut-off date, (ii) any Appraisal Reduction allocated to the Sawgrass Mills Mall Subordinate Companion Loans and (iii) realized losses allocated to the Sawgrass Mills Mall Subordinate Companion Loans) is less than 25% of its initial principal balance (minus the sum of any principal payments whether as scheduled amortization, principal prepayments or otherwise received on, the Sawgrass Mills Mall Subordinate Companion Loans after the cut-off date).
For purposes of the information presented in this prospectus supplement with respect to the Sawgrass Mills Mall Loan, the debt service coverage ratio and the loan-to-value ratio reflect the aggregate indebtedness evidenced by the Sawgrass Mills Mall Loan and the Sawgrass Mills Mall Pari Passu Companion Loans but not the indebtedness evidenced by the Sawgrass Mills Mall Subordinate Companion Loans.
Servicing. The Sawgrass Mills Mall Intercreditor Agreement generally provides that the Sawgrass Mills Mall Whole Loan will be serviced by the Master Servicer and the Special Servicer
S-93
according to the Servicing Standards under the Pooling and Servicing Agreement. Midland Loan Services, Inc. will act as the primary servicer for the Sawgrass Mills Mall Whole Loan.
Distributions. Under the terms of the Sawgrass Mills Mall Intercreditor Agreement, prior to the occurrence and continuance of a monetary event of default or other material non-monetary event of default with respect to the Sawgrass Mills Mall Whole Loan (or, if such a default has occurred, but the Sawgrass Mills Mall Subordinate Noteholders have cured such a default) after payment of amounts payable or reimbursable under the Pooling and Servicing Agreement, payments and proceeds received with respect to the Sawgrass Mills Mall Whole Loan will generally be paid in the following manner, in each case to the extent of available funds:
First, each holder of the Sawgrass Mills Mall Loan and the Sawgrass Mills Mall Pari Passu Companion Loans will receive accrued and unpaid interest on its outstanding principal at its interest rate, pro rata;
Second, each holder of the Sawgrass Mills Mall Loan and the Sawgrass Mills Mall Pari Passu Companion Loans will receive its pro rata share of all scheduled and unscheduled principal payments received on the Sawgrass Mills Mall Whole Loan (based on the outstanding principal balance of each of the Sawgrass Mills Mall Loan, the Sawgrass Mills Mall Pari Passu Companion Loans and the Sawgrass Mills Mall Subordinate Companion Loans);
Third, any Yield Maintenance Charges will be paid to each holder of the Sawgrass Mills Mall Loan and the Sawgrass Mills Mall Pari Passu Companion Loans, pro rata, in the amount actually received in respect of the Sawgrass Mills Mall Loan and the Sawgrass Mills Mall Pari Passu Companion Loans, respectively;
Fourth, each holder of the Sawgrass Mills Mall Subordinate Companion Loans will receive accrued and unpaid interest on the outstanding principal balance at the applicable interest rate, pro rata;
Fifth, each holder of the Sawgrass Mills Mall Subordinate Companion Loans will receive its pro rata share of all scheduled and unscheduled principal payments received on the Sawgrass Mills Mall Whole Loan (based on the outstanding principal balance of each of the Sawgrass Mills Mall Loan, the Sawgrass Mills Mall Pari Passu Companion Loans and the Sawgrass Mills Mall Subordinate Companion Loans);
Sixth, any Yield Maintenance Charges will be paid to each holder of the Sawgrass Mills Mall Subordinate Companion Loans, pro rata, in the amount actually received in respect of the Sawgrass Mills Mall Subordinate Companion Loans;
Seventh, any default interest (in excess of the interest paid in accordance with clauses first and fourth above) will be paid to each of the holders of the Sawgrass Mills Mall Loan, the Sawgrass Mills Mall Pari Passu Companion Loans and the Sawgrass Mills Mall Subordinate Companion Loans, on a pro rata basis, in accordance with the respective principal balance of each loan, to the extent not applied to interest on advances or payable to the Master Servicer or the Special Servicer under the Pooling and Servicing Agreement or the servicers of the Sawgrass Mills Mall Pari Passu Companion Loans; and
Eighth, if any excess amount is paid by the borrower, and not otherwise applied in accordance with the foregoing clauses first through seventh above, such amount will be paid to each of the holders of the Sawgrass Mills Mall Loan, the Sawgrass Mills Mall Pari Passu Companion Loans and the Sawgrass Mills Mall Subordinate Companion Loans, on a pro rata basis, in accordance with the initial principal balance of each loan.
Notwithstanding the foregoing clauses first through eighth, in the event that one or more Sawgrass Mills Mall Subordinate Noteholders has previously made a cure payment pursuant to the Sawgrass Mills Mall Intercreditor Agreement in respect of any monetary default and the related borrower subsequently makes the payment for which the monetary default exists, such payment will be remitted to each applicable Sawgrass Mills Mall Subordinate Noteholder, pro rata, based on the amount of such outstanding cure payments, to reimburse it for such cure
S-94
payment, so long as no amounts would be payable at such time to the Sawgrass Mills Mall Senior Noteholders under the foregoing clauses first through seventh, and payments are not required to be applied in accordance with the Sawgrass Mills Mall Intercreditor Agreement.
Following the occurrence and during the continuance of a monetary event of default or other material non-monetary event of default with respect to the Sawgrass Mills Mall Whole Loan (unless the Sawgrass Mills Mall Subordinate Noteholders have cured such a default), after payment of all amounts then payable or reimbursable under the Pooling and Servicing Agreement, Liquidation Proceeds and other collections with respect to the Sawgrass Mills Mall Whole Loan (other than Yield Maintenance Charges, the entitlement to which will be determined in accordance with the following paragraph and other than the amounts received from the guarantor under the payment guaranty relating to the Sawgrass Mills Mall Whole Loan) will generally be applied in the following manner, in each case to the extent of available funds:
First, each holder of the Sawgrass Mills Mall Loan and the Sawgrass Mills Mall Pari Passu Companion Loans will receive accrued and unpaid interest on its outstanding principal balance at its interest rate, pro rata;
Second, each holder of the Sawgrass Mills Mall Loan and the Sawgrass Mills Mall Pari Passu Companion Loans will receive, pro rata, based on the principal balance of each such loan, an amount up to its principal balance, until the principal balance has been paid in full;
Third, if the proceeds of any foreclosure sale or any liquidation of the Sawgrass Mills Mall Whole Loan or the Sawgrass Mills Mall Mortgaged Property exceed the amounts required to be applied in accordance with the foregoing clauses first through second and, as a result of a workout, the principal balances of the Sawgrass Mills Mall Loan and the Sawgrass Mills Mall Pari Passu Companion Loans have been reduced, such excess amount will first be paid to the holder of the Sawgrass Mills Mall Loan and each holder of the Sawgrass Mills Mall Pari Passu Companion Loans, pro rata, in an amount up to the reduction, if any, of their respective principal balances as a result of such workout;
Fourth, any Yield Maintenance Charge that is allocable to the Sawgrass Mills Mall Loan and the Sawgrass Mills Mall Pari Passu Companion Loans, to the extent actually paid by the borrower, will be paid first to the holder of the Sawgrass Mills Mall Loan and each holder of the Sawgrass Mills Mall Pari Passu Companion Loans, pro rata;
Fifth, any default interest in excess of the interest paid in accordance with clauses first above and sixth below, will be paid to each holder of the Sawgrass Mills Mall Loan and the Sawgrass Mills Mall Pari Passu Companion Loans, pro rata, based on the total amount of default interest then owing to each such party, to the extent not applied to interest on advances or payable to the Master Servicer or the Special Servicer under the Po oling and Servicing Agreement or the servicers of the Sawgrass Mills Mall Pari Passu Companion Loans;
Sixth, the holders of the Sawgrass Mills Mall Subordinate Companion Loans will receive accrued and unpaid interest on its outstanding principal balance at its interest rate, pro rata;
Seventh, the holders of the Sawgrass Mills Mall Subordinate Companion Loans will receive, pro rata, based on the principal balance of each such loan, an amount up to its principal balance that remains outstanding;
Eighth, any Yield Maintenance Charge that is allocable to the Sawgrass Mills Mall Subordinate Companion Loans, to the extent actually paid by the borrower, will be paid to each holder of the Sawgrass Mills Mall Subordinate Companion Loans, pro rata; and
Ninth, any default interest in excess of the interest paid in accordance with clauses first, fifth and sixth above, will be paid to each holder of the Sawgrass Mills Mall Subordinate Companion Loans, pro rata, based on the total amount of default interest then owing to each such party, to the extent not applied to interest on advances or payable to the Master Servicer or the Special Servicer under the Pooling and Servicing Agreement o r the servicers of the Sawgrass Mills Mall Pari Passu Companion Loans;
S-95
Tenth, if any excess amount is paid by the borrower that is not otherwise applied in accordance with the foregoing clauses first through ninth or the proceeds of any foreclosure sale or any liquidation of the Sawgrass Mills Mall Whole Loan or the Sawgrass Mills Mall Mortgaged Property are received in excess of the amounts required to be applied in accordance with the foregoing clauses first through ninth, such amount will generally be paid to the holders of the Sawgrass Mills Mall Loan, Sawgrass Mills Mall Pari Passu Companion Loans and the Sawgrass Mills Mall Subordinate Companion Loans, on a pro rata basis, in accordance with the initial principal balance of each loan.
Notwithstanding the foregoing clauses first through tenth, in the event that one or more Sawgrass Mills Mall Subordinate Noteholders has previously made a cure payment pursuant to the Sawgrass Mills Mall Intercreditor Agreement in respect of any monetary default and the related borrower subsequently makes the payment for which the monetary default exists, such payment will be remitted to each applicable Sawgrass Mills Mall Subordinate Noteholder, pro rata, based on the amount of such outstanding cure payments, to reimburse it for such cure payment, so long as no amounts would be payable at such time to the Sawgrass Mills Mall Senior Noteholders under the foregoing clauses first through ninth and payments are not required to be applied in accordance with the Sawgrass Mills Mall Intercreditor Agreement.
Consent Rights of Certain Sawgrass Mills Mall Subordinate Noteholders. So long as no Sawgrass Mills Mall Control Appraisal Event has occurred, a majority of the holders of the Sawgrass Mills Mall Subordinate Companion Loans, by certificate principal balance, will have the rights and powers of the Directing Certificateholder set forth under ‘‘The Servicing of the Mortgage Loans—The Directing Certificateholder’’ in this prospectus supplement. If the Sawgrass Mills Mall Control Appraisal has occurred, the Directing Certificateholder will have those rights and powers.
Termination of Special Servicer. With respect to the Sawgrass Mills Mall Whole Loan, the Directing Certificateholder will be entitled to terminate the Special Servicer with respect to the special servicing of the Sawgrass Mills Mall Whole Loan at any time, with or without cause, and to appoint a replacement special servicer, subject to satisfaction of the conditions contained in the Pooling and Servicing Agreement and the Sawgrass Mills Mall Intercreditor Agreement. The appointment of a successor special servicer will generally be subject to receipt of written confirmation from the rating agencies that such appointment would not cause the downgrade, withdrawal or qualification of the then-current ratings of the Certificates or any certificates backed by the Sawgrass Mills Mall Pari Passu Companion Loans.
Cure Rights. In the event that the borrower fails to make any payment of principal or interest on the Sawgrass Mills Mall Whole Loan, resulting in a monetary event of default under the related mortgage loan documents, the Sawgrass Mills Mall Subordinate Noteholders will have the right to cure such monetary event of default subject to certain limitations set forth in the Sawgrass Mills Mall Intercreditor Agreement.
Purchase Option. In the event that the Sawgrass Mills Mall Loan is delinquent at least 60 days in respect of its scheduled monthly debt service payments, or more than 30 days delinquent in respect of its balloon payment, the Sawgrass Mills Mall Subordinate Noteholders will have an option (the ‘‘Sawgrass Mills Mall Purchase Option’’) to purchase the Sawgrass Mills Mall Loan from the trust fund at a price generally equal to the unpaid principal balance of the Sawgrass Mills Mall Loan, plus accrued and unpaid interest on such balance, all related unreimbursed Servicing Advances (and all related Servicing Advances that were reimbursed from general collections on the mortgage loans, but not yet repaid by the related borrower) together with accrued and unpaid interest on all Advances and all accrued Special Servicing Fees allocable to the Sawgrass Mills Mall Loan whether paid or unpaid and any other additional trust fund expenses relating to the Sawgrass Mills Mall Whole Loan. In order to exercise the Sawgrass Mills Mall Purchase Option, the Sawgrass Mills Mall Subordinate Noteholders will also be required to purchase the Sawgrass Mills Mall Pari Passu Companion Loans for a similar price.
S-96
Pari Passu Whole Loans
The Carespring Portfolio Whole Loan
The Carespring Portfolio Loan. One mortgage loan (identified as Loan No. 6 on Annex A-1 to this prospectus supplement) (the ‘‘Carespring Portfolio Loan’’), representing approximately 2.7% of the Initial Pool Balance (3.1%, 0.0%), is part of a split loan structure comprised of three mortgage loans, each of which is secured by the same mortgage instrument on the same underlying Mortgaged Property (the ‘‘Carespring Portfolio Mortgaged Property’’). The Carespring Portfolio Loan is comprised of two of those three mortgage loans, which are pari passu with each other and are evidenced by promissory note A-2 and promissory note A-3, respectively. The mortgage loan evidenced by promissory note A-1 (with an outstanding principal balance as of the Cut-off Date of $34,155,000 is referred to in this prospectus supplement as a ‘‘Carespring Portfolio A-1 Pari Passu Companion Loan.’’ The Carespring Portfolio Pari Passu Companion Loan is not included in the trust. Only the Carespring Portfolio Loan is included in the trust. The Carespring Portfolio Loan and the Carespring Portfolio Pari Passu Companion Loan are collectively referred to in this prospectus supplement as the ‘‘Carespring Portfolio Whole Loan.’’ The notes evidencing the Carespring Portfolio Whole Loan are collectively referred to in this prospectus supplement as the ‘‘Carespring Portfolio Notes.’’
The Carespring Portfolio Pari Passu Companion Loan is included in the trust established in connection with the issuance of the J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP11, Commercial Mortgage Pass-Through Certificates, Series 2007-LDP11 (the ‘‘JPMCC 2007-LDP11 Securitization’’).
For purposes of the information presented in this prospectus supplement with respect to the Carespring Portfolio Loan, the debt service coverage ratio and the loan-to-value ratio reflect the aggregate indebtedness evidenced by the Carespring Portfolio Loan and the Carespring Portfolio Pari Passu Companion Loan.
Distributions. Pursuant to the Carespring Portfolio Intercreditor Agreement, all payments, proceeds and other recoveries on or in respect of the Carespring Portfolio Loan and/or the Carespring Portfolio Pari Passu Companion Loan (in each case, subject to the rights of the JPMCC 2007-LDP11 Master Servicer, the JPMCC 2007-LDP11 Special Servicer and the JPMCC 2007-LDP11 Trustee under the JPMCC 2007-LDP11 Pooling and Servicing Agreement (and the rights of the master servicer and the Trustee under the Pooling and Servicing Agreement) to payments and reimbursements pursuant to and in accordance with the terms of the JPMCC 2007-LDP11 Pooling and Servicing Agreement) will be applied to the Carespring Portfolio Loan and the Carespring Portfolio Pari Passu Companion Loan on a pro rata and pari passu basis according to their respective outstanding principal balances.
Servicing. The holders of the Carespring Portfolio Notes (the ‘‘Carespring Portfolio Noteholders’’) have entered into an intercreditor agreement that sets forth the respective rights of each Carespring Portfolio Noteholder (the ‘‘Carespring Portfolio Intercreditor Agreement’’). The trust fund relating to the JPMCC 2007-LDP11 Securitization (the ‘‘JPMCC 2007-LDP1 1 Trust Fund’’) is the holder of the Carespring Portfolio A-1 Pari Passu Companion Loan. Pursuant to the terms of the Carespring Portfolio Intercreditor Agreement, the Carespring Portfolio Whole Loan is being serviced and administered pursuant to the pooling and servicing agreement (the ‘‘JPMCC 2007-LDP11 Pooling and Servicing Agreement’’) entered into by and among J.P. Morgan Chase Commercial Mortgage Securities Corp., as depositor, Wachovia Bank, National Association, as the master servicer (the ‘‘JPMCC 2007-LDP11 Master Servicer’’), CWCapital Asset Management LLC, as the special servicer (the ‘‘J PMCC 2007-LDP11 Special Servicer’’) and LaSalle Bank National Association, as the trustee (the ‘‘JPMCC 2007-LDP11 Trustee’’), in connection with the JPMCC 2007-LDP11 Securitization. The Carespring Portfolio Intercreditor Agreement provides that expenses, losses and shortfalls relating to the Carespring Portfolio Whole Loan will be allocated, on a pro rata and pari passu basis, to the Carespring Portfolio Noteholders.
Although many pooling and servicing agreements relating to rated commercial mortgage-backed securities contain customary provisions regarding servicing, the servicing
S-97
arrangements under the JPMCC 2007-LDP11 Pooling and Servicing Agreement differ in certain respects to the servicing arrangements under the Pooling and Servicing Agreement. The Master Servicer, the Special Servicer or the Trustee under the Pooling and Servicing Agreement will have no obligation or authority to (a) supervise the JPMCC 2007-LDP11 Master Servicer, the JPMCC 2007-LDP11 Special Servicer or the JPMCC 2007-LDP11 Trustee or (b) make servicing advances with respect to the Carespring Portfolio Loan.
The JPMCC 2007-LDP11 Master Servicer is obligated to make servicing advances with respect to the Carespring Portfolio Whole Loan pursuant to the terms of the JPMCC 2007-LDP11 Pooling and Servicing Agreement. If the JPMCC 2007-LDP11 Master Servicer makes a servicing advance with respect to the Carespring Portfolio Whole Loan, it will be entitled to be reimbursed from the Carespring Portfolio Loan and the Carespring Portfolio Pari Passu Loan, on a pro rata basis (based on each such loan’s outstanding principal balance), and if such servicing advance has been determined to be nonrecoverable, then from general collections on all mortgage loans included in the JPMCC 2007-LDP11 Trust Fund and general collections on all Mortgage Loans included in the Trust Fund, in each case, on a pro rata basis (based on each such lo an’s outstanding principal balance).
The obligation of the Master Servicer to provide information and collections and make P&I Advances to the Trustee and the Certificateholders with respect to the Carespring Portfolio Loan is dependent on its receipt of the corresponding information and/or collections from the JPMCC 2007-LDP11 Master Servicer or the JPMCC 2007-LDP11 Special Servicer. The Master Servicer (or the Trustee, if applicable) will be required to make P&I Advances with respect to the Carespring Portfolio Loan, unless the Master Servicer, after receiving the necessary information from the JPMCC 2007-LDP11 Master Servicer or Special Servicer has determined that such P&I Advance would not be recoverable from collections on the Carespring Portfolio Loan.
The JPMCC 2007-LDP11 Master Servicer or JPMCC 2007-LDP11 Special Servicer will need to obtain the consent of the directing certificateholder under the JPMCC 2007-LDP11 Pooling and Servicing Agreement (the ‘‘JPMCC 2007-LDP11 Directing Certificateholder’’), with respect to certain servicing actions set forth below (provided that generally a failure by the JPMCC 2007-LDP11 Directing Certificateholder to approve or disapprove any proposed action within 30 days (or such shorter time frame as is provided for in the related loan documents will have the effect of a deemed consent). Additionally, the holder of any Carespring Portfolio Note will have the right to consult with the JPMCC 2007-LDP11 Master Servicer or JPMCC 2007-LDP11 Special Servicer with respect to the servicing actions set forth below:
(1) any proposed or actual foreclosure upon or comparable conversion of the ownership of the Carespring Portfolio Mortgaged Property;
(2) any modification, consent to a modification or waiver of any monetary term or material non-monetary term of the Carespring Portfolio Whole Loan or material modification or waiver of any terms of the Carespring Portfolio Whole Loan relating to the nature or amount of required insurance coverage;
(3) any sale of the Carespring Portfolio Whole Loan or related REO Property for less than the outstanding principal balance of the Carespring Portfolio Whole Loan plus all accrued and unpaid interest thereon;
(4) any determination to bring an REO Property related to the Carespring Portfolio Whole Loan into compliance with applicable environmental laws or to address hazardous materials located at a related REO Property;
(5) any release of collateral or any acceptance of substitute or additional collateral for the Carespring Portfolio Whole Loan (other than pursuant to the specific terms of the loan documents);
(6) any waiver of a ‘‘due-on-sale’’ clause or ‘‘due-on-encumbrance’’ clause with respect to the Carespring Portfolio Whole Loan or a transfer of the Carespring Portfolio Mortgaged Property or interests in the related borrower (other than pursuant to the specific terms of the loan documents);
S-98
(7) any property management changes with respect to the Carespring Portfolio Whole Loan as to which lender is required to consent or approve under the loan documents;
(8) releases of any escrow accounts, reserve accounts or letters of credit held as performance escrows or reserves with respect to the Carespring Portfolio Whole Loan, in an amount greater than or equal to $1,500,000 (other than those required pursuant to the specific terms of the loan documents);
(9) any acceptance of an assumption agreement releasing the borrower from liability under the Carespring Portfolio Whole Loan (other than pursuant to the specific terms of the loan documents);
(10) any approval of a material capital expenditure (if lender’s approval is required under the Carespring Portfolio Whole Loan); and
(11) any adoption or approval of a plan in bankruptcy of the borrower under the Carespring Portfolio Whole Loan.
Notwithstanding the above, no advice, direction or objection from or by the JPMCC 2007-LDP11 Directing Certificateholder may (and the JPMCC 2007-LDP11 Master Servicer or the JPMCC 2007-LDP11 Special Servicer, as applicable, shall ignore and act without regard to any such advice, direction or objection that the JPMCC 2007-LDP11 Master Servicer or the JPMCC 2007-LDP11 Special Servicer has determined, in its reasonable, good faith judgment, will) require, cause or permit the JPMCC 2007-LDP11 Master Servicer or the JPMCC 2007-LDP11 Special Servicer, as applicable, to violate any provision of the Carespring Portfolio Intercreditor Agreement or the JPMCC 2007-LDP11 Pooling and Servicing Agreement (including the JPMCC 2007-LDP11 Master Servicer’s and JPMCC 2007-LDP11 Special Servicer’s obligation to act in accordance with the servicing standards set forth in the JPMCC 2007-LDP11 Pooling and Servicing Agreement, the related loan documents or applicable law) or result in an adverse REMIC event or an adverse grantor trust event.
If a servicing event of default with respect to the JPMCC 2007-LDP11 Master Servicer under the JPMCC 2007-LDP11 Pooling and Servicing Agreement has occurred and remains unremedied that materially and adversely affects the holder of the Carespring Portfolio Loan, the holder of the Carespring Portfolio Loan will have the right to require the JPMCC 2007-LDP11 Master Servicer to appoint a sub-servicer solely with respect to the Carespring Portfolio Whole Loan, subject to confirmation by the rating agencies that such appointment will not cause the downgrade, qualification or withdrawal of the ratings on any securities backed by the Carespring Portfolio Loan or the Carespring Portfolio Pari Passu Companion Loan.
Sale of Defaulted Mortgage Loan. Under the JPMCC 2007-LDP11 Pooling and Servicing Agreement, if the Carespring Portfolio Pari Passu Loan is subject to a fair value purchase option, the JPMCC 2007-LDP11 Special Servicer will be required to determine the purchase price for the Carespring Portfolio Loan and the Carespring Portfolio Pari Passu Companion Loan. Each option holder specified under ‘‘Servicing of the Mortgage Loans—Realization Upon Defaulted Mortgage Loans’’ in this prospectus supplement will have an option to purchase the Carespring Portfolio Loan and the holder of the Carespring Portfolio Pari Passu Companion Loan (or its designees) will have an option to purchas e the Carespring Portfolio Pari Passu Companion Loan, at the purchase price determined by the JPMCC 2007-LDP11 Special Servicer under the JPMCC 2007-LDP11 Pooling and Servicing Agreement.
The Logan Portfolio Whole Loans
The Logan Portfolio Loans. Each of the 14 mortgage loans (identified as Loan Nos. 143, 145, 146, 148, 149, 150, 151, 152, 153, 155, 156, 157, 159 and 161 on Annex A-1 to this prospectus supplement) (the ‘‘Logan Portfolio Loans’’ and, together with the Carespring Portfolio Loan, the ‘‘Non-Serviced Mortgage Loans’’) is part of a split loan structure comprised of two mortgage loans, each of which is secured by the same mortgage instrument on the same respective underlying Mortgaged Property (each, a ‘‘Logan Portfolio Mortgaged Property’’ and collectively,
S-99
‘‘Logan Portfolio Mortgaged Properties’’). Each Logan Portfolio Loan is evidenced by promissory note A-2. Each mortgage loan evidenced by promissory note A-1 (with an outstanding principal balance as of the Cut-off Date reflected on the chart titled ‘‘Whole Loans Summary’’ above) is referred to in this prospectus supplement as a ‘‘Logan Portfolio Pari Passu Companion Loan’’ and collectively, the ‘‘Logan Portfolio Pari Passu Companion Loans.’’ The Logan Portfolio Pari Passu Companion Loans are not included in the trust. Only the Logan Portfolio Loans are included in the trust. Each of Logan Portfolio Loans and the related Logan Portfolio Pari Passu Companion Loan are each collectively referred to in this prospectus supplement as a ‘‘Logan Portfolio Whole Loan.’’ Each Logan Portfolio Whole Loan and the Carespring Portfolio Whole Loan are collectively referred to in this prospectus supplement as the ‘‘Non-Serviced Whole Loans.’’ The notes evidencing each of the Logan Portfolio Whole Loans are collectively referred to in this prospectus supplement as the ‘‘Logan Portfolio Notes.’’
Each of the Logan Portfolio Pari Passu Companion Loans is included in the JPMCC 2007-LDP11 Trust Fund.
For purposes of the information presented in this prospectus supplement with respect to each of the Logan Portfolio Loans, the debt service coverage ratios and the loan-to-value ratios reflect the aggregate indebtedness evidenced by such Logan Portfolio Loan and the respective Logan Portfolio Pari Passu Companion Loan.
Distributions. The Intercreditor Agreement relating to each Logan Portfolio Whole Loan (each, a ‘‘Logan Portfolio Intercreditor Agreement’’) provides that the related Logan Portfolio Pari Passu Companion Loan will be always pari passu in right of payment with the related Logan Portfolio Loan. Under the terms of each Logan Portfolio Intercreditor Agreement, any payment whether principal or interest or prepayment under the related Logan Portfolio Notes, or proceeds relating to the respective Logan Portfolio Mortgaged Property (in each case, subject to the rights of th e JPMCC 2007-LDP11 Master Servicer, the JPMCC 2007-LDP11 Special Servicer, the depositor of the JPMCC 2007-LDP11 Trust Fund, the JPMCC 2007-LDP11 Trustee and any related sub-servicer to payments and reimbursements pursuant to and in accordance with the terms of the JPMCC 2007-LDP11 Pooling and Servicing Agreement) will be applied to the related Logan Portfolio Loan and the related Logan Portfolio Pari Passu Companion Loan on a pro rata and pari passu basis according to their respective outstanding principal balances. Any expenses, losses and shortfalls relating to the related Logan Portfolio Whole Loan will be also allocated, on a pro rata and pari passu basis, to the holder of the related Logan Portfolio Pari Passu Companion Loan.
Servicing. Each Logan Portfolio Intercreditor Agreement generally provides that the related Logan Portfolio Whole Loan will be serviced and administered pursuant to the JPMCC 2007-LDP11 Pooling and Servicing Agreement by the JPMCC 2007-LDP11 Master Servicer and the JPMCC 2007-LDP11 Special Servicer, as applicable, according to the servicing standards under the JPMCC 2007-LDP11 Pooling and Servicing Agreement. Under each Logan Portfolio Intercreditor Agreement, the JPMCC 2007-LDP11 Directing Certificateholder will have the right to consult with and advise the JPMCC 2007-LDP11 Master Servicer and the JPMCC 2007-LDP11 Special Servicer with respect to certain actions relating to the related Logan Portfolio Whole Loan but the JPMCC 2007-LDP11 Master Servicer or the JPMCC 2007-LDP11 Special Servicer, as applicable, will be required to consult, on a non- binding basis, with the Directing Certificateholder with respect to such actions.
Although many pooling and servicing agreements relating to rated commercial mortgage-backed securities contain customary provisions regarding servicing, the servicing arrangements under the JPMCC 2007-LDP11 Pooling and Servicing Agreement differ in certain respects to the servicing arrangements under the Pooling and Servicing Agreement. The Master Servicer, the Special Servicer or the Trustee under the Pooling and Servicing Agreement will have no obligation or authority to (a) supervise the JPMCC 2007-LDP11 Master Servicer, the JPMCC 2007-LDP11 Special Servicer or the JPMCC 2007-LDP11 Trustee or (b) make servicing advances with respect to the Logan Portfolio Loans.
S-100
The JPMCC 2007-LDP11 Master Servicer is obligated to make servicing advances with respect to the Logan Portfolio Whole Loans. If the JPMCC 2007-LDP11 Master Servicer makes a servicing advance with respect to any Logan Portfolio Whole Loans, it will be entitled to be reimbursed from the respective Logan Portfolio Loan and the related Logan Portfolio Pari Passu Loan, on a pro rata basis (based on each such loan’s outstanding principal balance), and if such servicing advance has been determined to be nonrecoverable, then from general collections on all mortgage loans included in the JPMCC 2007-LDP11 Trust Fund and general collections on all Mortgage Loans included in the Trust Fund, in each case, on a pro rata basis (based on each such loan’s outstanding principal balance).
The obligation of the Master Servicer to provide information and collections and make P&I Advances to the Trustee and the Certificateholders with respect to the Logan Portfolio Loans is dependent on its receipt of the corresponding information and/or collections from the JPMCC 2007-LDP11 Master Servicer or the JPMCC 2007-LDP11 Special Servicer. The Master Servicer (or the Trustee, if applicable) will be required to make P&I Advances with respect to the Logan Portfolio Loans, unless the Master Servicer, after receiving the necessary information from the JPMCC 2007-LDP11 Servicers has determined that such P&I Advance would not be recoverable from collections on the Logan Portfolio Loans.
With respect to each Logan Portfolio Whole Loan, the JPMCC 2007-LDP11 Master Servicer or the JPMCC 2007-LDP11 Special Servicer, as applicable, will not be permitted to take any of the following actions without obtaining the approval of the JPMCC 2007-LDP11 Directing Certificateholder:
(1) any modification or amendment of, or waiver with respect to, such Logan Portfolio Whole Loan or the Logan Portfolio Whole Loan’s documents that would result in the extension of the maturity date, a reduction in the interest rate or the monthly payment, or any prepayment premium, exit fee or yield maintenance premium payable on such Logan Portfolio Whole Loan or a deferral or forgiveness of interest on or principal of such Logan Portfolio Whole Loan, a modification or waiver of any other monetary term of such Logan Portfolio Whole Loan documents relating to the timing or amount of any payment of principal and interest (other than default interest) or a modification or waiver of any provision of such Logan Portfolio Whole Loan which restricts the related borrower from incurring additional indebtedness or from transferring a mortgaged property or any transfer of direct or indirect equity interests in the borrower;
(2) any modification or amendment of, or waiver with respect to, such Logan Portfolio Whole Loan’s documents that would result in a discounted pay off of such Logan Portfolio Whole Loan;
(3) any foreclosure upon or comparable conversion (which may include acquisition of REO Property) of the ownership of the mortgaged property securing such Logan Portfolio Whole Loan or any acquisition of the related mortgaged property by deed in lieu of foreclosure;
(4) any proposed or actual sale of the mortgaged property or REO property (other than in connection with (i) the repurchase or replacement of any mortgage loan by the related loan seller for a breach of representation or warranty or for defective or deficient loan documentation, (ii) the sale of defaulted mortgage loans and (iii) the termination of the trust and liquidation of all of the mortgage loans in the trust, in each case as provided in the related Logan Portfolio Intercreditor Agreement);
(5) subject to certain exceptions, any proposed or actual sale of such Logan Portfolio Whole Loan by the applicable servicer;
(6) any release of the respective borrower, any guarantor or other obligor from liability with respect to such Logan Portfolio Whole Loan;
(7) any determination not to enforce a ‘‘due on sale’’ or ‘‘due on encumbrance’’ clause (unless such clause is not exercisable under applicable law or such exercise is
S-101
reasonably likely to result in successful legal action by the borrower) as provided in the JPMCC 2007-LDP11 Pooling and Servicing Agreement (or similar provision in any other servicing agreement, if applicable);
(8) any action to bring a related property or REO property into compliance with environmental laws or otherwise address hazardous materials located at the property or REO property;
(9) any substitution or release of collateral or acceptance of additional collateral for such Logan Portfolio Whole Loan including the release of additional collateral for such Logan Portfolio Whole Loan unless required by the underlying Logan Portfolio Whole Loan’s documents (other than any release made in connection with the grant of a non-material easement or right-of-way or other non-material release such as a ‘‘curb-cut’’);
(10) any consent, waiver or approval with respect to any change in the property manager at the mortgaged property;
(11) adoption or approval of a plan in a bankruptcy of a related borrower;
(12) consenting to any new lease or any amendment, modification, waiver or termination of any lease, in each case to the extent the lender’s approval is required under such Logan Portfolio Whole Loan’s documents; or
(13) any renewal or replacement of the then existing insurance policies (to the extent the lender’s approval is required under such Logan Portfolio Whole Loan’s documents) or any waiver, modification or amendment of any insurance requirements under such Logan Portfolio Whole Loan’s documents; provided that the JPMCC 2007-LDP11 Master Servicer or the JPMCC 2007-LDP11 Special Servicer, as applicable, shall be required to consult, on a non-binding basis, with the Directing Certificateholder in respect of the items set forth above, and shall provide such parties with an opportunity to review any proposed action to be taken in respect thereof.
Notwithstanding the above, no advice, direction or objection from or by the JPMCC 2007-LDP11 Directing Certificateholder may (and the JPMCC 2007-LDP11 Master Servicer or the JPMCC 2007-LDP11 Special Servicer, as applicable, shall ignore and act without regard to any such advice, direction or objection that the JPMCC 2007-LDP11 Master Servicer or the JPMCC 2007-LDP11 Special Servicer has determined, in its reasonable, good faith judgment, will) require, cause or permit the JPMCC 2007-LDP11 Master Servicer or the JPMCC 2007-LDP11 Special Servicer, as applicable, to violate any provision of the Logan Portfolio Intercreditor Agreements or the JPMCC 2007-LDP11 Pooling and Servicing Agreement (including the JPMCC 2007-LDP11 Master Servicer’s and JPMCC 2007-LDP11 Special Servicer’s obligation to act in accordance with the servicing standards provided in the JPMCC 2007-LDP11 Pooling and Servicing Agreement, the related loan documents or applicable law) or re sult in an adverse REMIC event or an adverse grantor trust event.
If a servicing event of default with respect to the JPMCC 2007-LDP11 Master Servicer under the JPMCC 2007-LDP11 Pooling and Servicing Agreement has occurred and remains unremedied that materially and adversely affects the holders of any Logan Portfolio Pari Passu Companion Loans, the JPMCC 2007-LDP11 Directing Certificateholder will have the right to require the JPMCC 2007-LDP11 Master Servicer to appoint a sub-servicer solely with respect to the related Logan Portfolio Whole Loan, subject to confirmation by the rating agencies that such appointment will not cause the downgrade, qualification or withdrawal of the ratings on any securities backed by the related Logan Portfolio Loan or any related Logan Portfolio Pari Passu Companion Loan.
Termination of Special Servicer. The JPMCC 2007-LDP11 Directing Certificateholder, after consultation, on a non-binding basis, for a period of at least 10 business days, with the Directing Certificateholder, will be entitled to terminate the JPMCC 2007-LDP11 Special Servicer with respect to the special servicing of a Logan Portfolio Whole Loan at any time, with or without cause, and to appoint a replacement special servicer, subject to satisfaction of the conditions
S-102
contained in the JPMCC 2007-LDP11 Pooling and Servicing Agreement and the related Logan Portfolio Intercreditor Agreement, and if such holders are not able to agree on such appointment and removal within 30 days after receipt of notice, the JPMCC 2007-LDP11 Directing Certificateholder will be entitled to appoint a replacement special servicer. The appointment of a successor special servicer will generally be subject to receipt of written confirmation from the rating agencies that such appointment would not cause the downgrade, withdrawal or qualification of the then-current ratings of the Certificates or any class of certificates backed by the related Logan Portfolio Whole Loan.
Sale of Defaulted Mortgage Loan. Under the JPMCC 2007-LDP11 Pooling and Servicing Agreement, if any of the Logan Portfolio Pari Passu Loans is subject to a fair value purchase option, the JPMCC 2007-LDP11 Special Servicer will be required to determine the purchase price for the respective Logan Portfolio Loan. Each option holder specified under ‘‘Servicing of the Mortgage Loans—Realization Upon Defaulted Mortgage Loans’’ in this prospectus supplement will have an option to purchase the applicable Logan Portfolio Loan and the holders of the respective Logan Portfolio Pari Passu Companion Loan (or their designees) will have an option to purchase the related Logan Portfolio P ari Passu Companion Loan, at the purchase price determined by the JPMCC 2007-LDP11 Special Servicer under the JPMCC 2007-LDP11 Pooling and Servicing Agreement.
AB Whole Loans
General
Each AB Mortgage Loan, which for purposes hereof, does not include the Sawgrass Mills Mall Whole Loan, is evidenced by the senior of two or more notes each secured by a single Mortgage and a single assignment of leases and rents. The AB Subordinate Companion Loan relating to each AB Mortgage Loan, which is in each case evidenced by the subordinate of the two or more notes, will not be part of the trust fund.
Each AB Mortgage Loan and the related AB Subordinate Companion Loan are cross-defaulted. For purposes of the information presented in this prospectus supplement with respect to each AB Mortgage Loan, unless otherwise specified, the LTV Ratio and DSCR reflect only the AB Mortgage Loan and do not take into account the related AB Subordinate Companion Loan.
The trust, as the holder of each AB Mortgage Loan, and the holder of the related AB Subordinate Companion Loan will be parties to a separate intercreditor agreement (each, an ‘‘AB Intercreditor Agreement’’). Under the terms of each AB Intercreditor Agreement, the holder of the related AB Subordinate Companion Loan has agreed to subordinate its interest in certain respects to the related AB Mortgage Loan. The Master Servicer and the Special Servicer will undertake to perform the obligations of the holder of each AB Mortgage Loan under the related AB Intercreditor Agreement.
The AB Whole Loans and the related Mortgaged Properties will be serviced and administered by the Master Servicer and, if necessary, the Special Servicer, pursuant to the Pooling and Servicing Agreement, in the manner described under ‘‘Servicing of the Mortgage Loans’’ in this prospectus supplement, but subject to the terms of the related AB Intercreditor Agreement to the extent set forth therein. In servicing an AB Whole Loan, the Servicing Standards set forth in the Pooling and Servicing Agreement will require the Master Servicer and the Special Servicer to take into account the interests of the Certificateholders and the holder of any related AB Subordinate Companion Loans as a collective whole. The Master Servicer and the Special Servicer have the initial authority to service and administer , and to exercise the rights and remedies with respect to, each AB Whole Loan.
Amounts payable to the trust as holder of any AB Mortgage Loan pursuant to the related AB Intercreditor Agreement will be included in the Available Distribution Amount for each
S-103
Distribution Date to the extent described in this prospectus supplement and amounts payable to the holder of a related AB Subordinate Companion Loan will be distributed to such holder net of certain fees and expenses on the related AB Subordinate Companion Loan to the extent set forth in the related AB Intercreditor Agreement.
Plaza El Segundo Whole Loan
One mortgage loan (identified as Loan No. 1 on Annex A-1 to this prospectus supplement) (the ‘‘Plaza El Segundo Loan’’), representing approximately 6.5% of the Initial Pool Balance (7.3%, 0.0%), is part of a split loan structure comprised of a senior mortgage loan secured by the related mortgage instrument on the underlying Mortgaged Property (the ‘‘Plaza El Segundo Mortgaged Property’’). The related companion loan (the ‘‘Plaza El Segundo Subordinate Companion Loan’’), which is not included in the trust, has an initial principal balance of $13,000, 000. The Plaza El Segundo Loan and the Plaza El Segundo Subordinate Companion Loan are collectively referred to in this prospectus supplement as the ‘‘Plaza El Segundo Whole Loan’’.
Servicing Provisions of the Plaza El Segundo Intercreditor Agreement. An intercreditor agreement (the ‘‘Plaza El Segundo Intercreditor Agreement’’) between the holder of the Plaza El Segundo Loan (the ‘‘Plaza El Segundo Note A Holder’’), and the holder of the Plaza El Segundo Subordinate Companion Loan (the ‘‘Plaza El Segundo Note B Holder’’), sets forth the rights of such noteholders. The Plaza El Segundo Interc reditor Agreement generally provides that the Plaza El Segundo Whole Loan will be serviced and administered pursuant to the Pooling and Servicing Agreement and the Plaza El Segundo Intercreditor Agreement by the Master Servicer and Special Servicer, as applicable, according to the Servicing Standards.
Distributions. With respect to the Plaza El Segundo Whole Loan, pursuant to the Plaza El Segundo Intercreditor Agreement, to the extent described below, the right of the Plaza El Segundo Note B Holder to receive payments with respect to the Plaza El Segundo Subordinate Companion Loan, is subordinate to the payment rights of the related Plaza El Segundo Note A Holder to receive payments with respect to the Plaza El Segundo Loan.
Prior to the occurrence and continuation of a monetary event of default or a non-monetary event of default resulting in the Plaza El Segundo Whole Loan becoming a Specially Serviced Mortgage Loan, all payments and proceeds (of whatever nature) received with respect to the Plaza El Segundo Whole Loan (excluding certain reserves and escrows as well as insurance proceeds and awards otherwise required to be applied under the related mortgage loan documents or released to the borrower) will generally be applied in the following manner:
First, to the Plaza El Segundo Note A Holder in an amount equal to any unreimbursed costs and expenses paid or advanced, together with interest thereon, by the Plaza El Segundo Note A Holder with respect to the Plaza El Segundo Loan or the related mortgaged property;
Second, to the Plaza El Segundo Note A Holder (for payment to the related Master Servicer and Special Servicer) in an amount equal to all accrued and unpaid servicing compensation earned with respect to the Plaza El Segundo Loan;
Third, to the Plaza El Segundo Note A Holder in an amount equal to accrued and unpaid interest with respect to the Plaza El Segundo Loan;
Fourth, to the Plaza El Segundo Note A Holder in an amount equal to its pro rata portion of any scheduled principal payments received with respect to the Plaza El Segundo Whole Loan and its pro rata portion of any prepayments with respect to the Plaza El Segundo Whole Loan;
Fifth, to the Plaza El Segundo Note B Holder in an amount equal to any cure payments made by the Plaza El Segundo Note B Holder with respect to the Plaza El Segundo Loan;
Sixth, to the Plaza El Segundo Note B Holder (for payment to the Master Servicer and Special Servicer) in an amount equal to all accrued and unpaid servicing compensation earned with respect to the Plaza El Segundo Subordinate Companion Loan;
Seventh, to the Plaza El Segundo Note B Holder in an amount equal to accrued and unpaid interest with respect to the Plaza El Segundo Subordinate Companion Loan;
S-104
Eighth, to the Plaza El Segundo Note B Holder in the amount equal to its pro rata portion of any scheduled principal payments received with respect to the Plaza El Segundo Whole Loan and its pro rata portion of any prepayments with respect to the Plaza El Segundo Whole Loan;
Ninth, pro rata, (i) to the Plaza El Segundo Note A Holder, any penalty charges and any default interest with respect to the Plaza El Segundo Loan (net of any amounts payable to the Plaza El Segundo Note A Holder pursuant to clause first above); and (ii) to the Plaza El Segundo Note B Holder, any penalty charges and any default interest with respect to the Plaza El Segundo Subordinate Companion Loan (net of any amounts payable to the Plaza El Segundo Note A Holder pursuant to clause firs t above);
Tenth, pro rata, (i) to the Plaza El Segundo Note A Holder, its percentage interest of any exit fees and extension fees allocated to the Plaza El Segundo Whole Loan, to the extent actually paid, and (ii) to the Plaza El Segundo Note B Holder, its percentage interest of any exit fees and extension fees allocated to the Plaza El Segundo Whole Loan, to the extent actually paid; and
Eleventh, if any excess amount is paid by the respective borrowers, and not otherwise applied in accordance with the foregoing clauses first through tenth above, such remaining amount shall be paid to the Plaza El Segundo Note A Holder and the Plaza El Segundo Note B Holder, pro rata based on their respective initial percentage interests.
Following the occurrence and continuation of a monetary event of default or a non-monetary event of default resulting in the Plaza El Segundo Whole Loan becoming a Specially Serviced Mortgage Loan, all payments and proceeds (of whatever nature) received with respect to the Plaza El Segundo Whole Loan (excluding certain reserves and escrows as well as insurance proceeds and awards otherwise required to be applied under the related mortgage loan documents or released to the borrower) will generally be applied in the following manner:
First, to the Plaza El Segundo Note A Holder in an amount equal to any unreimbursed costs and expenses paid or advanced, together with interest thereon, by the Plaza El Segundo Note A Holder with respect to the Plaza El Segundo Loan or the related mortgaged property;
Second, to the Plaza El Segundo Note A Holder (for payment to the related Master Servicer and Special Servicer) in an amount equal to all accrued and unpaid servicing compensation (including any workout fees and liquidation fees payable to the related Special Servicer) earned with respect to the Plaza El Segundo Loan;
Third, to the Plaza El Segundo Note A Holder in an amount equal to accrued and unpaid interest with respect to the Plaza El Segundo Loan;
Fourth, to the Plaza El Segundo Note A Holder in an amount equal to the outstanding principal balance of the Plaza El Segundo Loan, until such principal balance has been paid in full;
Fifth, to the Plaza El Segundo Note B Holder in an amount equal to any cure payments made by the Plaza El Segundo Note B Holder with respect to the Plaza El Segundo Loan;
Sixth, to the Plaza El Segundo Note B Holder (for payment to the related Master Servicer and Special Servicer) in an amount equal to all accrued and unpaid servicing compensation (including any workout fees and liquidation fees payable to the related Special Servicer) earned with respect to the Plaza El Segundo Subordinate Companion Loan;
Seventh, to the Plaza El Segundo Note B Holder in an amount equal to accrued and unpaid interest with respect to the Plaza El Segundo Subordinate Companion Loan;
Eighth, to the Plaza El Segundo Note B Holder in an amount equal to the outstanding principal balance of the Plaza El Segundo Subordinate Companion Loan, until such principal balance has been paid in full;
Ninth, pro rata, to (i) to the Plaza El Segundo Note A Holder, any penalty charges and any default interest with respect to the Plaza El Segundo Loan (net of amounts payable to the Plaza El Segundo Note A Holder pursuant to clause first above) and (ii) to the Plaza El Segundo Note B
S-105
Holder, any penalty charges and any default interest with respect to the Plaza El Segundo Subordinate Companion Loan (net of any amounts payable to the Plaza El Segundo Note A Holder pursuant to the clause first above);
Tenth, pro rata, to (i) to the Plaza El Segundo Note A Holder, its percentage interest of any exit fees and extension fees allocated to the Plaza El Segundo Whole Loan, to the extent actually paid, and (ii) the Plaza El Segundo Note B Holder, its percentage interest of any exit fees and extension fees allocated to the Plaza El Segundo Subordinate Companion Loan, to the extent actually paid; and
Eleventh, if any excess amount is paid by the respective borrowers, and not otherwise applied in accordance with the foregoing clauses first through tenth above, such remaining amount shall be paid to the Plaza El Segundo Note A Holder and the Plaza El Segundo Note B Holder, pro rata based on their respective initial percentage interests.
Consent Rights of Each Plaza El Segundo Note B Holder. With respect to the Plaza El Segundo Whole Loan, unless a Plaza El Segundo Control Appraisal Period exists, the Plaza El Segundo Note B Holder, or an advisor on its behalf, will be entitled to advise and direct the Master Servicer and/or Special Servicer with respect to certain matters, including among other things, any modification or waiver of a monetary term of the Plaza El Segundo Whole Loan and any modification of, or waiver that would result in the extension of the maturity date, a reduction in the interest rate on the Plaza El Segundo Subordinate Companion Loan or the monthly debt service payment payable on the Plaza El Segundo Subordinate Companion Loan or a deferral or forgiveness of interest on or principal of the Plaza El Segundo Subordinate Companion Loan or a modification or waive r of any other monetary term of the Plaza El Segundo Subordinate Companion Loan relating to the timing or amount of any payment of principal and interest (other than default interest); any modification of, or waiver with respect to, the Plaza El Segundo Whole Loan that would result in a discounted pay-off of the Plaza El Segundo Subordinate Companion Loan; any foreclosure upon or comparable conversion (which may include acquisition of an REO property) of the ownership of the related mortgaged property or any acquisition of the mortgaged property by deed-in-lieu of foreclosure; any sale of the Plaza El Segundo Whole Loan, the related mortgaged property or REO property; any release of the related borrower or any guarantor from liability with respect to the Plaza El Segundo Whole Loan; any waiver of or determination not to enforce a ‘‘due-on-sale’’ or ‘‘due-on-encumbrance’’ clause (unless such clause is not exercisable under applicable law or such exercise is reas onably likely to result in successful legal action by the related borrower); any action to bring the related mortgaged property or an REO property into compliance with environmental laws; any substitution or release of collateral for the Plaza El Segundo Whole Loan, except as permitted by the related mortgage loan documents; any transfer of the related mortgaged property or any portion thereof; the voting on any plan of reorganization, restructuring or similar plan in the bankruptcy of the related borrower; and any releases of reserve funds or related letters of credit or adjustment to the amounts of reserve funds required under the related mortgage loan documents. However, no advice or direction may require or cause the related Master Servicer or the Special Servicer to violate any provision of the Pooling and Servicing Agreement, including the Master Servicer’s and the Special Servicer’s obligation to act in accordance with the Servicing Standards.
With respect to the Plaza El Segundo Whole Loan, a ‘‘Plaza El Segundo Control Appraisal Period’’ will exist if, and for so long as, the initial principal balance of the Plaza El Segundo Subordinate Companion Loan, minus the sum of (i) any principal payments (principal prepayments or otherwise) allocated to, and received on, that Plaza El Segundo Subordinate Companion Loan, (ii) any appraisal reduction amount allocated to that Plaza El Segundo Subordinate Companion Loan and (iii) any realized principal losses allocated to that Plaza El Segundo Subordinate Companion Loan, is less than 25% of (A) the initial principal balance of that Plaza El Segundo Subordinate Companion Loan minus (B) any payments of principal (whether as principal prepayments or otherwise) allocated to, and received on, that Plaza El Segundo Subordinate Compa nion Loan.
S-106
Cure Rights. In the event of any monetary default with respect to the Plaza El Segundo Loan, or to the extent of the related Master Servicer’s knowledge thereof, a non-monetary default with respect to the Plaza El Segundo Loan, the Plaza El Segundo Note B Holder will be entitled to cure (i) a monetary default within five (5) business days of receipt of notice thereof and (ii) a non-monetary default within 30 days of receipt of notice thereof, subject to limitations, specified in the Plaza El Segundo Intercreditor Agreement, on the number of times that the Plaza El Segundo Note B Holder may exercise such cure rights.
Purchase Option. With respect to the Plaza El Segundo Loan, the Plaza El Segundo Note B Holder has the right, by written notice to the Plaza El Segundo Note A Holder, following the occurrence of (i) any event of default with respect to an obligation of the related borrower to pay principal and interest payments or any other monetary obligations due under the Plaza El Segundo Loan or (ii) any non-monetary event of default as a result of which the Plaza El Segundo Whole Loan becomes a Specially Serviced Mortgage Loan, to purchase the Plaza El Segundo Loan from the Plaza El Segundo Note A Holder subject to the terms and conditions contained in the Plaza El Segundo Intercreditor Agreement. The purchase price will include, among other things, an amount equal to the unpaid principal balance of the Plaza El Segundo Loan, together with all unpaid interest on the Plaza El Segundo Loan at the related interest rate (excluding default interest and any prepayment premium) and any servicing compensation, advances and interest on advances payable or reimbursable to any party to the Pooling and Servicing Agreement.
The Ten Penn Center Whole Loan
One mortgage loan (identified as Loan No. 5 on Annex A-1 to this prospectus supplement) (the ‘‘Ten Penn Center Loan’’), representing approximately 2.8% of the Initial Pool Balance (3.1%, 0.0%), is part of a split loan structure comprised of three mortgage loans, each of which is secured by the same mortgage instrument on the same underlying Mortgaged Property (the ‘‘Ten Penn Center Mortgaged Property’’). The Ten Penn Center Loan is comprised of the A-Note and the C-Note, which are pari passu with each other. The related companion loan (the ‘‘Ten Penn Center Subordinate Companion Loan’’), which is not included in the trust, is an obligation subject to certain conditions to make certain future advances in a maximum aggregate amount up to $18,500,000 (each, an ‘‘Ten Penn Center Future Advance’’) and is evidenced by the B-Note. The Ten Penn Center Subordinate Companion Loan, when funded, will be subordinate in right of payment to the Ten Penn Center Loan. The Ten Penn Center Loa n and the Ten Penn Center Subordinate Companion Loan are collectively referred to in this prospectus supplement as the ‘‘Ten Penn Center Whole Loan’’.
Each Ten Penn Center Future Advance will be advanced to the related borrower by the related Mortgage Loan Seller for approved tenant improvements and/or leasing expenses, in each case upon the fulfillment of the conditions for each Ten Penn Center Future Advance that are contained in the related mortgage loan documents. The conditions for a Tenn Penn Center Future Advance include, among other conditions, that (A) there is no existing default or event of default under the terms of the related mortgage loan documents and (B) the borrower has purchased an interest rate cap agreement acceptable to the lender for the term of the Ten Penn Center Subordinate Companion Loan in a notional amount equal to the amount of the related Ten Penn Center Future Advance. In addition, the lender is not required to make more th an four Ten Penn Center Future Advances during the period commencing on the closing date of the Ten Penn Center Whole Loan and ending on the first anniversary thereof, or during any ensuing twelve (12) month period.
Ten Penn Center Intercreditor Agreement. An intercreditor agreement (the ‘‘Ten Penn Center Intercreditor Agreement’’) between the holder of the Ten Penn Center Loan and the holder of the Ten Penn Center Subordinate Companion Loan (the ‘‘Ten Penn Center Note B Holder’’) sets forth the rights of such noteholders. The Ten Penn Center Intercreditor Agreement generally provides that the Ten Penn Center Loan and the Ten Penn Center Sub ordinate
S-107
Companion Loan will be serviced and administered pursuant to the Pooling and Servicing Agreement by the Master Servicer and Special Servicer, as applicable, according to the Servicing Standards.
Distributions. Under the terms of the Ten Penn Center Intercreditor Agreement, prior to the occurrence and continuation of a monetary event of default or other material non-monetary event of default with respect to the Ten Penn Center Whole Loan (or, if such a default has occurred, but the Ten Penn Center Note B Holder has cured such a default) after payment of amounts payable or reimbursable under the Pooling and Servicing Agreement, payments and proceeds received with respect to the Ten Penn Center Whole Loan will generally be paid in the following manner, in each case to the extent of available funds:
First, the holder of the Ten Penn Center Loan will receive accrued and unpaid interest on its outstanding principal at its interest rate;
Second, the holder of the Ten Penn Center Loan will receive its pro rata share of all scheduled and unscheduled principal payments received on the Ten Penn Center Whole Loan (based on the outstanding principal balance of each of the Ten Penn Center Loan and the Ten Penn Center Subordinate Companion Loan);
Third, Yield Maintenance Charges will be paid to the holder of the Ten Penn Center Loan, in the amount actually received in respect of the Ten Penn Center Loan;
Fourth, the Ten Penn Center Note B Holder will receive accrued and unpaid interest on the outstanding principal balance of the Ten Penn Center Subordinate Companion Loan at its interest rate;
Fifth, the Ten Penn Center Note B Holder will receive its pro rata share of all scheduled and unscheduled principal payments received on the Ten Penn Center Whole Loan (based on the outstanding principal balance of each of the Ten Penn Center Loan and the Ten Penn Center Subordinate Companion Loan);
Sixth, Yield Maintenance Charges will be paid to the Ten Penn Center Note B Holder, in the amount actually received in respect of the Ten Penn Center Subordinate Companion Loan;
Seventh, any default interest (in excess of the interest paid in accordance with clauses first and fourth above) will be paid to the holder of the Ten Penn Center Loan and the Ten Penn Center Note B Holder, pro rata, based on the outstanding principal balance of each loan, to the extent not applied to interest on advances or payable to the Master Servicer or the Special Servicer under the Pooling and Servicing Agreement; and
Eighth, if any excess amount is paid by the borrower, and not otherwise applied in accordance with the foregoing clauses first through seventh above, such amount will be paid to each of the holder of the Ten Penn Center Loan and the Ten Penn Center Note B Holder on a pro rata basis in accordance with the initial principal balance of each loan.
Notwithstanding the foregoing clauses first through eighth, in the event that the Ten Penn Center Note B Holder has previously made a cure payment pursuant to the Ten Penn Center Intercreditor Agreement in respect of any monetary default and the related borrower subsequently makes the payment for which the monetary default exists, such payment will be remitted to the Ten Penn Center Note B Holder to reimburse it for such cure payment, so long as no amounts would be payable at such time to the holder of the Ten Penn Center Loan under the foregoing clauses first through seventh and payments are not required to be applied in accordance with the Ten Penn Center Intercreditor Agreement.
Following the occurrence and during the continuance of a monetary event of default or other material non-monetary event of default with respect to the Ten Penn Center Loan (unless the Ten Penn Center Note B Holder has cured such a default), after payment of all amounts then payable or reimbursable under the Pooling and Servicing Agreement, Liquidation Proceeds and other collections with respect to the Ten Penn Center Loan (other than Yield Maintenance
S-108
Charges, the entitlement to which will be determined in accordance with the following paragraph and other than the amounts received from the guarantor under the payment guaranty relating to the Ten Penn Center Loan) will generally be applied in the following manner, in each case to the extent of available funds:
First, the holder of the Ten Penn Center Loan will receive accrued and unpaid interest on its outstanding principal balance at its interest rate;
Second, the holder of the Ten Penn Center Loan will receive an amount up to its principal balance, until the principal balance has been paid in full;
Third, if the proceeds of any foreclosure sale or any liquidation of the Ten Penn Center Loan or the Ten Penn Center Mortgaged Property exceed the amounts required to be applied in accordance with the foregoing clauses first through second and, as a result of a workout, the principal balance of the Ten Penn Center Loan has been reduced, such excess amount will be paid to the holder of the Ten Penn Center Loan in an amount up to the reduction, if any, of its principal balance as a result of such workout;
Fourth, any Yield Maintenance Charge that is allocable to the Ten Penn Center Loan to the extent actually paid by the borrower will be paid to the holder of the Ten Penn Center Loan;
Fifth, any default interest in excess of the interest paid in accordance with clause first above and sixth below, will be paid to the holder of the Ten Penn Center Loan, based on the total amount of default interest then owing to such holder to the extent not applied to interest on advances or payable to the Master Servicer or Special Servicer under the Pooling and Servicing Agreement;
Sixth, the Ten Penn Center Note B Holder will receive accrued and unpaid interest on the outstanding principal balance of the Ten Penn Center Subordinate Companion Loan at its interest rate;
Seventh, the Ten Penn Center Note B Holder will receive an amount up to the outstanding principal balance of the Ten Penn Center Subordinate Companion Loan, until such principal has been paid in full;
Eighth, any Yield Maintenance Charge that is allocable to the Ten Penn Center Subordinate Companion Loan, to the extent actually paid by the borrower, will be paid to the Ten Penn Center Note B Holder;
Ninth, any default interest in excess of the interest paid in accordance with clause first, fifth and sixth above, will be paid to the Ten Penn Center Note B Holder, based on the total amount of default interest then owing to such holder to the extent not applied to interest on advances or payable to the Master Servicer or Special Servicer under the Pooling and Servicing Agreement; and
Tenth, if any excess amount is paid by the borrower that is not otherwise applied in accordance with the foregoing clauses first through ninth or the proceeds of any foreclosure sale or any liquidation of the Ten Penn Center Loan or the Ten Penn Center Mortgaged Property are received in excess of the amounts required to be applied in accordance with the foregoing clauses first through ninth, such amount will generally be paid to the holder of the Ten Penn Center Loan and the Ten Penn Center Note B Holder, on a pro rata basis, in accordance with the initial principal balance of each loan.
Notwithstanding the foregoing clauses first through tenth, in the event that the Ten Penn Center Note B Holder has previously made a cure payment pursuant to the Ten Penn Center Intercreditor Agreement in respect of any monetary default and the related borrower subsequently makes the payment for which the monetary default exists, such payment will be remitted to the Ten Penn Center Note B Holder to reimburse it for such cure payment, so long as no amounts would be payable at such time to the holder of the Ten Penn Center Loan under the foregoing clauses first through ninth and payments are not required to be applied in accordance with the Ten Penn Center Intercreditor Agreement.
S-109
Consent Rights of the Ten Penn Center Note B Holder. So long as no Ten Penn Center Control Appraisal Period exists and so long as the Ten Penn Center Note B Holder has funded at least 10% of Ten Penn Center Future Advance pursuant to the terms of the related mortgage loan documents, the Ten Penn Center Note B Holder will have the rights and powers of the Directing Certificateholder set forth under ‘‘The Servicing of the Mortgage Loans—The Directing Certificateholder’’ in this prospectus supplement. In addition, so long as no Ten Penn Center Control Appraisal Period exists and so long as the Ten Penn Center Note B Holder has funded at least 42% of Ten Penn Center Future Adv ance pursuant to the terms of the related mortgage loan documents, the Ten Penn Center Note B Holder will have the right to approve any of the following actions to be taken with respect to the Ten Penn Center Whole Loan:
(i) any acquisition of the Mortgaged Property by deed-in-lieu of foreclosure or any other exercise of remedies following an event of default under the loan documents;
(ii) any sale of all or any portion of the Mortgaged Property or REO Property;
(iii) any release of the borrower or guarantor from liability with respect to the Ten Penn Center Whole Loan including, without limitation, by acceptance of an assumption of the Ten Penn Center Whole Loan by a successor borrower or replacement guarantor;
(iv) any transfer of the Mortgaged Property or any portion thereof, or any transfer of any direct or indirect ownership interest in the borrower, except in each case as expressly permitted by the loan documents;
(v) any incurring of additional debt by the borrower, including the terms of any document evidencing or securing any such additional debt and of any intercreditor or subordination agreement executed in connection therewith and any waiver of or amendment or modification to the terms of any such document or agreement or incurring of mezzanine financing by any beneficial owner of the borrower, including the terms of any document evidencing or securing any such mezzanine debt and of any intercreditor or subordination agreement executed in connection therewith and any waiver of or amendment or modification to the terms of any such document or agreement;
(vi) consenting to any modification or waiver of any provision of any loan documents governing the types, nature or amounts of insurance coverage required to be obtained and maintained by the borrower;
(vii) approval of any renewal or replacement of the then existing insurance policies (to the extent the lender’s approval is required under the loan documents);
(viii) the execution, termination, renewal or material modification of any ‘‘Major Lease’’ (as defined in the related loan documents), to the extent lender approval is required by the loan documents (and notwithstanding anything to the contrary set forth herein, subject to the same standard of approval as is set forth in the applicable loan documents);
(ix) approval of the termination or replacement of the manager of the Mortgaged Property or of the execution, termination, renewal or material modification of the management agreement, to the extent the lender’s approval is required by the loan documents;
(x) any waiver of amounts required to be deposited into escrow reserve accounts under the loan documents, or any amendment to any of the loan documents that would modify the amount required to be deposited into reserve accounts established under the loan documents (other than changes in the ordinary course of business of the amounts required to be deposited into escrow accounts for real estate taxes, insurance premiums or ground rents, if any);
(xi) the settlement of any insurance claim or condemnation proceeding for a cash payment that will be applied to the principal amount of the Ten Penn Center Whole Loan, if such settlement would result in a shortfall of amounts due and payable to the Ten Penn Center B Note Holder;
S-110
(xii) the approval or adoption of any annual budget for, or material alteration at, the Mortgaged Property (if lender approval is required by the loan documents and, if so, notwithstanding anything to the contrary set forth herein, subject to the same standard of approval as is set forth in the applicable loan documents);
(xiii) the approval of significant repair or renovation projects (other than in connection with a casualty or condemnation event) that are intended to be funded through the disbursement of any funds from any reserve accounts established in accordance with the loan documents (to the extent the lender’s consent is required by the loan documents);
(xiv) the approval of any ground lease at or related to the Mortgaged Property or any proposed amendment of, modification to or waiver of, any of the terms and conditions thereof, or any surrender or cancellation thereof, to the extent lender approval is required under the loan documents;
(xv) the waiver or modification of any provision in the loan documents relating to the interest rate cap agreement (including any provision requiring certain minimum financial ratings for the provider of an interest rate cap agreement), or the waiver of any claim against, or release of, any counter-party to any interest rate cap agreement;
(xvi) the waiver or modification of any documentation relating to a guarantor’s obligations under a guaranty relating to the Ten Penn Center Whole Loan;
(xvii) the modification in the related loan documents of the definition of a ‘‘Major Lease’’;
(xviii) the voting on any plan of reorganization, restructuring or similar plan in the bankruptcy of the borrower; and
(xix) any material change to the calculation of the ‘‘debt service coverage ratio’’ (as defined in the related loan documents) or any components to the calculation thereof, or the material amendment of any such term or any component definition thereof.
If a Ten Penn Center Control Appraisal Period exists or no Ten Penn Center Future Advance has been advanced, the Directing Certificateholder will have the rights and power described above. A ‘‘Ten Penn Center Control Appraisal Period’’ will exist if, and for so long as the aggregate amount of all Ten Penn Center Future Advances made through the date of determination, minus the sum of (i) any principal payments (principal prepayments or otherwise) allocated to, and received on, the Ten Penn Center Subordinate Companion Loan, (ii) any appraisal reduction amount allocated to the Ten Penn Center Subordinate Companion Loan and (iii) any realized principal losses allocated to the Ten Penn Center Subordinate Companion Loan, is less than 25% of (A) the aggregate amount of all Ten Penn Center Future Advances made t hrough the date of determination minus (B) any payments of principal (whether as principal prepayments or otherwise) allocated to, and received on, the Ten Penn Center Subordinate Companion Loan.
Termination of Special Servicer. The Directing Certificateholder will have the right to terminate the Special Servicer at any time, with or without cause, and to appoint a replacement special servicer, subject to satisfaction of the conditions contained in the Pooling and Servicing Agreement and the Ten Penn Center Intercreditor Agreement. The appointment of a successor special servicer will be subject to receipt of written confirmation from the Rating Agencies that such appointment would not cause the downgrade, withdrawal or qualification of the then current ratings of the Certificates.
Cure Rights. In the event that the borrower fails to make any payment of principal or interest on the Ten Penn Center Loan, resulting in a monetary event of default, or in the event of a non-monetary event of default under the related mortgage loan documents, so long as the Ten Penn Center Note B Holder has funded a Ten Penn Center Future Advance pursuant to the terms of the related mortgage loan documents, the Ten Penn Center Note B Holder will have the right to cure such monetary event of default subject to certain limitations set forth in the Ten Penn Center Intercreditor Agreement.
S-111
Purchase Option. So long as the Ten Penn Center Note B Holder has funded a Ten Penn Center Future Advance pursuant to the terms of the related mortgage loan documents, the Ten Penn Center Note B Holder has the right, by written notice to the Ten Penn Center Note A Holder, following the occurrence of (i) any event of default with respect to an obligation of the related borrower to pay principal and interest payments or any other monetary obligations due under the Ten Penn Center Loan or (ii) any non-monetary event of default as to which the Ten Penn Center Loan becomes a Specially Serviced Mortgage Loan, to purchase the Ten Penn Center Loan from the Ten Penn Center Note A Holder subject to the terms and conditions contained in the Ten Penn Center Intercreditor Agreement. The purchase price will generally be equal to the unpaid principal balance of the Ten Penn Center Loan, plus accrued and unpaid interest on such balance, all related unreimbursed Servicing Advances (and all related Servicing Advances that were reimbursed from general collections on the mortgage loans, but not yet repaid by the related borrower) together with accrued and unpaid interest on all Advances and all accrued Special Servicing Fees allocable to the Ten Penn Center Loan whether paid or unpaid and any other additional trust fund expenses relating to the Ten Penn Center Whole Loan.
Hotel Pacific Whole Loan
One mortgage loan (identified as Loan No. 30 on Annex A-1 to this prospectus supplement) (the ‘‘Hotel Pacific Loan’’), representing approximately 0.9% of the Initial Pool Balance (1.1%, 0.0%), is part of a split loan structure comprised of two mortgage loans, each of which is secured by the same mortgage instrument on the same underlying Mortgaged Property (the ‘‘Hotel Pacific Mortgaged Property’’). The related companion loan (the ‘‘Hotel Pacific Subordinate Companion Loa n’’), which is not included in the trust, has an initial principal balance of $2,000,000. The Hotel Pacific Loan and the Hotel Pacific Subordinate Companion Loan are collectively referred to in this prospectus supplement as the ‘‘Hotel Pacific Whole Loan’’.
An intercreditor agreement (the ‘‘Hotel Pacific Intercreditor Agreement’’) between the holder of the Hotel Pacific Loan (the ‘‘Hotel Pacific Note A Holder’’) and the holder of the Hotel Pacific Subordinate Companion Loan (the ‘‘Hotel Pacific Note B Holder’’) sets forth the rights of such noteholders. The Hotel Pacific Intercreditor Agreement provides that the Hotel Pacific Loan and the Hotel Pacific Subordin ate Companion Loan will be serviced and administered pursuant to the Pooling and Servicing Agreement by the Master Servicer and Special Servicer, as applicable, according to the Servicing Standards.
Distributions. Pursuant to the Hotel Pacific Intercreditor Agreement, to the extent described below, the right of the related Hotel Pacific B Note Holder to receive payments with respect to the Hotel Pacific Subordinate Companion Loan held by it, is subordinate to the payment rights of the related Hotel Pacific A Note Holder to receive payments with respect to the Hotel Pacific Loan.
Prior to the occurrence and continuation of an event of default, the acceleration of the Hotel Pacific Whole Loan, the Hotel Pacific Whole Loan becoming a Specially Serviced Mortgage Loan or the occurrence of the maturity date, after payment or reimbursement of the applicable servicing fees, any additional trust fund expenses and/or Advances and any costs, all payments and proceeds (of whatever nature) received with respect to the Hotel Pacific Whole Loan (excluding certain reserves and escrows as well as insurance proceeds and awards otherwise required to be applied under the related mortgage loan documents or released to the borrower) will generally be applied in the following manner:
First, to the Hotel Pacific A Note Holder in an amount equal to accrued and unpaid interest (other than default interest) with respect to the Hotel Pacific Loan;
Second, to the Hotel Pacific A Note Holder in an amount equal to its pro rata share (based on outstanding principal balance) of any principal payments received with respect to the Hotel Pacific Whole Loan;
Third, to the Hotel Pacific B Note Holder in an amount equal to accrued and unpaid interest (other than default interest) with respect to the Hotel Pacific Subordinate Companion Loan;
S-112
Fourth, to the Hotel Pacific B Note Holder in the amount equal to its pro rata share (based on outstanding principal balance) of any principal payments received with respect to the Hotel Pacific Whole Loan;
Fifth, to the Hotel Pacific A Note Holder and the Hotel Pacific B Note Holder, pro rata (based on outstanding principal balances), any prepayment premiums with respect to the Hotel Pacific Whole Loan, to the extent actually paid by the borrower;
Sixth, to the Hotel Pacific A Note Holder and the Hotel Pacific B Note Holder, pro rata, based upon any unreimbursed costs and expenses owing to the Hotel Pacific A Note Holder and the Hotel Pacific B Note Holder, respectively, up to the amount of any such unreimbursed costs and expenses;
Seventh, to the Hotel Pacific A Note Holder and the Hotel Pacific B Note Holder, pro rata, default interest, based upon the default interest accrued under each of the Hotel Pacific Loan and the Hotel Pacific Subordinate Companion Loan, respectively, to the extent actually paid by the borrower; and
Eighth, any excess, pro rata, to the Hotel Pacific A Note Holder and the Hotel Pacific B Note Holder, based upon outstanding principal balances; provided that if the outstanding principal balances are each equal to zero, then based upon the initial principal balances.
Following the occurrence and continuation of an event of default, the acceleration of the Hotel Pacific Whole Loan, the Hotel Pacific Whole Loan becoming a Specially Serviced Mortgage Loan or the occurrence of the maturity date, and provided any applicable cure rights either do not exist or have expired, after payment or reimbursement of the applicable servicing fees, any additional trust fund expenses and/or Advances and any costs, all payments and proceeds (of whatever nature) received with respect to the Hotel Pacific Whole Loan (excluding certain reserves and escrows as well as insurance proceeds and awards otherwise required to be applied under the related mortgage loan documents or released to the borrower) will generally be applied in the following manner:
First, to the Hotel Pacific A Note Holder in an amount equal to any unreimbursed costs and expenses paid by the Hotel Pacific A Note Holder;
Second, to the Hotel Pacific A Note Holder in an amount equal to accrued and unpaid interest (other than default interest) with respect to the Hotel Pacific Loan;
Third, to the Hotel Pacific A Note Holder in an amount equal to the outstanding principal balance of the Hotel Pacific Loan, until such principal balance has been paid in full;
Fourth, to the Hotel Pacific B Note Holder in an amount equal to accrued and unpaid interest (other than default interest) with respect to the Hotel Pacific Subordinate Companion Loan;
Fifth, to the Hotel Pacific B Note Holder in an amount equal to the outstanding principal balance of the Hotel Pacific Subordinate Companion Loan, until such principal balance has been paid in full;
Sixth, to the Hotel Pacific A Note Holder, any prepayment premiums allocable to the Hotel Pacific Loan to the extent actually paid by the borrower;
Seventh, to the Hotel Pacific A Note Holder, default interest accrued under the Hotel Pacific Loan;
Eighth, to the Hotel Pacific B Note Holder, any prepayment premiums allocable to the Hotel Pacific Subordinate Companion Loan to the extent actually paid by the borrower;
Ninth, to the Hotel Pacific B Note Holder, default interest accrued under the Hotel Pacific Subordinate Companion Loan;
Tenth, to the Hotel Pacific B Note Holder in an amount equal to any unreimbursed costs and expenses paid by the Hotel Pacific B Note Holder; and
S-113
Eleventh, any excess, pro rata, to the Hotel Pacific A Note Holder and the Hotel Pacific B Note Holder, based upon outstanding principal balances; provided that if the outstanding principal balances are each equal to zero, then based upon the initial principal balances.
Consent Rights of Hotel Pacific B Note Holder. Unless a Hotel Pacific Control Appraisal Period exists, the Hotel Pacific B Note Holder, or an advisor on its behalf, will be entitled to advise and direct the Master Servicer and/or Special Servicer with respect to certain matters, including among other things, any modification of, or waiver with respect to, the Hotel Pacific Whole Loan that would result in the extension of the maturity date thereof, a reduction in the interest rate with respect to Note A and/or Note B or the monthly payment of principal and/or interest or prepayment premium payable thereon or a deferral or forgiveness of interest on, or principal of, the Hotel Pacific Whole Loan or a modification or waiver of any other monetary term of the Hotel Pacific Whole Loan relating to the timing or amount of any payment of principal and inte rest (other than late fees or default interest); any actual or proposed foreclosure upon or comparable conversion (which may include acquisition of an REO Property) of the ownership of the related mortgaged property; any actual or proposed sale of REO Property; any acceptance of an assumption agreement releasing the borrower from liability under the Hotel Pacific Whole Loan; any waiver of a ‘‘due-on-sale’’ clause or ‘‘due-on-encumbrance’’ clause; any determination to bring REO Property into compliance with applicable environmental laws or to otherwise address hazardous materials located at the REO Property; and any acceptance of substitute or additional collateral or release of material collateral for the Hotel Pacific Whole Loan unless required by the loan documents. However, no advice or direction may require or cause the Master Servicer or the Special Servicer to violate any provision of the Pooling and Servicing Agreement, including the Master Servicer&rsqu o;s and the Special Servicer’s obligation to act in accordance with the Servicing Standards.
A ‘‘Hotel Pacific Control Appraisal Period’’ will exist if, and for so long as, the initial principal balance of the Hotel Pacific Subordinate Companion Loan, minus the sum of (i) any principal payments (principal prepayments or otherwise) allocated to, and received thereon, (ii) any appraisal reduction amount allocated to the Hotel Pacific Subordinate Companion Loan and (iii) any realized principal losses allocated to the Hotel Pacific Subordinate Companion Loan, is less than 25% of the initial principal balance of that AB Subordinate Companion Loan.
Cure Rights. In the event of any monetary event of default with respect to the Hotel Pacific Whole Loan, or to the extent of the Master Servicer’s knowledge thereof, a non-monetary default with respect thereto, the Hotel Pacific B Note Holder will be entitled to cure (i) a monetary default within five (5) business days of receipt of notice thereof and (ii) a non-monetary default within 30 days of receipt of notice thereof, subject to limitations, specified in the Hotel Pacific Intercreditor Agreement, on the number of times that the related Hotel Pacific B Note Holder may exercise such cure rights.
Purchase Option. The Hotel Pacific B Note Holder has the right, by written notice to Hotel Pacific A Note Holder, following the occurrence of any event of default under the Hotel Pacific Whole Loan, to purchase the Hotel Pacific Loan from Hotel Pacific A Note Holder subject to the terms and conditions contained in the Hotel Pacific Intercreditor Agreement. The purchase price will include, among other things, an amount equal to the unpaid principal balance of the Hotel Pacific Loan, together with all unpaid interest on the Hotel Pacific Loan (excluding default interest and any prepayment premiums) and any special servicing compensation, advances and interest on advances payable or reimbursable to any party to the Pooling and Servicing Agreement.
Cassford Corporate Park Whole Loan
One mortgage loan (identified as Loan No. 32 on Annex A-1 to this prospectus supplement) (the ‘‘Cassford Corporate Park Loan’’), representing approximately 0.9% of the Initial Pool Balance (1.0%, 0.0%), is part of a split loan structure comprised of two mortgage loans, each of which is secured by the same mortgage instrument on the same underlying Mortgaged Property
S-114
(the ‘‘Cassford Corporate Park Mortgaged Property’’). The related companion loan (the ‘‘Cassford Corporate Park Subordinate Companion Loan’’), which is not included in the trust, has an initial principal balance of $940,000. The Cassford Corporate Park Loan and the Cassford Corporate Park Subordinate Companion Loan are collectively referred to in this prospectus supplement as the ‘‘Cassford Corporate Park Whole Loan’’.
Servicing Provisions of the Cassford Corporate Park Intercreditor Agreement. An intercreditor agreement (the ‘‘Cassford Corporate Park Intercreditor Agreement’’) between the holder of the Cassford Corporate Park Loan (the ‘‘Cassford Corporate Park Note A Holder’’) and the holder of the Cassford Corporate Park Subordinate Companion Loan (the ‘‘Cassford Corporate Park Note B Holder’’) sets forth the rights of such noteholders. The Cassford Corporate Park AB Intercreditor Agreement generally provides that the Master Servicer and the Special Servicer will service and administer the Cassford Corporate Park AB Loan and the Cassford Corporate Park Subordinate Companion Loan pursuant to the Pooling and Servicing Agreement and the Cassford Corporate Park AB Intercreditor Agreement for so long as the Cassford Corporate Park Loan is part of the trust; provided, that prior to a material event of default under the related mortgage loan documents with respect to the Cassford Corporate Park Loan, the servicer of the Cassford Corporate Park Subordinate Companion Loan (which may or may not be the Master Servicer or the sub-servicer with respect to the Cassford Corpora te Park Loan) will collect its principal and interest payments directly from the borrower. The Master Servicer and/or the Special Servicer may not enter into amendments, modifications, waivers or extensions of the Cassford Corporate Park Loan or the Cassford Corporate Park Subordinate Companion Loan if, among other things, the proposed amendment, modification, waiver or extension adversely affects certain payment terms of the Cassford Corporate Park Subordinate Companion Loan or the lien priority of the related Mortgage without the consent of the holder of the Cassford Corporate Park Subordinate Companion Loan; provided, however, that such consent right will expire when the repurchase period described below expires. See ‘‘—Purchase Options’’ below and ‘‘Servicing of the Mortgage Loans—The Directing Certificateholder’’ in this prospectus supplement.
Application of Payments on the Cassford Corporate Park Whole Loan. Pursuant to the Cassford Corporate Park Intercreditor Agreement and prior to the occurrence of (i) the acceleration of the Cassford Corporate Park Loan or the Cassford Corporate Park Subordinate Companion Loan, (ii) a monetary event of default or (iii) an event of default triggered by the bankruptcy of the borrower or other insolvency proceeding affecting the borrower, the related borrower will make separate monthly payments of principal and interest to the Master Servicer and the servicer of the Cassford Corporate Park Subordinate Companion Loan. Any escrow and reserve payments required in respect of the Cassford Corpora te Park Loan or the Cassford Corporate Park Subordinate Companion Loan will be paid to the Master Servicer.
Following the occurrence and during the continuance of (i) the acceleration of the Cassford Corporate Park Loan or the Cassford Corporate Park Subordinate Companion Loan, (ii) a monetary event of default or (iii) an event of default triggered by the bankruptcy of the borrower or other insolvency proceeding affecting the borrower, and subject to certain rights of the holder of the Cassford Corporate Park Subordinate Companion Loan to purchase the Cassford Corporate Park Loan from the trust, all payments and proceeds (of whatever nature) on the Cassford Corporate Park Subordinate Companion Loan will be subordinated to all payments due on that Cassford Corporate Park Loan, and the amounts with respect to that Cassford Corporate Park Loan and the Cassford Corporate Park Subordinate Companion Loan will be paid:
First, to the Cassford Corporate Park Note A Holder in an amount equal to any unreimbursed costs and expenses paid, together with interest thereon, by the Cassford Corporate Park Note A Holder with respect to the Cassford Corporate Park AB Loan or the related Mortgaged Property;
Second, to the Master Servicer and the Special Servicer, in an amount equal to the accrued and unpaid servicing fees and other servicing compensation earned by such entity with respect to the Cassford Corporate Park Loan and the Cassford Corporate Park Subordinate Companion Loan;
S-115
Third, to the Cassford Corporate Park A Note Holder, in an amount equal to interest due with respect to the Cassford Corporate Park Loan (excluding any default interest);
Fourth, to the Cassford Corporate Park Note A Holder, in an amount equal to the principal balance of the Cassford Corporate Park Loan until paid in full;
Fifth, to the Cassford Corporate Park Note A Holder, in an amount equal to any prepayment premium, to the extent actually paid, allocable to the Cassford Corporate Park Loan;
Sixth, to the Cassford Corporate Park Note B Holder, up to the amount of any unreimbursed costs and expenses paid by the holder of the Cassford Corporate Park Subordinate Companion Loan (or any servicer or trustee on its behalf);
Seventh, to the Cassford Corporate Park Note B Holder, in an amount equal to interest due with respect to the Cassford Corporate Park Subordinate Companion Loan (excluding any default interest);
Eighth, to the Cassford Corporate Park Note B Holder, in an amount equal to the principal balance of the Cassford Corporate Park Subordinate Companion Loan until paid in full;
Ninth, to the Cassford Corporate Park Note B Holder, in an amount equal to any prepayment premium, to the extent actually paid, allocable to the Cassford Corporate Park Subordinate Companion Loan;
Tenth, to the Cassford Corporate Park Note A Holder, in an amount equal to any unpaid default interest accrued on the Cassford Corporate Park Loan, until paid in full, and then to the holder of the Cassford Corporate Park Subordinate Companion Loan in an amount equal to default interest accrued on the Cassford Corporate Park Subordinate Companion Loan;
Eleventh, to the Cassford Corporate Park Note A Holder and the holder of the Cassford Corporate Park Subordinate Companion Loan on a pro rata basis based on initial principal balances, in an amount equal to late payment charges actually received or collected, other than prepayment premiums or default interest, that are not payable to any of the Master Servicer, the Special Servicer or the Trustee; and
Twelfth, any excess, to the Cassford Corporate Park Note A Holder and the Cassford Corporate Park Note B Holder, pro rata, based upon the initial loan principal balances of the Cassford Corporate Park Loan and the Cassford Corporate Park Subordinate Companion Loan.
Application of Amounts Paid to the Trust in Respect of the Cassford Corporate Park Loan. Amounts payable to the trust as the Cassford Corporate Park Note A Holder pursuant to the Cassford Corporate Park Intercreditor Agreement will be included in the Available Distribution Amount for each Distribution Date to the extent described in this prospectus supplement and amounts payable to the holder of the Cassford Corporate Park Subordinate Companion Loan will be distributed to such holders net of certain fees and expenses on the Cassford Corporate Park Subordinate Companion Loan.
Amendments and Consents. The Master Servicer and/or the Special Servicer may not enter into any amendment, deferral, extension, modification, increase, renewal, replacement, consolidation, supplement or waiver of the Cassford Corporate Park Loan or the related loan documents without obtaining the prior written consent of the holder of the Cassford Corporate Park Subordinate Companion Loan if such proposed amendment, deferral, extension, modification, increase, renewal, replacement, consolidation, supplement or waiver of such Cassford Corporate Park Loan or the related loan documents adversely affects the lien priority of the related mortgage or constitutes a material modification as specified in the Cassford Corporate Park Intercreditor Agreement.
Purchase Option. In the event that (i) any payment of principal or interest on the Cassford Corporate Park Loan or the Cassford Corporate Park Subordinate Companion Loan becomes 90 or more days delinquent, (ii) the principal balance of the Cassford Corporate Park Loan or the Cassford Corporate Park Subordinate Companion Loan has been accelerated, (iii) the principal
S-116
balance of the Cassford Corporate Park Loan or the Cassford Corporate Park Subordinate Companion Loan is not paid at maturity, (iv) the borrower under the Cassford Corporate Park Loan or the Cassford Corporate Park Subordinate Companion Loan declares bankruptcy or is otherwise the subject of a bankruptcy proceeding or (v) any other event where the cash flow payment under the Cassford Corporate Park Subordinate Companion Loan has been interrupted and payments are made pursuant to the event of default waterfall described above, the holder of the Cassford Corporate Park Subordinate Companion Loan will be entitled to purchase the Cassford Corporate Park Loan from the trust for a period of 30 days after its receipt of a repurchase option notice from the Master Servicer or the Special Servicer (on behalf of the trust) of the occurrence of one of the foregoing events, subject to certain conditions set forth in the Cassford Corporate Park Intercreditor Agreement. The purchase price will generally equal the unpaid principal balance of the Cassford Corporate Park Loan, together with all unpaid interest (and, if the date of purchase is not a payment date, accrued and unpaid interest up to the payment date next succeeding the date of the purchase) on that Cassford Corporate Park Loan (other than default interest) at the related mortgage rate and any outstanding servicing expenses, Servicing Advances, interest on Advances and Servicing Fees and Trustee Fees payable prior to the date of purchase. Unless the borrower or an affiliate is purchasing the Cassford Corporate Park Loan, no prepayment consideration will be payable in connection with such purchase of the Cassford Corporate Park Loan.
Top Fifteen Mortgage Loans
The following table shows certain information regarding the fifteen largest mortgage loans by Cut-off Date Balance:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loan Name | | | Loan Group | | | Cut-off Date Balance | | | % of Initial Pool Balance | | | Loan per Unit | | | UW DSCR(1)(2) | | | Cut-off LTV Ratio(1)(2) | | | Property Type | ||||||||||||||||||
| Plaza El Segundo | | | | | 1 | | | | | $ | 162,000,000 | | | | | | 6.5 | % | | | | $ | 424 | | | | | | 1.30x | | | | | | 78.6 | % | | | Retail |
| Sawgrass Mills Mall | | | | | 1 | | | | | | 150,000,000 | | | | | | 6.0 | | | | | $ | 412 | | | | | | 1.20x | | | | | | 80.0 | % | | | Retail |
| 111 Massachusetts Avenue | | | | | 1 | | | | | | 90,000,000 | | | | | | 3.6 | | | | | $ | 353 | | | | | | 1.10x | | | | | | 72.0 | % | | | Office |
| Hard Rock Hotel – Chicago | | | | | 1 | | | | | | 69,500,000 | | | | | | 2.8 | | | | | $ | 182,415 | | | | | | 1.90x | | | | | | 63.8 | % | | | Hotel |
| Ten Penn Center | | | | | 1 | | | | | | 69,000,000 | | | | | | 2.8 | | | | | $ | 103 | | | | | | 1.60x | | | | | | 62.7 | % | | | Office |
| Carespring Portfolio | | | | | 1 | | | | | | 68,310,000 | | | | | | 2.7 | | | | | $ | 90,198 | | | | | | 2.75x | | | | | | 60.7 | % | | | Senior Housing |
| Overlook III | | | | | 1 | | | | | | 66,700,000 | | | | | | 2.7 | | | | | $ | 152 | | | | | | 1.23x | | | | | | 79.2 | % | | | Office |
| 7000 Central Park | | | | | 1 | | | | | | 65,000,000 | | | | | | 2.6 | | | | | $ | 157 | | | | | | 1.20x | | | | | | 73.9 | % | | | Office |
| Summit Mall | | | | | 1 | | | | | | 65,000,000 | | | | | | 2.6 | | | | | $ | 123 | | | | | | 2.20x | | | | | | 49.1 | % | | | Retail |
| Pacific Coast Plaza | | | | | 1 | | | | | | 62,950,000 | | | | | | 2.5 | | | | | $ | 202 | | | | | | 1.20x | | | | | | 76.4 | % | | | Retail |
| Marriott Overland Park | | | | | 1 | | | | | | 49,500,000 | | | | | | 2.0 | | | | | $ | 126,923 | | | | | | 1.26x | | | | | | 73.0 | % | | | Hotel |
| St. Joe - Windward Plaza | | | | | 1 | | | | | | 47,634,792 | | | | | | 1.9 | | | | | $ | 142 | | | | | | 1.10x | | | | | | 80.1 | % | | | Office |
| St. Joe - 150 W. Main | | | | | 1 | | | | | | 46,948,014 | | | | | | 1.9 | | | | | $ | 208 | | | | | | 1.11x | | | | | | 79.4 | % | | | Office |
| Liberty Plaza | | | | | 1 | | | | | | 43,000,000 | | | | | | 1.7 | | | | | $ | 116 | | | | | | 1.25x | | | | | | 77.5 | % | | | Retail |
| Sheraton Gunter | | | | | 1 | | | | | | 40,000,000 | | | | | | 1.6 | | | | | $ | 124,224 | | | | | | 1.50x | | | | | | 76.9 | % | | | Hotel |
| Total/Weighted Average | | | | | | | | | $ | 1,095,542,806 | | | | | | 43.7 | % | | | | | | | | | | 1.44x | | | | | | 72.8 | % | | | |||
| |
| |
|
| (1) | Information with regard to any AB Whole Loan is calculated without regard to the related Subordinate Companion Loan(s), and in the case of the Pari Passu Whole Loans and the Sawgrass Mills Mall Whole Loan, in certain circumstances, such information, particularly as it relates to debt service coverage ratios and loan-to-value ratios, includes the principal balance and debt service payment of the respective Pari Passu Companion Loans. |
| (2) | With respect to mortgage loans secured by more than one Mortgaged Property, the information presented in this prospectus supplement with respect to UW DSCR and LTV Ratios, as applicable, is the UW DSCR or LTV Ratio of the mortgage loan in the aggregate. |
For more information regarding the fifteen largest mortgage loans and/or loan concentrations and related Mortgaged Properties, see the individual mortgage loan and portfolio descriptions under ‘‘Description of Top Fifteen Mortgage Loans or Groups of Cross-Collateralized Mortgage Loans and Additional Mortgage Loan Information’’ in Annex A-3 to this prospectus supplement.
S-117
ARD Loan
1 mortgage loan (identified as Loan No. 23 on Annex A-1 to this prospectus supplement) (the ‘‘ARD Loan’’), representing approximately 1.2% of the Initial Pool Balance (1.3%, 0.0%), provided that, if after a certain date (the ‘‘Anticipated Repayment Date’’), the borrower has not prepaid the ARD Loan in full, any principal outstanding on that date will accrue interest at an increased interest rate (which rate may continue to increase annually after the Anticipated Repayment Date) (the ‘‘Revised Rate’’) rather than the stated Mortgage Rate (the & lsquo;‘Initial Rate’’). The Anticipated Repayment Date for the ARD Loan is approximately 5 years after origination. The Revised Rate for the 1 ARD Loan (identified as Loan No. 23 on Annex A-1 to this prospectus supplement) is equal to the lesser of the maximum rate permitted by law and the Initial Rate plus 2%. After the Anticipated Repayment Date, the ARD Loan further requires that all cash flow available from the related Mortgaged Property after payment of the Periodic 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 on the ARD Loan. While interest at the Initial Rate continues to accrue and be payable on a current basis on the ARD Loan after its Anticipated Repayment Date, the payment of interest at th e excess of the Revised Rate over the Initial Rate for the ARD Loan will be deferred and will be required to be paid, with interest (to the extent permitted under applicable law and the related mortgage loan documents), only after the outstanding principal balance of the ARD Loan has been paid in full, at which time the deferred interest will be paid to the holders of the Class S Certificates.
Additionally, generally, an account was established at the origination of the ARD Loan into which the related borrower, property manager and/or tenants is required to directly deposit rents or other revenues from the related Mortgaged Property. In certain instances, the lockbox structure does not come into effect (i.e., spring) until immediately prior to, or on, the Anticipated Repayment Date. See ’’—Lockbox Accounts’’ below. The foregoing features, to the extent applicable, are designed to increase the likelihood that the ARD Loan will be prepaid by the related borrower on or about the Anticipated Repayment Date. However, we cannot assure yo u that the ARD Loan will be prepaid on its respective Anticipated Repayment Dates.
Certain Terms and Conditions of the Mortgage Loans
Mortgage Loans. The mortgage loans have due dates that occur on the day of each month as set forth in the following table:
Overview of Due Dates
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Due Date | | | Number of Mortgage Loans | | | Aggregate Principal Balance of Mortgage Loans | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | % of Initial Loan Group 2 Balance | |||||||||||||||
| 1 | | | | | 54 | | | | | $ | 922,703,807 | | | | | | 36.8 | % | | | | | 36.4 | % | | | | | 40.3 | % |
| 3 | | | | | 1 | | | | | | 6,073,711 | | | | | | 0.2 | | | | | | 0.3 | | | | | | 0.0 | |
| 5 | | | | | 27 | | | | | | 544,313,821 | | | | | | 21.7 | | | | | | 22.8 | | | | | | 13.7 | |
| 6 | | | | | 1 | | | | | | 11,550,000 | | | | | | 0.5 | | | | | | 0.5 | | | | | | 0.0 | |
| 7 | | | | | 18 | | | | | | 53,537,074 | | | | | | 2.1 | | | | | | 2.4 | | | | | | 0.0 | |
| 9 | | | | | 24 | | | | | | 414,502,000 | | | | | | 16.5 | | | | | | 17.6 | | | | | | 8.6 | |
| 10 | | | | | 8 | | | | | | 267,650,000 | | | | | | 10.7 | | | | | | 10.2 | | | | | | 14.2 | |
| 11 | | | | | 30 | | | | | | 284,337,525 | | | | | | 11.4 | | | | | | 9.8 | | | | | | 23.2 | |
| Total: | | | | | 163 | | | | | $ | 2,504,667,937 | | | | | | 100.0 | % | | | | | 100.0 | % | | | | | 100.0 | % |
S-118
The mortgage loans have grace periods as set forth in the following table:
Overview of Grace Periods
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Grace Period | | | Number of Mortgage Loans | | | Aggregate Principal Balance of Mortgage Loans | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | % of Initial Loan Group 2 Balance | |||||||||||||||
| 0 | | | | | 107 | | | | | $ | 1,608,168,828 | | | | | | 64.2 | % | | | | | 63.5 | % | | | | | 69.9 | % |
| 2 | | | | | 1 | | | | | | 6,073,711 | | | | | | 0.2 | | | | | | 0.3 | | | | | | 0.0 | |
| 3 | | | | | 1 | | | | | | 11,550,000 | | | | | | 0.5 | | | | | | 0.5 | | | | | | 0.0 | |
| 4 | | | | | 1 | | | | | | 29,000,000 | | | | | | 1.2 | | | | | | 1.3 | | | | | | 0.0 | |
| 5 | | | | | 9 | | | | | | 353,220,166 | | | | | | 14.1 | | | | | | 15.9 | | | | | | 0.0 | |
| 6 | | | | | 1 | | | | | | 16,380,000 | | | | | | 0.7 | | | | | | 0.7 | | | | | | 0.0 | |
| 7 | | | | | 37 | | | | | | 356,565,232 | | | | | | 14.2 | | | | | | 13.0 | | | | | | 23.4 | |
| 10 | | | | | 6 | | | | | | 123,710,000 | | | | | | 4.9 | | | | | | 4.7 | | | | | | 6.7 | |
| Total: | | | | | 163 | | | | | $ | 2,504,667,937 | | | | | | 100.0 | % | | | | | 100.0 | % | | | | | 100.0 | % |
As used in this prospectus supplement, ‘‘grace period’’ is the number of days following the due date before a payment default under each mortgage loan.
In some cases, there are exceptions to the strict operation of the grace period (or lack thereof). Some mortgage loans, for example, allow for a notice and cure right prior to acceleration of the mortgage loan. Some mortgage loans also provide exceptions in the event that the failure to make timely principal and interest payments is relatively infrequent.
The mortgage loans accrue interest on the basis of the actual number of days in a month, assuming a 360-day year (‘‘Actual/360 Basis’’) or accrue interest on the basis of twelve 30-day months, assuming a 360-day year (‘‘30/360 Basis’’), as set forth in the following table:
Interest Accrual Basis
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Accrual | | | Number of Mortgage Loans | | | Aggregate Principal Balance of Mortgage Loans | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | % of Initial Loan Group 2 Balance | |||||||||||||||
| Actual/360 | | | | | 160 | | | | | $ | 2,452,657,906 | | | | | | 97.9 | % | | | | | 98.4 | % | | | | | 94.3 | % |
| 30/360 | | | | | 3 | | | | | | 52,010,031 | | | | | | 2.1 | | | | | | 1.6 | | | | | | 5.7 | |
| Total: | | | | | 163 | | | | | $ | 2,504,667,937 | | | | | | 100.0 | % | | | | | 100.0 | % | | | | | 100.0 | % |
The mortgage loans have the amortization characteristics set forth in the following table:
Amortization Type
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amort Type | | | Number of Mortgage Loans | | | Aggregate Principal Balance of Mortgage Loans | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | % of Initial Loan Group 2 Balance | |||||||||||||||
| Balloon Loans | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| Interest Only | | | | | 53 | | | | | $ | 1,496,222,031 | | | | | | 59.7 | % | | | | | 61.1 | % | | | | | 49.0 | % |
| Partial Interest Only | | | | | 69 | | | | | | 734,670,746 | | | | | | 29.3 | | | | | | 27.6 | | | | | | 42.4 | |
| Balloon | | | | | 36 | | | | | | 243,783,605 | | | | | | 9.7 | | | | | | 9.9 | | | | | | 8.6 | |
| Subtotal | | | | | 158 | | | | | $ | 2,474,676,382 | | | | | | 98.8 | % | | | | | 98.6 | % | | | | | 100.0 | % |
| Fully Amortizing Loans | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| Fully Amortizing | | | | | 5 | | | | | $ | 29,991,555 | | | | | | 1.2 | % | | | | | 1.4 | % | | | | | 0.0 | % |
| Total: | | | | | 163 | | | | | $ | 2,504,667,937 | | | | | | 100.0 | % | | | | | 100.0 | % | | | | | 100.0 | % |
S-119
Prepayment Provisions. All of the mortgage loans (other than 23 mortgage loans, representing approximately 3.9% of the aggregate principal balance of the pool of mortgage loans as of the Cut-off Date (4.5%, 0.0%)) prohibit any prepayments or Defeasance for a specified period of time after its date of origination (a ‘‘Lockout Period’’). In addition, each mortgage loan restricts voluntary prepayments or Defeasance in one of the following ways, subject in each case to any described open periods:
Overview of Prepayment Protection
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Prepayment Protection | | | Number of Mortgage Loans | | | Aggregate Principal Balance of Mortgage Loans | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | % of Initial Loan Group 2 Balance | |||||||||||||||
| Defeasance | | | | | 112 | | | | | $ | 1,833,010,047 | | | | | | 73.2 | % | | | | | 73.3 | % | | | | | 72.6 | % |
| Yield Maintenance | | | | | 26 | | | | | | 472,555,817 | | | | | | 18.9 | | | | | | 18.9 | | | | | | 18.4 | |
| Defeasance, Defeasance/Fixed Penalty | | | | | 1 | | | | | | 69,000,000 | | | | | | 2.8 | | | | | | 3.1 | | | | | | 0.0 | |
| Yield Maintenance/Fixed Penalty, Yield Maintenance | | | | | 1 | | | | | | 40,000,000 | | | | | | 1.6 | | | | | | 1.8 | | | | | | 0.0 | |
| Yield Maintenance, Defeasance/Yield Maintenance | | | | | 5 | | | | | | 27,340,000 | | | | | | 1.1 | | | | | | 1.2 | | | | | | 0.0 | |
| Defeasance, Fixed Penalty | | | | | 2 | | | | | | 26,050,000 | | | | | | 1.0 | | | | | | 0.0 | | | | | | 9.1 | |
| Yield Maintenance/Defeasance | | | | | 15 | | | | | | 24,012,074 | | | | | | 1.0 | | | | | | 1.1 | | | | | | 0.0 | |
| Defeasance, Defeasance/Yield Maintenance | | | | | 1 | | | | | | 12,700,000 | | | | | | 0.5 | | | | | | 0.6 | | | | | | 0.0 | |
| Total: | | | | | 163 | | | | | $ | 2,504,667,937 | | | | | | 100.0 | % | | | | | 100.0 | % | | | | | 100.0 | % |
With respect to certain mortgage loans, ‘‘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 applicable Anticipated Repayment Date (including any balloon payment) determined by discounting such payments at the ‘‘Discount Rate’’ defined below (or as stated in the related loan documents), less the amount of principal being prepaid.
The term ‘‘Discount Rate’’ generally means the yield on a U.S. Treasury security (in the case of certain mortgage loans, plus a specified percentage) that has the most closely corresponding maturity date to the maturity date, or, the remaining weighted average life of the mortgage loan, and in some cases, converted to a monthly equivalent yield (as described in the respective loan documents).
Yield Maintenance Charges and any prepayment premiums are distributable as described in this prospectus supplement under ‘‘Description of the Certificates—Allocation of Yield Maintenance Charges and Prepayment Premiums.’’
The mortgage loans generally permit voluntary prepayment without the payment of a Yield Maintenance Charge or any prepayment premium during an ‘‘open period’’ immediately prior to and including the stated maturity date or Anticipated Repayment Date set forth in the following table:
S-120
Prepayment Open Period
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Open Period (Payments) | | | Number of Mortgage Loans | | | Aggregate Principal Balance of Mortgage Loans | | | % of Initial Pool Balance | | | % of Initial Loan Group 1 Balance | | | % of Initial Loan Group 2 Balance | |||||||||||||||
| 1 | | | | | 16 | | | | | $ | 125,267,000 | | | | | | 5.0 | % | | | | | 4.8 | % | | | | | 6.5 | % |
| 2 | | | | | 3 | | | | | | 92,740,000 | | | | | | 3.7 | | | | | | 3.4 | | | | | | 6.1 | |
| 3 | | | | | 29 | | | | | | 465,790,434 | | | | | | 18.6 | | | | | | 19.7 | | | | | | 10.1 | |
| 4 | | | | | 80 | | | | | | 1,057,474,703 | | | | | | 42.2 | | | | | | 43.0 | | | | | | 36.5 | |
| 5 | | | | | 9 | | | | | | 192,288,246 | | | | | | 7.7 | | | | | | 8.7 | | | | | | 0.0 | |
| 6 | | | | | 4 | | | | | | 37,150,000 | | | | | | 1.5 | | | | | | 0.1 | | | | | | 11.9 | |
| 7 | | | | | 11 | | | | | | 270,636,000 | | | | | | 10.8 | | | | | | 9.6 | | | | | | 20.4 | |
| 8 | | | | | 1 | | | | | | 6,900,000 | | | | | | 0.3 | | | | | | 0.3 | | | | | | 0.0 | |
| 10 | | | | | 3 | | | | | | 148,000,000 | | | | | | 5.9 | | | | | | 6.7 | | | | | | 0.0 | |
| 13 | | | | | 2 | | | | | | 41,380,000 | | | | | | 1.7 | | | | | | 0.7 | | | | | | 8.7 | |
| 18 | | | | | 1 | | | | | | 40,000,000 | | | | | | 1.6 | | | | | | 1.8 | | | | | | 0.0 | |
| 25 | | | | | 4 | | | | | | 27,041,555 | | | | | | 1.1 | | | | | | 1.2 | | | | | | 0.0 | |
| Total: | | | | | 163 | | | | | $ | 2,504,667,937 | | | | | | 100.0 | % | | | | | 100.0 | % | | | | | 100.0 | % |
Unless a mortgage loan is relatively near its stated maturity date (or Anticipated Repayment Date) or unless the sale price or the amount of the refinancing of the related Mortgaged Property is considerably higher than the current outstanding principal balance of the mortgage loan (due to an increase in the value of the Mortgaged Property or otherwise) and depending on the interest rate environment at the time of prepayment, the Yield Maintenance Charge or prepayment premium may offset entirely or render insignificant any economic benefit to be received by a related borrower upon a refinancing or sale of its Mortgaged Property. The Yield Maintenance Charge or prepayment premium provision of a mortgage loan creates an economic disincentive for the borrower to prepay its mortgage loan voluntarily and, accordingly, the related borrower may elect not to prepay its mortgage loan. However, we cannot assure you that the imposition of a Yield Maintenance Charge or prepa yment premium will provide a sufficient disincentive to prevent a voluntary principal prepayment or sufficient compensation to Certificateholders affected by a prepayment.
Certain state laws limit the amounts that a lender may collect from a borrower as an additional charge in connection with the prepayment of a mortgage loan. Certain mortgage loans require the payment of Yield Maintenance Charges or prepayment premiums in connection with a prepayment of the related mortgage loan with Insurance and Condemnation Proceeds as a result of a casualty or condemnation. Certain other of the mortgage loans do not require the payment of Yield Maintenance Charges or prepayment premiums in connection with a prepayment of the related mortgage loan with Insurance and/or Condemnation Proceeds as a result of a casualty or condemnation; so long as no event of default exists. In addition, certain of the mortgage loans permit the related borrower, after a partial casualty or partial condemnation, to prepay the remaining principal balance of the mortgage loan (after application of the related Insurance and Condemnation Proceeds to pay the principal b alance of the mortgage loan), which may in certain cases not be accompanied by any prepayment consideration. Certain of the mortgage loans provide for a recast of the amortization schedule and an adjustment of the scheduled debt service payments on the mortgage loan upon application of specified amounts of Insurance and Condemnation Proceeds to pay the related unpaid principal balance. Certain of the mortgage loans provide for a recast of the amortization schedule and an adjustment of the scheduled debt service payments on the mortgage loan upon application of certain holdbacks, if such holdbacks are not used for their specified purpose, to pay the related unpaid principal balance of such mortgage loan. Furthermore, the enforceability, under the laws of a number of states, of provisions providing for payments comparable to the Yield Maintenance Charges or prepayment premiums upon an involuntary prepayment is unclear. We cannot assure you that, at
S-121
the time a Yield Maintenance Charge or prepayment premium is required to be made on a mortgage loan in connection with an involuntary prepayment, the obligation to pay the Yield Maintenance Charge or prepayment premium will be enforceable under applicable state law. See ‘‘Certain Legal Aspects of Mortgage Loans—Default Interest and Limitations on Prepayments’’ in the prospectus.
Defeasance; Collateral Substitution; Property Releases. The terms of 136 of the mortgage loans, representing approximately 79.5% of the Initial Pool Balance (79.3%, 81.6%), permit the applicable borrower on any due date after a specified period (the ‘‘Defeasance Lockout Period’’); so long as no event of default exists, to obtain a release of all or a portion of a Mortgaged Property from the lien of the related Mortgage in exchange for a grant of a security interest in certain government securities (a ‘‘Defeasance’’). Except as provided in the following sentence, the Defeasan ce Lockout Period is at least two years from the Closing Date. In the case of the Logan Portfolio loans, the borrowers signed respective REMIC declarations with respect to the Logan Portfolio Companion Loans on the closing date of the JPMCC Series 2007-LDP11 securitization (which occurred on July 5, 2007), and defeasance is permitted following the second anniversary of that date and with a start-up date of July 5, 2007. The release is subject to certain conditions, including, among other conditions, that the borrower:
(a) pays or delivers to the Master Servicer on the requested release date (the ‘‘Release Date’’) (1) all other sums then due under the mortgage loan and all other loan documents executed in connection with the related mortgage loan, (2) funds to purchase direct non-callable obligations of the United States of America or, in certain cases, other U.S. government obligations providing payments (x) on or prior to all successive scheduled payment dates from the Release Date to the related maturity date (or, in some cases, the first day of the open period) including the balloon payment (or the Anticipated Repayment Date, including all amounts due and outstanding on the ARD Loan), assuming, in the case of the ARD Loan, a balloon payment that would be due assuming that the mortgage loan is p repaid on the related Anticipated Repayment Date (or, in some cases, the first day of the open period for the ARD Loan), and (y) in amounts at least equal to the scheduled payments due on those dates under the mortgage loan or the related defeased amount of the mortgage loan in the case of a partial Defeasance (including any balloon payment), and (3) any costs and expenses incurred in connection with the purchase of the U.S. government obligations; and
(b) delivers a security agreement granting the trust fund a first priority lien on the U.S. government obligations purchased as substitute collateral and an opinion of counsel relating to the enforceability of such security interest.
Except as described below, the mortgage loans secured by more than one parcel making up the related Mortgaged Property that permit release of one or more of such parcels without releasing all of such parcels by means of partial Defeasance generally require that either (or, in some cases, both) (1) prior to the release of such parcel, a specified percentage (generally between 100.0% and 125.0%) of the allocated loan amount (or in some cases a fixed dollar amount) for the Mortgaged Property be defeased and/or (2) certain DSCR and/or LTV Ratio tests (if applicable) be satisfied with respect to the remaining parcels making up the related Mortgaged Property after the partial Defeasance.
In the case of 1 mortgage loan (identified as Loan No. 99 on Annex A-1 to this prospectus supplement), representing approximately 0.2% of the aggregate principal balance of the pool of mortgage loans as of the cut off date (0.2%, 0.0%), the related loan documents permit the borrower to obtain the release of a parcel from the lien of the mortgage upon the satisfaction of certain conditions specified in the loan documents, including without limitation (i) the transfer of the release parcel to a bona-fide unaffiliated third party; (ii) no event of default has occurred and is continuing; (iii) defeasance of the greater of (a) 125% of the allocated loan amount for the released parcel and (b) 100% of the allocated net proceeds received for a release parcel; (iv) after giving effect to such partial release, the debt service coverage ratio is not less than the greater of
S-122
(a) the debt service coverage ratio immediately preceding such partial release and (b) the debt service coverage ratio as of July 27, 2007; and (v) after giving effect to such partial release, the loan-to-value ratio does not exceed (a) the loan-to-value ratio immediately preceding such partial release and (b) the loan-to-value ratio as of July 27, 2007.
With respect to 1 mortgage loan (identified as Loan No. 28 on Annex A-1 to this prospectus supplement, representing approximately 1.0% of the Initial Pool Balance (1.1%, 0.0%), after the defeasance lockout date, the related borrower may partially defease and obtain the release of individual properties subject to the mortgage by paying an amount equal to 115% of the allocated loan amount of such property and the fulfillment, among other things, of the following conditions: (i) the debt service coverage ratio after giving effect to the release with respect to the remaining parcels subject to the mortgage must be equal to or greater than the greater of (A) 1.15x, or (B) the debt service coverage ratio immediately preceding the release, (ii) no event of default shall have occurred and be continuing under the terms of the related mortgage loan documents and the related borrower is in material compliance with all terms and conditions of the related mortgage loan documents, and (iii) the borrower has delivered all required title, loan, security and related documents related to the release.
With respect to 1 mortgage loan (identified as Loan No. 6 on Annex A-1 to this prospectus supplement), representing approximately 2.7% of the Initial Pool Balance (3.1%, 0.0%), from and after the earlier to occur of the permitted release date and the defeasance lockout date, the related borrower may obtain the release of individual properties subject to the mortgage by paying an amount equal to 125% of the allocated loan amount of such property and the fulfillment, among other things, of the following conditions: (i) the debt service coverage ratio immediately after giving effect to the release with respect to the remaining properties subject to the mortgage must be equal to or greater than the greater of (A) 2.75x, and (b) the debt service coverage ratio immediately preceding the release, (ii) receipt by the lender of a confirmation in writing from the Rating Agencies to the effect that such substitution will not result in a withdrawal, qualification or do wngrade of the respective ratings of the Certificates in effect immediately prior to such substitution, (iii) no event of default shall have occurred and be continuing under the terms of the related mortgage loan documents and the related borrower is in material compliance with all terms and conditions of the related mortgage loan documents, and (iv) the borrower has delivered all title, loan, security and due diligence documents related to the release.
With respect to 1 mortgage loan (identified as Loan No. 22 on Annex A-1 to this prospectus supplement), representing approximately 1.3% of the Initial Pool Balance (1.4%, 0.0%), the related mortgagor may obtain the release of an unimproved parcel of the mortgaged property from the lien of the mortgage if, among other things, the loan-to-value ratio (excluding the value of such unimproved parcel) immediately prior to such release is not more than 80%. If such loan-to-value ratio exceeds 80%, but is less than 85%, the related mortgagor will have the right to prepay a portion of the principal balance of the mortgage loan in an amount sufficient to reduce such loan-to-value ratio to 80%, provided that such prepayment is accompanied by the applicable prepayment premium required in connection with such prepayment. No net operating income was attributed to the unimproved parcel in connection with the underwriting of the mortgage loan.
The related borrower or, if the borrower is not required to do so under the mortgage loan documents, the Master Servicer, will be responsible for purchasing the U.S. government obligations on behalf of the borrower at the borrower’s expense. Simultaneously with these actions, the related Mortgaged Property will be released from the lien of the mortgage loan and the pledged U.S. government obligations (together with any Mortgaged Property not released, in the case of a partial Defeasance) will be substituted as the collateral securing the mortgage loan.
In general, a successor borrower established or designated by the related borrower (or, if the borrower is not required or permitted to do so under the mortgage loan documents, established
S-123
or designated by the Master Servicer) will assume all of the defeased obligations of a borrower exercising a Defeasance option under a mortgage loan and the borrower will be relieved of all of the defeased obligations under the mortgage loan. In other cases, the existing borrower will remain liable for all of the defeased obligations, subject to the mortgage loan documents, after releasing the Mortgaged Property.
Although the collateral substitution provisions related to Defeasance are not intended to be, and do not have the same effect on the Certificateholders as, a prepayment of the related mortgage loan, a court could interpret these provisions as being equivalent to an unenforceable Yield Maintenance Charge or prepayment premium. We make no representation as to the enforceability of the defeasance provisions of any mortgage loan.
In addition to the partial defeasance, partial releases and substitutions described above, certain mortgage loans will permit partial releases as described below.
In the case of 1 mortgage loan (identified as Loan No. 25 on Annex A-1 to this prospectus supplement), representing approximately 1.1% of the aggregate principal balance of the mortgage loans as of the cut-off date (1.3%, 0.0%), after the first year from the date of origination, the related mortgagor may obtain the release of an unimproved parcel of the mortgaged property from the lien of the mortgage. In connection with such release, the mortgagor will be required to make a principal prepayment in the amount of $2,000,000 together with any applicable prepayment premium required in connection with such prepayment.
In the case of 1 mortgage loan (identified as Loan No. 24 on Annex A-1 to this prospectus supplement), representing approximately 1.2% of the aggregate principal balance of the pool of mortgage loans as of the cut off date (1.3%, 0.0%), the related loan documents permit the borrower to obtain the release of one or more parcels from the lien of the mortgage upon the satisfaction of certain conditions specified in the loan documents, including without limitation (a) payment of 100% of the allocated loan amount; (b) no event of default has occurred and is continuing; (c) after giving effect to such partial release, the debt service coverage ratio is not less than 1.25:1 and (d) after giving effect to such partial release, the loan-to-value ratio does not exceed 70%.
In the case of 1 mortgage loan (identified as Loan No. 47 on Annex A-1 to this prospectus supplement), representing approximately 0.5% of the aggregate principal balance of the pool of mortgage loans as of the cut off date (0.6%, 0.0%), the related loan documents permit the borrower to obtain the release of a parcel from the lien of the mortgage upon the satisfaction of certain conditions specified in the loan documents, including without limitation (i) the transfer of the release parcel to a bona-fide unaffiliated third party; (ii) no event of default has occurred and is continuing; (iii) payment of the greater of (a) $3,450,000 and (b) 100% of the net sale proceeds to a maximum of $4,000,000; (iv) after giving effect to such partial release, the debt service coverage ratio is not less than the greater of (a) the debt service coverage ratio immediately preceding such partial release and (b) the debt service coverage ratio as of the date of closing of the partia l release and (v) after giving effect to such partial release, the loan-to-value ratio is not less than the greater of (a) the loan-to-value ratio immediately preceding such partial release and (b) the loan-to-value ratio as of the date of closing of the partial release.
With respect to the 14 mortgage loans (identified as Loan Nos. 143, 145, 146, 148-153, 155-157, 159 and 161 on Annex A-1 to this prospectus supplement), representing approximately 0.8% of the Initial Pool Balance (1.0%, 0.0%), that are each part of one of the Logan Portfolio Whole Loan that are cross-collateralized and cross-defaulted with each other, the related borrower under the applicable Logan Portfolio Loan (the ‘‘Logan Released Whole Loan’’) is permitted to obtain a release of the mortgaged property (the ‘‘Logan Released Mortgaged Property’’) from the lien of the mortgage and/or a termination of any applicable cross-collateralization and cross-default provisions of the other re lated Logan Portfolio Loans (‘‘Logan Crossed Whole Loans’’) in connection with (1) transfer of the mortgaged property to a special purpose entity acceptable to the lender (‘‘Logan Special Transfer’’) or (2) repayment of the
S-124
Logan Portfolio Loan, provided that the following conditions are satisfied: (i) no event of default has occurred, (ii) the sole tenant at the Logan Released Mortgaged Property and sole tenants at the other Mortgaged Properties securing Logan Crossed Whole Loans are open for business and have not defaulted in the payment of rent, (iii) the debt service coverage ratio for the Logan Released Whole Loan after giving effect to such release is not less than the greater of (A) the debt service coverage ratio for the Logan Released Whole Loan as of origination date and (B) the debt service coverage ratio for the Logan Released Whole Loan immediately preceding such release, (iv) the loan-to-value ratio for the remaining Logan Portfolio Loans is not greater than 80%, (v) in the event of a full repayment, borrower under the Logan Released Whole Loan pays 115% of the outstanding principal (the ‘‘Logan Release Amount’’) to lender with yield maintenance premium and (vi) in the event of a Logan Special Transfer, borrower complies with certain other transfer requirements of the applicable loan agreement, including (a) absence of an event of default, (b) payment of the assumption fee; and (c) securing an approval of the Logan Special Transfer from the lender. In connection with a release upon the repayment of the Logan Portfolio Loan any funds remaining from the Logan Release Amount will be applied against the outstanding principal of the remaining Logan Crossed Whole Loans.
Certain of the mortgage loans permit a partial release of an unimproved portion (which may have landscaping, parking or other non-income generating improvements) of the related Mortgaged Property or an improved portion of the related Mortgaged Property that was, in either case, given no value or was not material for underwriting purposes for no consideration upon the satisfaction of certain requirements other than pursuant to Defeasance.
‘‘Due-on-Sale’’ and ‘‘Due-on-Encumbrance’’ Provisions. The mortgage loans contain ‘‘due-on-sale’’ and ‘‘due-on-encumbrance’’ provisions that in each case, with limited exceptions, permit the holder of the Mortgage to accelerate the maturity of the related mortgage loan if the borrower sells or otherwise transfers or encumbers the related Mortgaged Property without the consent of the holder of the Mortgage; provided, however, under the terms of many of the mortgage loans, this consent may not be unreasonably withheld, and in some cases must be granted if certain conditions are met (including that transfers to certain specified ‘‘qualified transferees’’ may be made without lender consent). Certain of the mortgage loans permit transfers by the related borrower of the Mortgaged Property to purchasers who would then assume the related mortgage loan subject to the reasonable acceptability of the transferee to the mortgagee and the satisfaction of certain conditions provided in the related loan documents. The transfer of a Mortgaged Property to a new unaffiliated entity will likely involve the termination of any applicable cross-collateralization arrangement under the related mortgage loan documents. Certain of the mortgage loans permit or, within a specified time period, require the tenants in common borrowers to transfer ownership to other tenants in common or into a single-purpose entity. Certain of the Mortgaged Properties have been, or may become, subject to additional financing. See ‘‘—Additional Debt’’ above and ‘‘Risk Factors—Multifamily Properties Have Special Risks’’ in this prospectus supplement.
The Master Servicer, with respect to non-Specially Serviced Mortgage Loans, and the Special Servicer, with respect to Specially Serviced Mortgage Loans, will be required (a) to exercise any right it may have with respect to a mortgage loan containing a ‘‘due-on-sale’’ clause (1) to accelerate the payments on that mortgage loan, or (2) to withhold its consent to any sale or transfer, consistent with the Servicing Standards or (b) to waive its right to exercise such rights; provided, however, with respect to such waiver of rights, (i) with respect to all non-Specially Serviced Mortgage Loans, the Master Servicer has obtained the prior written consent (or deemed consent) of the Special Servicer, (ii) with respect to all Specially Serviced Mortgage Loans, and all non-Specially Serviced Mortgage Loans having a Stated Principal Balance greater than or equal to $2,500,000, the Special Servicer has obtained the prior written consent (or deemed consent) of the Directing Certificateholder and (iii) with respect to any mortgage loan (x) with a Stated Principal Balance greater than or equal to $20,000,000, (y) with a Stated Principal Balance greater than or equal to 5% of the aggregate Stated Principal Balance of the mortgage loans then outstanding or (z) that is one of the ten largest mortgage loans (by Stated Principal Balance)
S-125
outstanding, confirmation from each Rating Agency is obtained that such waiver or consent would not result in the downgrade, withdrawal or qualification of the then-current ratings on any class of outstanding Certificates. Any confirmation required will be at the related borrower’s expense, to the extent permitted by the related mortgage loan documents; provided that, to the extent the mortgage loan documents are silent as to who bears the costs of any such confirmation, the Master Servicer or Special Servicer is required to use reasonable efforts to have the related borrower bear such costs and expenses.
With respect to a mortgage loan with a ‘‘due-on-encumbrance’’ clause, the Master Servicer, with respect to non-Specially Serviced Mortgage Loans, and the Special Servicer, with respect to Specially Serviced Mortgage Loans, will be required (a) to exercise any right it may have with respect to a mortgage loan containing a ‘‘due-on-encumbrance’’ clause (1) to accelerate the payments thereon, or (2) to withhold its consent to the creation of any additional lien or other encumbrance, consistent with the Servicing Standards or (b) to waive its right to exercise such rights; provided that, with respect to such waiver of rights, (i) if the mortgage loan is a non-Specially Serviced Mortgage Loan, the Master Servicer has made a recommendation and ob tained the consent (or deemed consent) of the Special Servicer and (ii) the Master Servicer or Special Servicer, as the case may be, has obtained from each Rating Agency a confirmation that the waiver would not result in the downgrade, withdrawal or qualification of the then-current ratings on any Class of outstanding Certificates if that mortgage loan (1) has an outstanding principal balance (together with any cross-collateralized mortgage loan) that is greater than or equal to 2% of the aggregate Stated Principal Balance of the mortgage loans or (2) has a loan-to-value ratio greater than 85% (including any proposed debt) or (3) has a debt service coverage ratio less than 1.20x (in each case, determined based upon the aggregate of the Stated Principal Balance of the mortgage loan and the principal amount of the proposed additional loan) or (4) is one of the ten largest mortgage loans (by Stated Principal Balance) or (5) has a principal balance over $20,000,000. Any confirmation required will be at the related borrower’s expense, to the extent permitted by the related mortgage loan documents; provided that, to the extent the mortgage loan documents are silent as to who bears the costs of any such confirmation, the Master Servicer or Special Servicer is required to use reasonable efforts to have the related borrower bear such costs and expenses.
Notwithstanding the foregoing, the existence of any additional indebtedness may increase the difficulty of refinancing the related mortgage loan at its maturity date or Anticipated Repayment Date, as applicable, and increase the possibility that reduced cash flow could result in deferred maintenance. Also, if the holder of the additional debt has filed for bankruptcy or been placed in involuntary receivership, foreclosure of the related mortgage loan could be delayed. See ‘‘Certain Legal Aspects of Mortgage Loans —Due-on-Sale and Due-on-Encumbrance’’ and ‘‘—Subordinate Financing’’ in the prospectus.
Hazard, Liability and Other Insurance. The mortgage loans generally require that each Mortgaged Property be insured by a hazard insurance policy in an amount (subject to a deductible approved by the lender pursuant to the terms of the related loan documents) at least equal to the lesser of (a) the outstanding principal balance of the related mortgage loan and (b) 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 originator. Certain mortgage loans permit a borrower to satisfy its insurance coverage requirement by permitting its tenant to self-insure.
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. Most of the mortgage loans generally also require the related borrower to maintain comprehensive general liability insurance against claims for personal and
S-126
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. Most of the mortgage loans generally further require 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. 22 of the Mortgaged Properties, securing mortgage loans representing approximately 18.8% of the Initial Pool Balance (19.3%, 15.3%), are located in areas that are considered a high earthquake risk (seismic zones 3 or 4). These areas include all or parts of the States of California, Alaska, Arizona and Tennessee. Except with respect to 1 of the Mortgaged Properties, securing 1 mortgage loans representing approximately 0.3% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, no Mortgaged Property has a probable maximum loss (‘‘PML’’) in excess of 20%. In the case of 1 mortgage loan (identified as Loan No. 85 on Annex A-1 to this prospectus supplement), representing approximately 0.3% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date (0.3%, 0.0%), the probable maximum loss is 26%, however the earthquake insurance was obtained with respect to the Mortgaged Property.
Generally, an environmental insurance policy obtained in lieu of a Phase I environmental site assessment is a blanket policy covering the Mortgage Loan Seller’s mortgage loans for which such assessments were not obtained. The policy insures the trust against losses, with a per incident limit set at 125% of the outstanding balance of the mortgage loan and an aggregate limit equal to a percentage of the aggregate outstanding principal balance of the mortgage loans covered by the policy, resulting from certain known and unknown environmental conditions in violation of applicable environmental standards at the related Mortgaged Property during the applicable policy period, which continues for a period at least equal to the lesser of (a) five years beyond the maturity date of the related mortgage loan and (b) twenty years beyond the date of origination of the related mortgage loan, provided no foreclosure has occurred. Subject to certai n conditions and exclusions, such insurance policies, by their terms, generally provide coverage against (i) losses resulting from default under the applicable mortgage loan, up to the amount of the then outstanding loan balance and certain unpaid interest, if on-site environmental conditions in violation of applicable environmental standards are discovered at the related Mortgaged Property during the policy period and no foreclosure of the Mortgaged Property has taken place; (ii) losses from third-party claims against the lender during the policy period for bodily injury, property damage or clean-up costs resulting from environmental conditions at or emanating from the Mortgaged Property; and (iii) after foreclosure, costs of clean-up of environmental conditions in violation of applicable environmental standards discovered during the policy period to the extent required by applicable law, including any court order or other governmental directive.
See ‘‘Risk Factors—Property Insurance, Including Terrorism Insurance May Not Be Sufficient’’ in this prospectus supplement for information regarding insurance coverage for acts of terrorism.
Additional Mortgage Loan Information
The tables presented in Annex A-2 set forth certain anticipated characteristics of the mortgage loans and the Mortgaged Properties. The sum in any column may not equal the indicated total due to rounding. The descriptions in this prospectus supplement of the mortgage loans and the Mortgaged Properties are based upon the pool of mortgage loans as it is expected to be constituted as of the close of business on the Closing Date, assuming that (1) all scheduled principal and/or interest payments due on or before the Cut-off Date will be made and (2) there will be no principal prepayments on or before the Cut-off Date.
Prior to the issuance of the Certificates, one or more mortgage loans (including mortgage loans specifically described in this prospectus supplement) may be removed from the pool of mortgage loans as a result of prepayments, delinquencies, incomplete documentation or for any other reason, if the Depositor or a Mortgage Loan Seller deems the removal necessary,
S-127
appropriate or desirable. A limited number of other mortgage loans may be included in the pool of mortgage loans prior to the issuance of the Certificates, unless including those mortgage loans would materially alter the characteristics of the pool of mortgage loans as described in this prospectus supplement. The Depositor believes that the information set forth in this prospectus supplement will be representative of the characteristics of the pool of mortgage loans as it will be constituted at the time the Certificates are issued, although the range of Mortgage Rates and maturities as well as other characteristics of the mortgage loans described in this prospectus supplement may vary.
With respect to mortgage loans secured by more than one Mortgaged Property, the information presented in this prospectus supplement with respect to UW DSCR and LTV Ratios, as applicable, is the UW DSCR or LTV Ratio of the mortgage loan in the aggregate. Unless otherwise noted, all numerical and statistical information presented in this prospectus supplement, including Cut-off Date Balances, LTV Ratios and UW DSCRs with respect to each AB Mortgage Loan and the Sawgrass Mills Mall Whole Loan is calculated without regard to the related Subordinate Companion Loan(s). In addition, the loan amount and debt service payment used in this prospectus supplement for purposes of calculating the loan-to-value ratios and debt service coverage ratios of the Pari Passu Whole Loans and the Sawgrass Mills Mall Whole Loan are the aggregate principal balance and aggregate debt service of the Mortgage Loan and the related Pari Passu Companion Loans. Whenever percentages and other inf ormation in this prospectus supplement 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 to this prospectus supplement.
A Current Report on Form 8-K (the ‘‘Form 8-K’’) will be available to purchasers of the Offered Certificates on or shortly after the Closing Date and will be filed, together with the Pooling and Servicing Agreement, with the Securities and Exchange Commission. If mortgage loans are removed from or added to the pool of mortgage loans as set forth above, the removal or addition will be noted in the Form 8-K.
For a detailed presentation of certain characteristics of the mortgage loans and the Mortgaged Properties on an individual basis, see Annex A-1 to this prospectus supplement.
The ‘‘Underwritten Cash Flow Debt Service Coverage Ratio’’ or ‘‘UW DSCR’’ for any mortgage loan for any period, as presented in this prospectus supplement, including the tables presented on Annex A-1 and Annex A-2 attached to this prospectus supplement, is the ratio of Underwritten Cash Flow calculated for the related Mortgaged Property to the amount of total annual debt service on such mortgage loan. In the case of each Pari Passu Mortgage Loan and the Sawgrass Mills Mall Loan, the Underwritten Cash Flow Debt Service Coverage Ratio was based on the aggregate cut-off date principal balance of each Mortgage Loan and each related Pari Passu Companion Loan. In the case of each AB Mo rtgage Loan and the Sawgrass Mills Mall Loan, the Underwritten Cash Flow Debt Service Coverage Ratio was calculated without regard to the related Subordinate Companion Loan(s). The Underwritten Cash Flow Debt Service Coverage Ratio for all partial interest-only loans was calculated based on the first principal and interest payment required to be made into the trust fund during the term of the loan. With respect to any mortgage loan that is part of a cross-collateralized group of mortgage loans, the Underwritten Cash Flow Debt Service Coverage Ratio is the ratio of the Underwritten Cash Flow calculated for the Mortgaged Properties related to the cross-collateralized group to the total annual debt service for all of the mortgage loans in the cross-collateralized group. ‘‘Underwritten Cash Flow’’ or ‘‘UW NC F’’ means the Underwritten NOI for the related Mortgaged Property decreased by an amount that the related Mortgage Loan Seller has determined to be an appropriate allowance for average annual tenant improvements and leasing commissions and/or replacement reserves for capital items based upon its underwriting guidelines. Each originator of commercial mortgage loans has its own underwriting criteria, and no assurance can be given that adjustments or calculations made by one originator would be made by other lenders. See ‘‘Risk Factors—Risks Relating to Underwritten Net Cash Flow’’ in this prospectus supplement.
S-128
‘‘Underwritten NOI’’ or ‘‘UW NOI’’ means the Net Operating Income for the related Mortgaged Property as determined by the related Mortgage Loan Seller in accordance with its underwriting guidelines for similar properties. Revenue from a Mortgaged Property (‘‘Effective Gross Income’’) is generally calculated as follows: rental revenue is calculated using actual or contractual rental rates (in some cases, including future contractual rent steps), in some cases adjusted to market rental and/or with vacancy rates or an assumed vacancy rate; other revenue, s uch as parking fees, laundry fees and other income items are generally included only if supported by a trend and/or are likely to be recurring. Operating expenses generally reflect the related Mortgaged Property’s historical expenses, adjusted to account for inflation, significant occupancy increases and a market rate management fee. Generally, ‘‘Net Operating Income’’ or ‘‘NOI,‘‘ for a Mortgaged Property equals the operating revenues (consisting principally of rental and related revenue) for that Mortgaged Property minus the operating expenses (such as utilities, repairs and maintenance, general and administrative, management fees, marketing and advertising, insurance and real estate tax expenses) for the Mort gaged Property. NOI generally does not reflect debt service, tenant improvements, leasing commissions, depreciation, amortization and similar non-operating items.
The Underwritten NOI for each Mortgaged Property is calculated on the basis of numerous assumptions and subjective judgments, which, if ultimately proven erroneous, could cause the actual operating income for such Mortgaged Property to differ materially from the Underwritten NOI set forth herein. Some assumptions and subjective judgments related to future events, conditions and circumstances, including future income and expense levels, the re-leasing of occupied space, which will be affected by a variety of complex factors over which none of the Issuing Entity, the Depositor, the Mortgage Loan Sellers, the Master Servicer, the Special Servicer or the Trustee have control. In some cases, the Underwritten NOI for any Mortgaged Property is higher, and may be materially higher, than the actual annual NOI for that Mortgaged Property, based on historical operating statements. No guaranty can be given with respect to the accuracy of the information provided by any borr owers, or the adequacy of the procedures used by a Mortgage Loan Seller in determining and presenting operating information. See ‘‘Risk Factors—Risks Relating to Underwritten Net Cash Flow’’ in this prospectus supplement. See Annex A-1 to this prospectus supplement and footnotes thereto for additional information on the calculation of Underwritten NOI and UW NOI for certain mortgage loans.
The amounts representing Net Operating Income, Underwritten NOI and Underwritten Cash Flow are not a substitute for or an improvement upon net income, as determined in accordance with generally accepted accounting principles, as a measure of the results of the Mortgaged Property’s operations or a substitute for cash flows from operating activities, as determined in accordance with generally accepted accounting principles, as a measure of liquidity. No representation is made as to the future cash flow of the Mortgaged Properties, nor are the Net Operating Income, Underwritten NOI and Underwritten Cash Flow set forth in this prospectus supplement intended to represent such future cash flow.
The UW NCFs and UW NOIs used as a basis for calculating the UW DSCRs presented in this prospectus supplement, including the tables presented on Annex A-1 and Annex A-2, were derived generally from operating statements obtained from the respective borrowers subject to certain assumptions including but not limited to those described below (the ‘‘Operating Statements’’). With respect to mortgage loans secured by newly constructed Mortgaged Properties, the UW NCFs and UW NOIs used as a basis for calculating UW DSCRs are derived generally from rent rolls, tenant leases, master leases and the appraisers’ projected expense levels or other assumptions. The Operating Statements and rent rolls were not audited and in most cases were not prepared in accordance with generally accepted accounting principles. To increase th e level of consistency between the Operating Statements and rent rolls, in some instances, adjustments were made to such Operating Statements. These adjustments were principally for real estate tax and insurance expenses (e.g., adjusting for the payment of two years of expenses in one year), and to eliminate obvious items not related to the operation of the Mortgaged Property. However, such adjustments were subjective in nature and may not have been made in a
S-129
uniform manner. The UW NCF for residential cooperative Mortgaged Properties is generally based on projected Net Operating Income at the Mortgaged Property, as determined by the appraisal obtained in connection with the origination of the related mortgage loan, assuming that the Mortgaged Property was operated as a rental property with rents set at prevailing market rates taking into account the presence of, if any, existing rent-controlled or rent-stabilized occupants, if any, reduced by underwritten capital expenditures, property operating expenses, a market-rate vacancy assumption and projected reserves. Notwithstanding the foregoing, as indicated on Annex A-1, in certain cases, historical income and revenue information was not utilized in determining UW NCF because such historical information either was not available or was not an accurate reflection of the current status of the related Mortgaged Property as a result of a change in circumstances at the related Mortgaged Property. In those cases, the related Mortgage Loan Seller generally relied on comparative market and sub-market leasing assumptions (including rental rates and vacancy), master leases and other potential revenue generators as well as budget projections provided by the borrower and information contained in the related Mortgaged Property appraisal in determining UW NCF.
The tables presented in Annex A-2 that are entitled ‘‘Cut-off Date LTV Ratios’’ and ‘‘Maturity Date LTV Ratios’’ set forth the range of LTV Ratios of the mortgage loans as of the Cut-off Date and the stated maturity dates or Anticipated Repayment Dates of the mortgage loans. An ‘‘LTV Ratio’’ for any mortgage loan, as of any date of determination, is a fraction, expressed as a percentage, the numerator of which is the scheduled principal balance of the mortgage loan as of that date (assuming no defaults or prepayments on the mortgage loan prior to t hat date), and the denominator of which is the appraised value of the related Mortgaged Property or Mortgaged Properties as determined by an appraisal of the property obtained at or about the time of the origination of the mortgage loan. In the case of the Pari Passu Mortgage Loans and the Sawgrass Mills Mall Loan, the loan-to-value ratio was based on the aggregate Cut-off Date principal balance of each Mortgage Loan and the related Pari Passu Companion Loans. In the case of each AB Mortgage Loan and the Sawgrass Mills Mall Loan, the loan-to-value ratio was calculated without regard to the related Subordinate Companion Loan(s). In the case of 7 mortgage loans (identified as Loan Nos. 5, 7, 11, 28, 30, 71 and 137 on Annex A-1 to this prospectus supplement), representing approximately 9.8% of the Initial Pool Balance (11.0%, 0.0%), loan-to-value ratios were based on the ‘‘as-stabilized’’ values or portfolio valuation as defined in the related appraisal. In addition, the apprai sal value of certain other mortgage loans may have been adjusted as described on Annex A-1 to this prospectus supplement. See ‘‘Risk Factors—Limitations of Appraisals’’ in this prospectus supplement. However, in the event that a mortgage loan is part of a cross-collateralized group of mortgage loans, the LTV Ratio is the fraction, expressed as a percentage, the numerator of which is the scheduled principal balance of all the mortgage loans in the cross-collateralized group and the denominator of which is the aggregate of the appraised values of all the Mortgaged Properties related to the cross-collateralized group. The LTV Ratio of a mortgage loan as of its stated maturity date or Anticipated Repayment Date, as the case may be, set forth in Annex A-2 was calculated based on the principal balance of the related mortgage loan on t he maturity date or Anticipated Repayment Date, as the case may be, assuming all principal payments required to be made on or prior to the mortgage loan’s maturity date or Anticipated Repayment Date, as the case may be, or (not including the balloon payment), are made. In addition, because it is based on the value of a Mortgaged Property determined as of loan origination date, the information set forth in this prospectus supplement in Annex A-1 and in Annex A-2 is not necessarily a reliable measure of the related borrower’s current equity in each Mortgaged Property. In a declining real estate market, the appraised value of a Mortgaged Property could have decreased from the appraised value determined at origination and the current actual LTV Ratio of a mortgage loan may be higher than its LTV Ratio at origination even after taking into account amortization since origination.
The characteristics described above and in Annex A-2, along with certain additional characteristics of the mortgage loans presented on a loan-by-loan basis, are set forth in Annex A-1 to this prospectus supplement. Certain additional information regarding the
S-130
mortgage loans is set forth in this prospectus supplement below under ‘‘Transaction Parties—The Sponsors’’ and in the prospectus under ‘‘Description of the Trust Funds—Mortgage Loans’’ and ‘‘Certain Legal Aspects of Mortgage Loans.’’
Sale of Mortgage Loans; Mortgage File Delivery
On the Closing Date, the Depositor will acquire the mortgage loans from each Mortgage Loan Seller and will simultaneously transfer the mortgage loans, without recourse, to the Trustee for the benefit of the Certificateholders. Under the related transaction documents, the Depositor will require each Mortgage Loan Seller to deliver to the Trustee or to a document custodian appointed by the Trustee (a ‘‘Custodian’’), among other things, the following documents with respect to each mortgage loan sold by the applicable Mortgage Loan Seller (except that with respect to each Non-Serviced Mortgage Loan, the Trustee will only hold originals of the related documents described in clause (i) ) (collectively, as to each mortgage loan, the ‘‘Mortgage File ’’): (i) the original Mortgage Note, endorsed on its face or by allonge attached thereto, without recourse, to the order of the Trustee or in blank (or, if the original Mortgage Note has been lost, an affidavit to such effect from the applicable Mortgage Loan Seller or another prior holder, together with a copy of the Mortgage Note); (ii) the original or a copy of the Mortgage, together with an original or copy of any intervening assignments of the Mortgage, in each case with evidence of recording indicated thereon or certified by a title insurance company, the related Mortgage Loan Seller or the applicable recorder’s office; (iii) the original or a copy of any related assignment of leases and of any intervening assignments thereof (if such item is a document separate from the Mortgage), with evidence of recording indicated thereon or certified by a title insurance company, the related Mortgage Loan Seller or the applicable r ecorder’s office; (iv) an original assignment of the Mortgage in favor of the Trustee or in blank and (subject to the completion of certain missing recording information) in recordable form; (v) an original assignment of any related assignment of leases (if such item is a document separate from the Mortgage) in favor of the Trustee or in blank and (subject to the completion of certain missing recording information) in recordable form; (vi) the original assignment of all unrecorded documents relating to the mortgage loan, if not already assigned pursuant to items (iv) or (v) above; (vii) originals or copies of all modification, consolidation, assumption and substitution agreements in those instances in which the terms or provisions of the Mortgage or Mortgage Note have been modified or the mortgage loan has been assumed or consolidated; (viii) the original or a copy of the policy or certificate of lender’s title insurance issued on the date of the origination of such mortgage loan, or, if such policy has not been issued or located, an irrevocable, binding commitment (which may be a pro forma or specimen 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 filed copies (bearing evidence of filing) or evidence of filing satisfactory to the Trustee of any UCC financing statements, related amendments and continuation statements in the possession of the applicable Mortgage Loan Seller; (x) an original assignment in favor of the Trustee of any financing statement filed in favor of the applicable Mortgage Loan Seller in the relevant jurisdiction; (xi) any intercreditor agreement relating to permitted debt of the mortgagor; (xii) copies of any loan agreement, escrow agreement, security agreement or letter of credit relating to a mortgage loan; and (xiii) the original or copy of any ground lease, ground lessor estoppel, environmental insurance policy or guaranty relating to a mortgage loan.
Notwithstanding the foregoing, with respect to any Mortgage, assignment of leases or UCC financing statements which have been recorded or filed in the name of MERS or its designee, no Mortgage assignment, assignment of the assignment of leases or UCC filing statements in favor of the Trustee will be required to be prepared or delivered. Instead, the related Mortgage Loan Seller will be required to take all actions as are necessary to cause the Trustee to be shown as the owner of the related mortgage loan on the records of MERS for purposes of the system of recording transfers of beneficial ownership of mortgages maintained by MERS.
S-131
As provided in the Pooling and Servicing Agreement, the Trustee or a Custodian on its behalf is required to review each Mortgage File within a specified period following its receipt thereof. If any of the above-described documents is found during the course of such review to be missing from any Mortgage File or defective, and in either case such omission or defect materially and adversely affects the value of the applicable mortgage loan or the interests of the Certificateholders therein, the applicable Mortgage Loan Seller, if it cannot deliver the document or cure the defect (other than omissions solely due to a document not having been returned by the related recording or filing office) within a period of 90 days (plus any applicable extension) following such Mortgage Loan Seller’s receipt of notice thereof, will be obligated pursuant to the applicable Purchase Agreement to (1) repurchase the affected mortgage loan within such 90-day period (p lus any applicable extension) or (2) substitute a qualified substitute mortgage loan for such mortgage loan and pay the Trustee a shortfall amount. See ‘‘—Representations and Warranties; Repurchases and Substitutions’’ below.
The Pooling and Servicing Agreement requires that the Trustee take the actions necessary to maintain the security interest of the trust fund in the mortgage loans. In addition, the Trustee is required to maintain custody of the Mortgage File for each mortgage loan in the State of Minnesota. The Trustee will not move any Mortgage File outside the State of Minnesota, other than as specifically provided for in the Pooling and Servicing Agreement, unless the Trustee first obtains and provides, at the expense of the Trustee, an opinion of counsel to the Depositor, which will be delivered to the Rating Agencies to the effect that the Trustee’s first priority interest in the Mortgage Notes has been duly and fully perfected under the applicable laws and regulations of such other jurisdiction. See ‘‘Description of the Certificates—Reports to Certificateho lders; Certain Available Information’’ in this prospectus supplement.
Representations and Warranties; Repurchases and Substitutions
In each Purchase Agreement, the applicable Mortgage Loan Seller will represent and warrant with respect to each mortgage loan (subject to certain exceptions specified in the related Purchase Agreement) sold by that Mortgage Loan Seller as of the Closing Date, or as of another date specifically provided in the representation and warranty, among other things, that:
(a) the mortgage loan is not delinquent 30 days or more in payment of principal and interest (without giving effect to any applicable grace period) as of the Cut-off Date and has not been 30 or more days past due, without giving effect to any applicable grace period;
(b) the mortgage loan is secured by a Mortgage that is a valid and subsisting first priority lien on the Mortgaged Property (or a leasehold interest therein) free and clear of any liens, claims or encumbrances, subject only to certain permitted encumbrances;
(c) the Mortgage, together with any separate security agreement, UCC financing statement or similar agreement, if any, establishes a first priority security interest in favor of the Mortgage Loan Seller, in all the related borrower’s personal property used in, and reasonably necessary to the operation of, the Mortgaged Property, and to the extent a security interest may be created therein and perfected by the filing of a UCC financing statement, the proceeds arising from the Mortgaged Property and any other collateral securing the mortgage loan subject only to certain permitted encumbrances;
(d) there is an assignment of leases and rents provision or agreement creating a first priority security interest in leases and rents arising in respect of the related Mortgaged Property, subject only to certain permitted encumbrances;
(e) to the Mortgage Loan Seller’s actual knowledge, there are no mechanics’ or other similar liens affecting the Mortgaged Property that are or may be prior or equal to the lien of the Mortgage, except those bonded, escrowed for or insured against pursuant to the applicable title insurance policy and except for permitted encumbrances;
(f) the related borrower has good and indefeasible fee simple or leasehold title to the Mortgaged Property subject to certain permitted encumbrances;
S-132
(g) the Mortgaged Property is covered by a title insurance policy (or binding commitment therefor) insuring the Mortgage is a valid first lien in the original principal amount of the related mortgage loan, subject only to certain permitted encumbrances; no claims have been made under the related title insurance policy and such policy is in full force and effect and will provide that the insured includes the owner of the mortgage loan;
(h) at the time of the assignment of the mortgage loan to the Depositor, the Mortgage Loan Seller had good and marketable title to and was the sole owner of the mortgage loan free and clear of any pledge, lien, encumbrance or security interest (other than the rights to servicing and related compensation as provided in the Pooling and Servicing Agreement and certain related agreements) and such assignment validly transfers ownership of the mortgage loan to the Depositor free and clear of any pledge, lien, encumbrance or security interest (other than the rights to servicing and related compensation as provided in the Pooling and Servicing Agreement and certain related agreements);
(i) the related assignment of mortgage and related assignment of the assignment of leases and rents are legal, valid and binding;
(j) the Mortgage Loan Seller’s endorsement of the related Mortgage Note constitutes the legal, valid, binding and enforceable assignment of the Mortgage Note, except as the enforceability thereof may be limited by applicable state law and by bankruptcy, insolvency, reorganization or other similar laws relating to creditors’ rights and general equitable principles, and together with an assignment of mortgage and an assignment of the assignment of leases and rents, legally and validly conveys all right, title and interest in the mortgage loan and related mortgage loan documents;
(k) each Mortgage and Mortgage Note is a legal, valid and binding obligation of the parties thereto (subject to any non-recourse provisions therein), enforceable in accordance with its terms, except as the enforceability thereof may be limited by applicable state law and by bankruptcy, insolvency, reorganization or other laws relating to creditors’ rights and general equitable principles and except that certain provisions of such documents are or may be unenforceable in whole or in part, but the inclusion of such provisions does not render such documents invalid as a whole, and such documents taken as a whole are enforceable to the extent necessary and customary for the practical realization of the principal rights and benefits afforded thereby;
(l) the terms of the mortgage loan and related mortgage loan documents have not been modified or waived in any material respect except as set forth in the related mortgage loan file;
(m) the mortgage loan has not been satisfied, canceled, subordinated, released or rescinded and the related borrower has not been released from its obligations under any mortgage loan document;
(n) except with respect to the enforceability of provisions requiring the payment of default interest, late fees, additional interest, prepayment premiums or yield maintenance charges and other creditors’ rights limitations on enforceability, none of the mortgage loan documents is subject to any right of rescission, set-off, abatement, diminution or valid counterclaim or defense;
(o) to the Mortgage Loan Seller’s knowledge, as of the date of origination of the mortgage loan, based on inquiry customary in the industry, the related Mortgaged Property was, and to the Mortgage Loan Seller’s actual knowledge, as of the Closing Date, the related Mortgaged Property is, in all material respects, in compliance with, and used and occupied in accordance with, all restrictive covenants of record applicable to the Mortgaged Property and applicable zoning laws and all inspections, licenses, permits and certificates of occupancy required by law, ordinance or regulation to be made or issued with regard to the Mortgaged Property have been obtained and are in full force and effect, except to the extent (a) any material non-compliance with applicable zoning laws is insured by an ALTA lender’s title
S-133
insurance policy (or binding commitment therefor), or the equivalent as adopted in the applicable jurisdiction, or a law and ordinance insurance policy, or (b) the failure to obtain or maintain such inspections, licenses, permits or certificates of occupancy does not materially impair or materially and adversely affect the use and/or operation of the Mortgaged Property as it was used and operated as of the date of origination of the mortgage loan or the rights of a holder of a related mortgage loan;
(p) to (i) the Mortgage Loan Seller’s knowledge, in reliance on an engineering report, the related Mortgaged Property is in good repair or escrows have been established to cover the estimated costs of repairs and (ii) the Mortgage Loan Seller’s actual knowledge, no condemnation proceedings are pending;
(q) as of the date of origination of the mortgage loan and as of the Closing Date, the Mortgaged Property is covered by insurance policies providing coverage against certain losses or damage;
(r) all escrow amounts required to be deposited by the borrower at origination have been deposited;
(s) to the Mortgage Loan Seller’s knowledge, as of the date of origination of the mortgage loan, there were and to the Mortgage Loan Seller’s actual knowledge, as of the Closing Date, there are no pending actions, suits or proceedings by or before any court or other governmental authority against or affecting the related borrower under the mortgage loan or the Mortgaged Property which, if determined against the borrower or property would materially and adversely affect the value of such property or ability of the borrower or the current use of the Mortgaged Property to generate net cash flow sufficient to pay principal, interest and other amounts due under the mortgage loan;
(t) To the Mortgage Loan Seller’s knowledge, there exists no material default or breach, and no such material default or breach has been waived by the Mortgage Loan Seller with respect to the mortgage loan, and to the Mortgage Loan Seller’s actual knowledge, no event which, with the passage of time or the giving of notice, would constitute a material default or breach, other than those defaults that are covered by certain other representations and warranties; and
(u) the terms of the mortgage loan documents evidencing such mortgage loan comply in all material respects with all applicable local, state, and federal laws and regulations and the Mortgage Loan Seller has complied with all material requirements pertaining to the origination of the mortgage loans, including but not limited to, usury and any and all other material requirements of any federal, state or local law to the extent non-compliance would have a material adverse effect on the mortgage loan.
If a Mortgage Loan Seller has been notified of a breach of any of the foregoing representations and warranties or of a document defect that in any case materially and adversely affects the value of a mortgage loan, the value of the related Mortgaged Property or the interests of the Certificateholders in the mortgage loan, and if the respective Mortgage Loan Seller cannot cure the breach or defect within a period of 90 days following its receipt of that notice or, in the case of a breach or a defect that would cause the mortgage loan not to be a ‘‘qualified mortgage’’ within the meaning of Section 860G(a)(3) of the Code, if earlier, its discovery of the breach or defect (the ‘‘Initial Resolution Period’’), then the respective Mortgage Loan Seller will be obligated, pursuant to the respect ive Purchase Agreement (the relevant rights under which will be assigned, together with the mortgage loans, to the Trustee), to (a) repurchase the affected mortgage loan or the related REO Loan within the Initial Resolution Period (or with respect to certain breaches or document defects, an extended cure period), at a price (the ‘‘Purchase Price’’) equal to the sum of (1) the outstanding principal balance of the mortgage loan (or related REO Loan) as of the date of purchase, (2) all accrued and unpaid interest on the mortgage loan (or the 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
S-134
additional interest on the ARD Loan), to, but not including, the due date immediately preceding the Determination Date for the Due 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) and additional trust fund expenses in respect of the mortgage loan or related REO Loan, if any, (4) solely in the case of a repurchase or substitution by a Mortgage Loan Seller, to the extent not otherwise included in clause (3) above, all reasonable out-of-pocket expenses reasonably incurred or to be incurred by the Master Servicer, the Special Servicer, the Depositor or the Trustee in respect of the breach or defect giving rise to the repurchase obligation, including any expenses arising out of the enforcement of the repurchase obligation, including, without limitation, legal fees and expenses, and (5) Liquidation Fees, if any, payable with respect to the a ffected mortgage loan as described in ‘‘Transaction Parties—Servicing and Other Compensation and Payment of Expenses’’ in this prospectus supplement or (b) within 2 years following the Closing Date, substitute a Qualified Substitute Mortgage Loan and pay any shortfall amount equal to the difference between the Purchase Price of the mortgage loan calculated as of the date of substitution and the scheduled principal balance of the Qualified Substitute Mortgage Loan as of the due date in the month of substitution; provided that the applicable Mortgage Loan Seller generally has an additional 90-day period immediately following the expiration of the Initial Resolution Period to cure the breach or defect (or if it cannot cure, to repurchase or substitute as described above) if it is diligently proceeding toward that cure, and has delivered to each Rating Agency, the Master Servicer, the Special Servicer, the Trustee and the Directing Certificateholder an officer’s certificate that describes the reasons that a cure was not effected within the Initial Resolution Period. Notwithstanding the foregoing, the actions specified in (a) and (b) of the preceding sentence must be taken within 90 days following the earlier of the Mortgage Loan Seller’s receipt of notice or discovery of a breach or defect, with no extension, if such breach or defect would cause the mortgage loan not to be a ‘‘qualified mortgage’’ within the meaning of Section 860G(a)(3) of the Code. Any breach of a representation or warranty with respect to a mortgage loan that is cross-collateralized with other mortgage loans may require the repurchase of or substitution fo r such other mortgage loans to the extent described under ‘‘—Repurchase or Substitution of Cross-Collateralized Mortgage Loans’’ below.
A ‘‘Qualified Substitute Mortgage Loan’’ is a mortgage loan that must, on the date of substitution: (a) have an outstanding principal balance, after application of all scheduled payments of principal and/or interest due during or prior to the month of substitution, whether or not received, not in excess of the Stated Principal Balance of the deleted mortgage loan as of the due date in the calendar month during which the substitution occurs; (b) have a Mortgage Rate not less than the Mortgage Rate of the deleted mortgage loan; (c) have the same due date and a grace period no longer than that of the deleted mortgage loan; (d) accrue interest on the same basis as the deleted mortgage loan (for example, on the basis of a 360-day year consisting of twelve 30-day months); (e) have a remaining term to stated maturity not greater than, and not more than two years less than, the remaining term to stated maturity of the deleted mortgage loan; (f) have a then-current LTV Ratio not higher than that of the deleted mortgage loan as of the Closing Date and a current LTV Ratio not higher than the then-current LTV Ratio of the deleted mortgage loan, in each case using a ‘‘value’’ for the Mortgaged Property as determined using an appraisal conducted by a member of the Appraisal Institute (‘‘MAI’’); (g) comply (except in a manner that would not be adverse to the interests of the Certificateholders) in all material respects with all of the representations and warranties set forth in the applicable Purchase Agreement; (h) have an environmental report with respect to the related Mortgaged Property that will be delivered as a part of the related servicing file; (i) have a then-current debt service coverage ratio not less than the original debt service coverage ratio of the deleted mortgage loan as of the Closing Date, and a current debt service coverage ratio of not less than the current debt service coverage ratio of the deleted mortgage loan; (j) constitute a ‘‘qualified replacement mortgage’’ within the meaning of Section 860G(a)(4) of the Code 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
S-135
Rated Final Distribution Date; (l) have prepayment restrictions comparable to those of the deleted mortgage loan; (m) not be substituted for a deleted mortgage loan unless the Trustee has received prior confirmation in writing by each Rating Agency that the substitution will not result in the withdrawal, downgrade, or qualification of the then-current rating assigned by such Rating Agency to any class of Certificates then rated by such Rating Agency (the cost, if any, of obtaining the confirmation to be paid by the applicable Mortgage Loan Seller); (n) have been approved by the Directing Certificateholder; (o) prohibit Defeasance within two years of the Closing Date; (p) not be substituted for a deleted mortgage loan if it would result in the termination of the REMIC status of any Loan REMIC, the Lower-Tier REMIC or the Upper-Tier REMIC or the imposition of tax on any such REMIC other than a tax on income expressly permitted or contemplated to be imposed by the terms of the Pool ing and Servicing Agreement; and (q) have an engineering report with respect to the related Mortgaged Property which will be delivered as a part of the related servicing file. In the event that more than one mortgage loan is substituted for a deleted mortgage loan or mortgage loans, then (x) the amounts described in clause (a) of the preceding sentence are required to be determined on the basis of aggregate principal balances and (y) each proposed substitute mortgage loan shall individually satisfy each of the requirements specified in clauses (b) through (q) of the preceding sentence, except 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 and the Trustee Fee) shall be lower than the highest fixed Pass-Through Rate (and not subject to a cap equal to the WAC Rate) of any class of Certificates having a principal balance then outstanding. When a Qualified Substitute Mortgage Loan is substituted for a deleted mortgage loan, (i) 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 and the Directing Certificateholder and (ii) such Qualified Substitute Mortgage Loan will become a part of the same Loan Group as the deleted mortgage loan.
The foregoing repurchase or substitution obligation will constitute the sole remedy available to the Certificateholders and the Trustee under the Pooling and Servicing Agreement for any uncured breach of any Mortgage Loan Seller’s representations and warranties regarding the mortgage loans or any uncured document defect; provided, however, 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 to the trust the reasonable amount of a ny such costs and expenses incurred by the Master Servicer, the Special Servicer, the Trustee or the trust fund that are the basis of such breach and have not been reimbursed by the related borrower; 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 respective 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 the Depositor, the Master Servicer, the Special Servicer, the other Mortgage Loan Sellers, the Trustee, the underwriters or any of their affiliates will be obligated to repurchase any affected mortgage loan in connection with a breach of the Mortgage Loan Seller’s representations and warranties or in connection with a document defect if the Mortgage Loan Seller defaults on its obligation to do so. However, the Depositor will not include any mortgage loan in the pool of mortgage loans if anything has come to the Depositor’s attention prior to the Closing Date that causes it to believe that the representations and warranties, subject to the exceptions to the representations and warranties, made by a Mortgage Loan Seller regarding the mortgage loan will not be correct
S-136
in all material respects when made. See ‘‘Description of the Pooling Agreements—Representations and Warranties; Repurchases’’ in the prospectus.
Repurchase or Substitution of Cross-Collateralized Mortgage Loans
To the extent that the related Mortgage Loan Seller repurchases or substitutes for an affected mortgage loan as provided above with respect to a document omission or defect or a breach of a representation or warranty and such mortgage loan is cross-collateralized and cross-defaulted with one or more other mortgage loans (each a ‘‘Crossed Loan’’), such document omission or defect or breach of a representation or warranty will be deemed to affect all such Crossed Loans. In such event, the applicable Mortgage Loan Seller will be required to (1) repurchase or substitute for all such Crossed Loans which are, or are deemed to be, materially and adversely affected by such document defect or omission or breach of a representation or warranty or (2) if the Crossed Loans meet the criteria listed below, at the Mortgage Loan Se ller’s election, repurchase or substitute for only the affected mortgage loan in the manner described above in ‘‘—Representations and Warranties; Repurchases and Substitutions.’’ The Mortgage Loan Seller may (in its discretion) repurchase or substitute for only the affected mortgage loan if, among other things, (i) the weighted average debt service coverage ratio for all the remaining Crossed Loans, excluding the affected Crossed Loan, for the four most recent reported calendar quarters preceding the repurchase or substitution is not less than the greater of (x) the weighted average debt service coverage ratio for all such related Crossed Loans, including the affected Crossed Loan for the four most recent reported calendar quarters preceding the repurchase or substitution and (y) 1.25x, (ii) the weighted ave rage loan-to-value ratio for all of the remaining Crossed Loans, excluding the affected Crossed Loan, based upon the appraised values of the related Mortgaged Properties at the time of repurchase or substitution, is not greater than the lesser of (x) the weighted average loan-to-value ratio for all such related Crossed Loans, including the affected Crossed Loan at the time of repurchase or substitution and (y) 75% and (iii) the related Mortgage Loan Seller causes the affected Crossed Loan to become not cross-collateralized and cross-defaulted with the remaining related Crossed Loan prior to such repurchase or substitution and provides the Trustee with certain REMIC opinions.
To the extent that the related Mortgage Loan Seller repurchases or substitutes for an affected Crossed Loan as described in clause (2) of the immediately preceding paragraph while the Trustee continues to hold any related Crossed Loans, the related Mortgage Loan Seller and the Depositor have agreed in the related Purchase Agreement to forbear from enforcing any remedies against the other’s Primary Collateral (as defined below), but each is permitted to exercise remedies against the Primary Collateral securing its respective affected Crossed Loans, including with respect to the Trustee, the Primary Collateral securing mortgage loans still held by the Trustee, so long as such exercise does not impair the ability of the other party to exercise its remedies against its Primary Collateral. If the exercise of the remedies by one party would impair the ability of the other party to exercise its remedies with respect to the Primary Collateral securing th e Crossed Loans held by such party, then both parties have agreed in the related Purchase Agreement to forbear from exercising such remedies until the mortgage loan documents evidencing and securing the relevant mortgage loans can be modified in a manner that complies with the Purchase Agreement to remove the threat of impairment as a result of the exercise of remedies. ‘‘Primary Collateral’’ means the Mortgaged Property directly securing a Crossed Loan and excluding any property as to which the related lien may only be foreclosed upon by exercise of the cross-collateralization provisions of such loan.
Lockbox Accounts
With respect to 95 mortgage loans (the ‘‘Lockbox Loans’’), representing approximately 72.3% of the Initial Pool Balance (78.9%, 21.0%), one or more accounts (collectively, the ‘‘Lockbox Accounts’’) have been or may be established into which the related borrower, property manager and/or tenants directly deposit rents or other revenues from the related Mortgaged Property. Pursuant to the terms of 35 Lockbox Loans, representing approximately 22.0% of the Initial Pool
S-137
Balance (24.9%, 0.0%), the related Lockbox Accounts were required to be established on the origination dates of the related mortgage loans into which operating lessees are required to make deposits directly and amounts may not be released to the borrowers, unless, with respect to certain Lockbox Loans, all debt service and required reserve account deposits have been made. Pursuant to the terms of 29 Lockbox Loans, representing approximately 38.6% of the Initial Pool Balance (43.2%, 3.2%), a cash management account was required to be established for such mortgage loans on or about the origination date of such mortgage loans into which the tenants are required to deposit rents directly, but the related borrower will have withdrawal rights until the occurrence of certain events specified in the related mortgage loan documents. Pursuant to the terms of 2 Lockbox Loans, representing approximately 1.1% of the Initial Pool Balance (0.1%, 8.7%), the borrower is required to deposit rents or other revenues into the re lated Lockbox Accounts. Pursuant to the terms of 29 Lockbox Loans, representing approximately 10.5% of the Initial Pool Balance (10.7%, 9.1%), the related mortgage loan documents provide for the establishment of a Lockbox Account upon the occurrence of certain events (such as (i) an event of default under the related mortgage loan documents, (ii) non-renewal of certain tenant leases or (iii) the related Anticipated Repayment Date). Except as set forth above, the agreements governing the Lockbox Accounts provide that the borrower has no withdrawal or transfer rights with respect to the related Lockbox Account. The Lockbox Accounts will not be assets of any Loan REMIC, the Upper-Tier REMIC or the Lower-Tier REMIC.
S-138
Transaction Parties
The Sponsors
JPMorgan Chase Bank, N.A.
General. JPMorgan Chase Bank, N.A. (‘‘JPMCB’’), a national banking association, is a sponsor. JPMCB is a commercial bank offering a wide range of banking services to its customers both domestically and internationally. JPMCB is also acting as a Mortgage Loan Seller. JPMCB is an affiliate of J.P. Morgan Securities Inc. and of the Depositor. See ‘‘The Sponsor’’ in the prospectus.
Sponsor’s Securitization Program. The following is a description of JPMCB’s commercial mortgage-backed securities securitization program. JPMCB originates and underwrites loans through six regional offices.
JPMCB’s primary business is the underwriting and origination of mortgage loans secured by commercial or multifamily properties for JPMCB’s securitization program. As sponsor, JPMCB sells the majority of the loans it originates through CMBS securitizations. JPMCB, with its commercial mortgage lending affiliates and predecessors, began originating commercial mortgage loans for securitization in 1994 and securitizing commercial mortgage loans in 1995. As of June 30, 2007, the total amount of commercial mortgage loans originated and securitized by JPMCB and its predecessors is in excess of $56.7 billion. Of that amount, approximately $47.1 billion have been securitized by the Depositor. In its fiscal year ended December 31, 2006, JPMCB originated approximately $12.0 billion of commercial mortgage loans, of which approximately $10.0 billion were securitized by the Depositor.
JPMCB’s annual commercial mortgage loan originations have grown from approximately $100 million in 1996 to approximately $3.0 billion in 2001 and to approximately $15.0 billion in 2006. The commercial mortgage loans originated by JPMCB include both fixed-and floating-rate loans and both smaller ‘‘conduit’’ loans and large loans. JPMCB primarily originates loans secured by retail, office, multifamily, hospitality, industrial and self-storage properties, but also originates loans secured by manufactured housing communities, theaters, land subject to a ground lease and mixed use properties. JPMCB originates loans in every state.
As a sponsor, JPMCB originates mortgage loans and, either by itself or together with other sponsors or loan sellers, initiates their securitization by transferring the mortgage loans to a depositor, which in turn transfers them to the issuing entity for the related securitization. In coordination with its affiliate, J.P. Morgan Securities Inc., and other underwriters, JPMCB works with rating agencies, loan sellers, subordinated debt purchasers and servicers in structuring the securitization transaction. JPMCB acts as sponsor, originator or loan seller both in transactions in which it is the sole sponsor and mortgage loan seller as well as in transactions in which other entities act as sponsor and/or mortgage loan seller. Multiple seller transactions in which JPMCB has participated to date include the ‘‘CIBC’’ program, in which JPMCB and CIBC Inc. generally are loan sellers, and the ‘‘Large Diversified Pool’’ p rogram (‘‘LDP’’), in which JPMCB, UBS Real Estate Securities Inc., Nomura Credit & Capital, Inc., Natixis Real Estate Capital Inc. and one or more other financial institutions generally are loan sellers. Some of these loan sellers may be affiliated with underwriters on the transactions. As of June 30, 2007, JPMCB securitized approximately $29.2 billion through the CIBC program and approximately $26.1 billion through the LDP program.
Neither JPMCB nor any of its affiliates acts as servicer of the commercial mortgage loans in its securitizations. Instead, JPMCB sells the right to be appointed servicer of its securitized loans to rating-agency approved servicers, including Capmark Finance Inc., Midland Loan Services, Inc. and Wachovia Bank, National Association, among others.
JPMCB is also a Mortgage Loan Seller and an affiliate of J.P. Morgan Chase Commercial Mortgage Securities Corp., which is the Depositor, and an affiliate of J.P. Morgan Securities Inc., which is acting as an underwriter for this transaction.
S-139
JPMCB’s Underwriting Guidelines and Processes.
JPMCB has developed guidelines establishing certain procedures with respect to underwriting the mortgage loans originated or purchased by it. All of the mortgage loans sold to the trust by JPMCB were generally underwritten in accordance with the guidelines below. In some instances, one or more provisions of the guidelines were waived or modified by JPMCB at origination where it was determined not to adversely affect the related mortgage loan originated by it in any material respect, including the existence of sufficient mitigating factors.
Property Analysis. JPMCB generally performs or causes to be performed a site inspection to evaluate the location and quality of the related mortgaged properties. Such inspection generally includes an evaluation of functionality, design, attractiveness, visibility and accessibility, as well as location to major thoroughfares, transportation centers, employment sources, retail areas and educational or recreational facilities. JPMCB assesses the submarket in which the property is located to evaluate competitive or comparable properties as well as market trends. In addition, JPMCB evaluates the property’s age, physical condition, operating history, lease and tenant mix, and management.
Cash Flow Analysis. JPMCB 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 Mortgage Loan Information’’ in this prospectus supplement.
Appraisal and Loan-to-Value Ratio. For each mortgaged property, JPMCB obtains a current full narrative appraisal conforming at least to the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (‘‘FIRREA’’). The appraisal is generally based on the highest and best use of the mortgaged property and must include an estimate of the then-current market value of the property in its then-current condition although in certain cases, JPMCB may also obtain a value on an ‘‘as-stabilized’’ basis. JPMCB then determines the loan-to-value ratio of the mortgage loan at the date of origination or, if applicable, in connection with its acquisition, in each case based on the value set forth in the appraisal.
Evaluation of Borrower. JPMCB 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 relating to fraud, misrepresentation, misappropriation of funds and breac h of environmental or hazardous waste requirements. JPMCB 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, JPMCB either (i) obtains or updates an environmental site assessment (‘‘ESA’’) for a mortgaged property prepared by a qualified environmental firm or (ii) obtains an environmental insurance policy for a mortgaged property. If an ESA is obtained or updated, JPMCB reviews the ESA to verify the absence of reported violations of applicable laws and regulations relating to environmental protection and hazardous waste or other material adverse environmental condition or circumstance. In cases in which the ESA identifies violations that would require cleanup, remedial action or other responses estimated to cost in excess of 5% of the outstanding principal balance of the mortgage loan, the JPMCB 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
S-140
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 other environmental insurance policies. See ‘‘Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans— Hazard, Liability and Other Insurance’’ in this prospectus supplement.
Physical Assessment Report. Prior to origination, JPMCB obtains a physical assessment report (‘‘PAR’’) for each mortgaged property prepared by a qualified structural engineering firm. JPMCB 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, JPMCB 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 suffic ient funds in escrow at the time of origination of the mortgage loan to complete such repairs or replacements within not more than twelve months.
Title Insurance Policy. The borrower is required to provide, and JPMCB reviews, a title insurance policy for each mortgaged property. The title insurance policy must generally 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 JPMCB reviews, certificates of required insurance with respect to the mortgaged property. Such insurance generally 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 area, flood insurance; and (5) such other coverage as JPMCB may require based on the specific characteristics of the mortgaged property. See ‘‘Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans —Hazard, Liability and Other Insurance’’ in this prospectus supplement.
| |
| UBS | Real Estate Securities Inc. |
General. UBS Real Estate Securities Inc., a Delaware corporation (‘‘UBSRESI’’), is one of the sponsors and one of the Mortgage Loan Sellers, and is an affiliate of UBS Securities LLC, one of the underwriters. UBSRESI is an indirect subsidiary of UBS AG, and its executive offices are located at 1285 Avenue of the Americas, 11th Floor, New York, New York 10019.
UBS AG provides global financing services to corporations, governments and municipalities, institutional clients and individuals worldwide. UBS AG provides a full array of equities and fixed income sales, trading and research, investment banking services and investment management and advisory services. It has global headquarters in Switzerland, regional headquarters in New York and London, and offices in additional locations throughout the world.
UBSRESI has engaged in a variety of capital markets related activities, including purchases and sales of loan portfolios, sales of assets for inclusion in securitizations and origination and
S-141
acquisition of loans and interests in such loans and the related servicing rights for sale, securitization and portfolio. Currently, UBSRESI engages in real estate acquisitions and finance, including mortgage-backed securitizations (of which the current securitization is the first with respect to commercial mortgage loans) and other structured financing arrangements. UBSRESI originates and purchases commercial and multifamily mortgage loans, some of which are originated or purchased primarily for securitization or resale. UBSRESI also acquires commercial real estate and originates fixed and floating rate mortgage loans and mezzanine loans to be held in a portfolio.
UBSRESI’s Securitization Program. UBSRESI engages in mortgage securitizations and other structured financing arrangements. UBSRESI has been engaged in the securitization of a variety of assets since 1983, primarily relating to residential properties (generally, 1-4 family units). UBSRESI engaged in its first securitization of commercial mortgage loans in December 2006, in which it securitized $1,034,330,405.06 of financial assets, and securitized $3,212,764,587 of commercial mortgage loans in 2007 to date.
UBSRESI originates and acquires multifamily and commercial mortgage loans throughout the United States and abroad. The commercial mortgage loans originated or acquired and to be securitized by UBSRESI include both small balance and large balance fixed-rate and floating-rate loans. The commercial mortgage loans that will be sold by UBSRESI into a commercial loan securitization sponsored by UBSRESI will have been or will be, as applicable, originated or acquired by it.
In connection with commercial mortgage securitization transactions, UBSRESI or an affiliate will generally transfer the mortgage assets to the depositor, who will then transfer those mortgage assets to the issuing entity for the related securitization. In return for the transfer of the mortgage assets by the depositor to the issuing entity, the issuing entity will issue commercial mortgage pass-through certificates backed by, and supported by the cash flows generated by, those mortgage assets.
Pursuant to a mortgage loan purchase agreement, UBSRESI will make certain representations and warranties, subject to certain exceptions set forth therein, to the depositor and will covenant to provide certain documents regarding the mortgage loans for which it acts as mortgage loan seller and, in connection with certain breaches thereof or certain defects with respect thereto, which breaches or defects are determined to have a material adverse effect on the value of the subject mortgage asset or such other standard as is described in the related mortgage loan purchase agreement, may have an obligation to repurchase such mortgage asset from the depositor, cure the subject defect or breach or substitute a qualified mortgage, as the case may be. See ‘‘Description of the Mortgage Pool—Sale of Mortgage Loans; Mortgage File Delivery’’ and ‘‘—Representations and Warranties; Repurchases and Substitutions’’ in this prospectus supplement.
Neither UBSRESI nor any of its affiliates acts as a servicer of the commercial mortgage loans it securitizes. Instead, UBSRESI sells the right to be appointed servicer of its securitized loans to third-party servicers.
Underwriting Guidelines and Processes.
Set forth below is a discussion of certain general underwriting guidelines with respect to multifamily and commercial mortgage loans originated by UBSRESI or an affiliate from which UBSRESI acquires mortgage loans.
Notwithstanding the discussion below, given the unique nature of commercial mortgage properties, the underwriting and origination procedures and the credit analysis with respect to any particular commercial mortgage loan may significantly differ from one asset to another, and will be driven by circumstances particular to that property, including, among others, its type, current use, size, location, market conditions, reserve requirements and additional collateral, tenants and leases, borrower identity, sponsorship, performance history and/or other factors.
S-142
Consequently, there can be no assurance that the underwriting of any particular commercial or multifamily mortgage loan will conform to the general guidelines described below.
Loan Analysis. Generally, both a credit analysis and a collateral analysis with respect to each multifamily and commercial mortgage loan. The credit analysis of the borrower generally includes a review of third-party credit reports or judgment, lien, bankruptcy and pending litigation searches. The collateral analysis generally includes an analysis, in each case to the extent available and applicable, of the historical property operating statements, rent rolls and a review of certain significant tenant leases. The credit underwriting also generally includes a review of third-party appraisals, as well as environmental reports, building condition reports and seismic reports, if applicable. Generally, a member of the mortgage loan underwriting team also conducts a site inspection to ascertain the overall quality, functionality and competitiveness of t he property, including its neighborhood and market, accessibility and visibility, and to assess the tenancy of the property. The submarket in which the property is located is assessed to evaluate competitive or comparable properties as well as market trends.
Loan Approval. Prior to commitment, all multifamily and commercial mortgage loans to be originated must be approved by a loan committee which includes senior personnel from UBSRESI or its affiliates as applicable. The committee may approve a mortgage loan as recommended, request additional due diligence, modify the loan terms or decline a loan transaction.
Debt Service Coverage Ratio and LTV Ratio. The underwriting includes a calculation of the debt service coverage ratio (the ‘‘DSCR’’) and loan-to-value ratio (the ‘‘LTV’’) in connection with the origination of a loan.
The DSCR will generally be calculated based on the underwritten net cash flow from the property in question as determined by UBSRESI and its affiliates, as applicable 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 DSCR 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. There is no assurance that the foregoing assumptions made with respect to any prospective multifamily or commercial mortgage loan will, in fact, be consistent with actual property performance. In addition, with respect to certain mortgage loans, there may exist subordinate mortg age debt or mezzanine debt. Such mortgage loans may have a lower DSCR and/or a higher LTV if such subordinate or mezzanine debt is taken into account. Additionally, certain mortgage loans may provide for only interest payments prior to maturity, or for an interest-only period during a portion of the term of the mortgage loan.
The LTV, 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.
Additional Debt. Certain mortgage loans may have or permit in the future certain additional subordinate debt, whether secured or unsecured. It is possible that UBSRESI or its affiliates may be the lender on that additional debt.
The DSCRs described above may be lower based on the inclusion of the payments related to such additional debt and the LTVs described above may be higher based on the inclusion of the amount of any such additional debt.
Assessments of Property Condition. As part of the underwriting process, UBSRESI will obtain the property assessments and reports described below will be obtained:
| | |
| (1) | Appraisals. Independent appraisals or an update of an independent appraisal will generally be required in connection with the origination of each mortgage loan that meet the requirements of the ‘‘Uniform Standards of Professional Appraisal Practice’’ as |
S-143
| | |
| adopted by the Appraisal Standards Board of the Appraisal Foundation, or the guidelines in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989. In some cases, however, the value of the subject real property collateral may be established based on a cash flow analysis, a recent sales price or another method or benchmark of valuation. |
| | |
| (2) | Environmental Assessment. In most cases, a Phase I environmental assessment with respect to the real property collateral for a prospective multifamily or commercial mortgage loan. However, when circumstances warrant, an update of a prior environmental assessment, a transaction screen or a desktop review. Alternatively, UBSRESI might forego an environmental assessment in limited circumstances, such as when it has obtained the benefits of an environmental insurance policy or an environmental guarantee. Furthermore, an environmental assessment conducted at any particular real property collateral will not necessarily cover all potential environmental i ssues. For example, an analysis for radon, lead-based paint, mold and lead in drinking water will usually be conducted only at multifamily rental properties and only when UBSRESI or an environmental consultant believes that such an analysis is warranted under the circumstances. |
Depending on the findings of the initial environmental assessment, additional environmental testing may be required, such as a Phase II environmental assessment with respect to the subject real property collateral, an environmental insurance policy or a guaranty with respect to environmental matters.
| | |
| (3) | Engineering Assessment. In connection with the origination process, in most cases, it will be required that an engineering firm inspect the real property collateral for any prospective multifamily or commercial mortgage loan to assess the structure, exterior walls, roofing, interior structure and/or mechanical and electrical systems. Based on the resulting report, the appropriate response will be determined to any recommended repairs, corrections or replacements and any identified deferred maintenance. |
| | |
| (4) | Seismic Report. Generally, 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, UBSRESI will generally 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: 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. Based on its analysis of the real property collateral, the borrower and the principals of the borrower, a borrower may be required under a multifamily or commercial mortgage loan to fund various escrows for taxes and/or insurance, capital expenses, replacement reserves and/or environmental remediation. A case-by-case analysis to determine the need for a particular escrow or reserve. Consequently, the aforementioned escrows and reserves are not established for every multifamily and commercial mortgage loan originated by UBSRESI or its affiliates. Furthermore, an alternative to a cash escrow or reserve from a borrower, such as a letter of credit or a guarantee or periodic evidence that the items for which the escrow or reserve would have been established are being paid or addressed.
Notwithstanding the foregoing discussion under this caption ‘‘—Underwriting Guidelines and Processes,’’ the depositor may purchase mortgage loans for inclusion in a trust fund which vary from, or do not comply with, the described underwriting guidelines. In addition, in some cases, UBSRESI and/or its affiliates may not have strictly applied these underwriting guidelines as the result of a case-by-case permitted exception based upon other compensating factors.
S-144
Natixis Real Estate Capital Inc.
General. Natixis Real Estate Capital Inc. (‘‘Natixis RE’’), formerly known as IXIS Real Estate Capital Inc., is a New York corporation. Natixis RE is a wholly-owned subsidiary of Natixis Capital Markets North America Inc. (formerly IXIS Capital Markets North America Inc.), which is more than a 95% owned subsidiary of Natixis North America Inc. (formerly IXIS North America Inc.), a wholly owned subsidiary of Natixis Corporate & Investment Bank (formerly IXIS Corporate & Investment Bank) (‘‘Natixis CIB’’), a fully licensed bank under French law. The executive offices of Natixis RE are located at 9 West 57th Street, New York, New York 10019, telephone number (212) 891-6152.
Natixis RE has been primarily engaged in originating, purchasing and securitizing commercial and residential mortgage loans. Natixis RE also provides warehouse and repurchase financing to mortgage lenders and purchases closed, first- and subordinate-lien residential mortgage loans for securitization or resale, or for its own investment. Natixis CIB and its affiliates are engaged in a wide range of banking and investment banking activities in France and internationally. Natixis RE is an affiliate of Natixis Securities North America Inc. (formerly, IXIS Securities North America Inc.), one of the underwriters.
As of March 1, 2007, Natixis RE began originating certain of its commercial mortgage loans (10 of the mortgage loans being sold into the J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP12), through Natixis Commercial Mortgage Funding, LLC (formerly, IXIS Commercial Mortgage Funding, LLC) (‘‘NCMF’’), an entity unaffiliated with Natixis RE. Although legal title to such mortgage loans will be held by NCMF, Natixis RE, in its capacity as structuring agent for NCMF, will continue to source, underwrite, negotiate and document such mortgage loans. Natixis RE will make the standard mortgage loan seller representations and warranties regarding such mortgage loans and will have the obligation to cure or repurchase any breach of a representation or warranty relating to such mortgage loans under the related mortg age loan purchase agreement. As such, unless otherwise noted, for all disclosure purposes in this prospectus supplement, Natixis RE is deemed to be the originator and mortgage loan seller for such mortgage loans. The information below regarding Natixis RE’s activities (including statistical information) incorporates the activities of NCMF as if they were a single entity.
Natixis RE’s Commercial Real Estate Securitization Program. Natixis RE’s primary business is the underwriting and origination of mortgage loans secured by commercial or multifamily properties for Natixis RE’s securitization program. Substantially all mortgage loans originated by Natixis RE are sold to securitizations as to which Natixis RE acts as a mortgage loan seller. Natixis RE, with its commercial mortgage lending affiliates and predecessors, began originating commercial mortgage loans for securitization in 1999 and securitizing commercial mortgage loans in 1998. As of December 31, 2006, the total amount of commercial mortgage loans originated and securitized by Natixis RE and its predecessors is in excess of $11.0 billion. In its fiscal year ended December 31, 2006, Natixis RE securitized in excess of $3 .1 billion of commercial mortgage loans.
Natixis RE’s annual origination of loans secured by commercial real estate has grown from approximately $870 million in 1999 to approximately $4.8 billion in 2006. The commercial mortgage loans originated by Natixis RE include both fixed- and floating-rate loans and both smaller ‘‘conduit’’ loans and large loans. Natixis RE primarily originates loans secured by retail, office, multifamily, hospitality, industrial and self-storage properties, but also originates loans secured by manufactured housing communities, theaters, land subject to a ground lease and mixed use properties. Natixis RE originates loans in every state.
Natixis RE originates or acquires mortgage loans and, together with other sponsors or loan sellers, participates in the securitization of those loans by transferring them to a depositor, which in turn transfers them to the issuing entity for the securitization. In coordination with its affiliate, Natixis Capital Markets North America Inc., and with other underwriters, Natixis RE works with rating agencies, investors, loan sellers and servicers in structuring the securitization transaction. Natixis RE currently acts as sponsor and mortgage loan seller in transactions in which other
S-145
entities act as sponsors, loan sellers and/or depositors. Neither Natixis RE nor any of its affiliates currently act as servicer of the mortgage loans in its securitization.
Natixis RE’s Underwriting Standards.
Loan Analysis and Approval. Conduit mortgage loans originated by Natixis RE will generally be originated in accordance with the underwriting criteria described below. Each lending situation is unique, however, and the facts and circumstances surrounding the mortgage loan, such as the quality and location of the real estate collateral, the sponsorship of the borrower and the tenancy of the collateral, will impact the extent to which the general guidelines below are applied to a specific loan. The underwriting criteria are general, and in many cases exceptions to one or more of these guidelines may be approved. Accordingly, no representation is made that every mortgage loan will comply in all respects with the criteria set forth below.
The Natixis RE credit underwriting team for each mortgage loan is required to conduct a review of the related mortgaged property, generally including an analysis of the historical property operating statements, rent rolls, current and historical real estate taxes, and a review of tenant leases. The credit of the borrower and certain key principals of the borrower are examined for financial strength and character prior to approval of the loan. This analysis generally includes a review of historical financial statements (which are generally unaudited), historical income tax returns of the borrower and its principals, third-party credit reports, judgment, lien, bankruptcy and pending litigation searches. Depending on the type of real property collateral involved and other relevant circumstances, the credit of key tenants also may be examined as part of the underwriting process. Generally, a member of the Natixis RE underwriting team visits the property for a site i nspection to ascertain the overall quality and competitiveness of the property, including its physical attributes, neighborhood and market, accessibility and visibility and demand generators.
Prior to commitment, all mortgage loans must be approved by a loan committee comprised of senior real estate professionals from Natixis RE and its affiliates. The loan committee may either approve a mortgage loan as recommended, request additional due diligence, modify the terms, or reject a mortgage loan.
Debt Service Coverage Ratio and Loan-to-Value Ratio. Natixis RE’s underwriting standards generally require a minimum debt service coverage ratio of 1.20x and maximum loan-to-value ratio of 80%. However, these requirements constitute solely guidelines, and exceptions to these guidelines may be approved based on the individual characteristics of a mortgage loan. For example, Natixis RE may originate a mortgage loan with a lower debt service coverage ratio or higher loan-to-value ratio based on the types of tenants and leases at the subject real property, the taking of additional collateral such as reserves, letters of credit and/or guarantees, Natixis RE’s judgment of improved property performance in the future and/or other relevant factors. In addition, with respect to certain mortgage loans originated by Natixis RE there may exist subo rdinate debt secured by the related mortgaged property and/or mezzanine debt secured by direct or indirect ownership interests in the borrower. Such mortgage loans may have a lower debt service coverage ratio, and a higher loan-to-value ratio, if such subordinate or mezzanine debt is taken into account.
The debt service coverage ratio guidelines set forth above are calculated based on underwritten net cash flow at origination. Therefore, the debt service coverage ratio for each mortgage loan as reported in this prospectus supplement and Annex A-1 attached hereto may differ from the amount calculated at the time of origination. In addition, Natixis RE’s underwriting guidelines generally permit a maximum amortization period of 30 years. However, certain 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. See ‘‘Description of the Mortgage Pool’’ in this prospectus supplement.
Escrow Requirements. Natixis RE often requires a borrower to fund various escrows for taxes and insurance, and may also require reserves for deferred maintenance, re-tenanting
S-146
expenses and capital expenses, in some cases only during periods when certain debt service coverage ratio tests are not satisfied. In some cases, the borrower is permitted to post a letter of credit or guaranty, or provide periodic evidence that the items for which the escrow or reserve would have been established are being paid or addressed, in lieu of funding a given reserve or escrow. Natixis RE conducts a case-by-case analysis to determine the need for a particular escrow or reserve. Consequently, the aforementioned escrows and reserves are not established for every multifamily and commercial mortgage loan originated by Natixis RE.
Appraisals. Natixis RE requires that the mortgaged property for a prospective mortgage loan be appraised by a state certified appraiser within the state such mortgaged property is located. In addition, Natixis RE requires that those appraisals comply with the requirements of the Federal Institutions Reform, Recovery and Enforcement Act of 1989.
Environmental Assessments. Natixis RE may require a Phase I environmental assessment with respect to the real property for a prospective multifamily or commercial mortgage loan. However, when circumstances warrant, Natixis RE may utilize an update of a prior environmental assessment, a transaction screen or a desktop review. Alternatively, Natixis RE might forego an environmental assessment in limited circumstances, such as when it has obtained the benefits of an environmental insurance policy or an environmental guarantee. Furthermore, an environmental assessment conducted at any particular real property will not necessarily cover all potential environmental issues. For example, an analysis for radon, lead-based paint and lead in drinking water may be conducted only at multifamily rental properties and only when Natixis RE or the environment al consultant believes that special circumstances warrant such an analysis. Depending on the findings of the initial environmental assessment, Natixis RE may require additional record searches or environmental testing, such as a Phase II environmental assessment with respect to the subject real property.
Engineering Assessment. In connection with the origination process, Natixis RE may require that an engineering firm inspect the real property for any prospective multifamily or commercial mortgage loan to assess the structure, exterior walls, roofing, interior structure and/or mechanical and electrical systems. Based on the resulting report, Natixis RE will determine the appropriate response, if any, to any recommended repairs, corrections or replacements and any identified deferred maintenance.
Seismic Report. Generally a seismic report is required for all mortgaged properties located in seismic zones 3 or 4.
Zoning and Building Code Compliance. In connection with the origination process, Natixis RE generally examines whether the use and operation of the mortgaged properties are in material compliance with zoning and land-use related ordinances, rules, regulations and orders applicable to the use of the mortgaged property. Evidence of this compliance may be in the form of one or more of the following: 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.
Nomura Credit & Capital, Inc.
General. Nomura Credit & Capital, Inc. (‘‘Nomura’’) is a Delaware corporation, which is an indirect wholly owned subsidiary of Nomura Holding America Inc. Nomura makes, and purchases from lenders, commercial and multifamily mortgage loans primarily for the purpose of securitizing them in commercial mortgage-backed securitization (‘‘CMBS’’) transactions, or for disposition through alternate means. Nomura also purchases prime, subprime, conforming and non-conforming, nonperforming and subperforming first and second lien residential mortgage loans from originators of s uch residential loans primarily for the purpose of securitizing them in asset-backed or residential mortgage securitization transactions, or for disposition through alternate means. In addition, Nomura purchases FHA insured project loans and certificates, other insured loans, home equity loans, student loans, and various other types of receivables.
S-147
Nomura also engages in the origination, and/or buying and selling, of mortgages, other interests in mortgage loans and related assets for investment and other purposes. Further, Nomura enters into resale and repurchase agreements and other financing arrangements with third parties and to finance its trading and inventory positions.
Nomura’s Securitization Program. Nomura, directly or through correspondents, originates multifamily and commercial mortgage loans throughout the United States and abroad. Nomura has been engaged in the origination of multifamily and commercial mortgage loans for securitization under programs substantially similar to its current program (which may have been modified, changed or amended from time to time) since 2001. The multifamily and commercial mortgage loans originated and securitized by Nomura include both fixed-rate loans and floating-rate loans and both conduit balance loans (which are average-size multifamily and commercial loans by industry standards) and large balance loans. Most of the multifamily and commercial mortgage loans included by Nomura in commercial mortgage securitizations in which Nomura has participated have been origin ated, directly by Nomura or through correspondents on its behalf. Nomura securitized approximately $951.8 million, $2.0 billion, $3.7 billion and $4.3 billion of commercial mortgage loans during the calendar years 2003, 2004, 2005 and 2006, respectively.
When Nomura originates mortgage loans in conjunction with third-party correspondents, the third-party correspondents generally perform the underwriting based on various criteria established or reviewed by Nomura, and Nomura originates or acquires the subject mortgage loan on a specified closing date prior to inclusion in the subject securitization.
In addition, in the normal course of its securitization program, Nomura 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 Nomura. The trust fund relating to a series of offered certificates may include mortgage loans originated by one or more of these third parties.
In connection with the commercial mortgage securitization transactions Nomura participates in, Nomura 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 backed by, and supported by the cash flows generated by, those mortgage assets.
In addition to the depositor, Nomura also works with rating agencies, unaffiliated mortgage loan sellers and servicers in connection with securitization transactions. Nomura will generally act as an originator and, in certain instances, a sponsor, in the commercial mortgage securitization transactions it participates in. Neither Nomura nor any of its affiliates has acted as a servicer of multifamily and commercial mortgage loans in the commercial mortgage securitizations it has participated in. Instead, the related depositor contracts with other entities to service the multifamily and commercial mortgage loans following their transfer into a trust fund for a series of offered certificates and the sale of related servicing rights by Nomura to the related servicer.
In connection with Nomura contributing mortgage loans to a commercial mortgage securitization transaction, Nomura may be obligated, specifically with respect to the mortgage loans that it is contributing, generally pursuant to a mortgage loan purchase agreement or other comparable agreement, to:
| | |
| • | deliver various specified loan documents; |
| | |
| • | file and/or record various specified loan documents and assignments of those documents or arrange for a third party to do so on its behalf; and |
| | |
| • | make various loan-specific representations and warranties. |
If it is later determined that any mortgage asset contributed by Nomura fails to materially conform to the specified representations and warranties or there is a material defect in or a
S-148
material omission with respect to certain specified mortgage loan documents related to that mortgage asset, which breach, defect or omission, as the case may be, is determined to have a material adverse effect on the value of the subject mortgage asset and/or the interests of holders of securities issued in connection with the subject commercial mortgage securitization transaction, then Nomura will generally have an obligation to cure the subject defect, omission or breach or to repurchase or replace the subject mortgage asset.
Nomura’s Underwriting Guidelines and Processes.
Set forth below is a discussion of certain general underwriting guidelines of Nomura generally applicable with respect to multifamily and commercial mortgage loans originated by Nomura. The underwriting guidelines described below may not—and generally will not—apply to multifamily and commercial mortgage loans acquired by Nomura from third-party originators.
Notwithstanding the discussion below, given the unique nature of income-producing real properties, the underwriting and origination procedures and the credit analysis with respect to any particular multifamily or commercial mortgage loan may differ significantly from one asset to another, and will be driven by circumstances particular to that property, including, among others, its type, current use, physical quality, size, environmental condition, location, market conditions, capital reserve requirements and additional collateral, tenants and leases, borrower identity, borrower sponsorship and/or performance history, and certain other factors. Consequently, there can be no assurance that the underwriting of any particular multifamily or commercial mortgage loan will conform to the general guidelines described in this ‘‘—Nomura’s Underwriting Guid elines and Processes’’ section.
Loan Analysis. Nomura performs both a credit analysis and a collateral analysis with respect to each multifamily and commercial mortgage loan it originates. Generally, borrowers are required to be single-purpose entities, although exceptions may be made from time to time on a case-by-case basis. The credit analysis of the borrower may include a review of third-party credit reports, reports resulting from judgment, lien or bankruptcy searches and, if applicable and available, the loan payment history of the borrower or its principals. The collateral analysis includes an analysis, in each case to the extent available, of historical property operating statements, rent rolls and a review of certain tenant leases. Depending on the type of real property involved and other relevant circumstances, Nomura’s underwriting staff and/or legal counsel wil l review leases of certain significant tenants. Nomura may also perform a limited qualitative review with respect to certain tenants located at the subject property, particularly significant tenants, credit tenants and sole tenants. Nomura generally requires third-party appraisals, as well as third-party environmental reports, building condition reports and, if determined by Nomura to be applicable, seismic reports. Each report is reviewed for acceptability by Nomura or a third-party reviewer. The results of these reviews are incorporated into the underwriting analysis.
Loan Approval. Prior to commitment, all multifamily and commercial mortgage loans to be originated by Nomura must be approved by one or more—depending on loan size—specified internal committees or by officers of Nomura, which may approve a mortgage loan as recommended, request additional due diligence, modify the loan terms or decline a loan transaction.
Debt Service Coverage Ratio. The repayment of a multifamily or commercial mortgage loan is typically dependent upon the successful operation of the related mortgaged property and the ability of that property to generate income sufficient to make payments on the loan. Accordingly, in connection with the origination of multifamily or commercial mortgage loans, Nomura will analyze whether cash flow expected to be derived from the subject mortgaged property will be sufficient to make the required payments under that mortgage loan over its expected term, taking into account, among other things, revenues and expenses for, and other debt currently secured by, or that in the future may be secured by, the subject mortgaged property as well as
S-149
debt secured by pledges of the ownership interests in the related borrower, any related debt services reserves, interest guarantees and other sources of income or payment or factors expected to affect such matters.
The debt service coverage ratio of a multifamily or commercial mortgage loan is an important measure of the likelihood of default on the loan. In general, the debt service coverage ratio of a multifamily or commercial mortgage loan at any given time is the ratio of—
| | |
| • | the amount of income, net of operating expenses, capital expenditures and other amounts required to be reserved for various purposes, derived or expected to be derived from the related mortgaged property for a given period that is available to pay debt service on the subject mortgage loan, to |
| | |
| • | the scheduled payments of principal and/or interest during that given period on the subject mortgage loan and any other loans that are secured by liens of senior or equal priority on the related mortgaged property. |
However, the amount described in the first bullet of the preceding sentence is often a highly subjective number based on a variety of assumptions regarding, and adjustments to, revenues and expenses with respect to the related mortgaged property. Accordingly, based on such subjective assumptions and analysis, there can be no assurance that the underwriting analysis of any particular multifamily or commercial mortgage loan will conform to the foregoing in every respect or to any similar analysis which may be performed by other persons or entities.
For example, when calculating the debt service coverage ratio for a multifamily or commercial mortgage loan, Nomura may utilize annual net cash flow that was calculated based on assumptions regarding projected rental income, expenses and/or occupancy, including, without limitation, one or more of the following:
| | |
| • | the assumption that a particular tenant at the subject mortgaged property that has executed a lease, but has not yet taken occupancy and/or has not yet commenced paying rent, will take occupancy and commence paying rent on a future date; |
| | |
| • | the assumption that an unexecuted lease that is currently being negotiated with respect to a particular tenant at the subject mortgaged property or is out for signature will be executed and in place on a future date; |
| | |
| • | the assumption that a portion of currently vacant and unleased space at the subject mortgaged property will be leased at current market rates and consistent with occupancy rates of comparable properties in the subject market; |
| | |
| • | the assumption that certain rental income that is to be payable commencing on a future date under a signed lease, but where the subject tenant is in an initial rent abatement or free rent period or has not yet taken occupancy, will be paid commencing on such future date; |
| | |
| • | assumptions regarding the probability of renewal or extension of particular leases and/or the re-leasing of certain space at the subject mortgaged property and the anticipated effect on capital and re-leasing expenditures; |
| | |
| • | assumptions regarding the costs and expenses, including leasing commissions and tenant improvements, associated with leasing vacant space or releasing occupied space at a future date; |
| | |
| • | assumptions regarding future increase or decreases in expenses, or whether certain expenses are capital expenses or should be treated as expenses which are not recurring; and |
| | |
| • | various additional lease-up assumptions and other assumptions regarding the payment of rent not currently being paid. |
There is no assurance that the foregoing assumptions made with respect to any prospective multifamily or commercial mortgage loan will, in fact, be consistent with actual property performance.
S-150
Generally, the debt service coverage ratio for multifamily and commercial mortgage loans originated by Nomura, calculated as described above, will be equal to or greater than 1.20x (subject to the discussion under ‘‘—Additional Debt’’ below); however, exceptions may be made when consideration is given to circumstances particular to the mortgage loan, the related mortgaged property, loan-to-value ratio (as described below), reserves, guarantees or other factors. For example, Nomura may originate a multifamily or commercial mortgage loan with a debt service coverage ratio below 1.20x based on, among other things, the amortization features of the mortgage loan (for example, if the mortgage loan provides for relatively rapid amortization), the type of tenants and leases at the subject mortga ged property, the taking of additional collateral such as reserves, letters of credit and/or guarantees, Nomura’s judgment of improved property and/or market performance in the future and/or other relevant factors.
Loan-to-Value Ratio. Nomura also looks at the loan-to-value ratio of a prospective multifamily or commercial mortgage loan as one of the factors it takes into consideration in evaluating the likelihood of recovery if a property is liquidated following a default. In general, the loan-to-value ratio of a multifamily or commercial mortgage loan at any given time is the ratio, expressed as a percentage, of—
| | |
| • | the then outstanding principal balance of the subject mortgage loan and any other loans that are secured by liens of senior or equal priority on the related mortgaged property, to |
| | |
| • | the estimated value of the related mortgaged property based on an appraisal, a cash flow analysis, a recent sales price or another method or benchmark of valuation. |
Generally, the loan-to-value ratio for multifamily and commercial mortgage loans originated by Nomura, calculated as described above, will be equal to or less than 80% (subject to the discussion under ‘‘—Additional Debt’’ below); however, exceptions may be made when consideration is given to circumstances particular to the mortgage loan, the related mortgaged property, debt service coverage, reserves or other factors. For example, Nomura may originate a multifamily or commercial mortgage loan with a loan-to-value ratio above 80% based on, among other things, the amortization features of the mortgage loan (for example, if the mortgage loan provides for relatively rapid amortization), the type of tenants and leases at the subject mortgaged property, the taking of additional collateral such as reserves, letters of credit and/or guarantees, Nomura’s judgment of improved property and/or performance in the future and/or other relevant factors.
Additional Debt. When underwriting a multifamily or commercial mortgage loan, Nomura will take into account whether the subject real property and/or direct or indirect interest in a related borrower are encumbered by additional debt and will analyze the likely effect of that additional debt on repayment of the subject mortgage loan. It is possible that Nomura or an affiliate will be the lender on that additional debt, and may either sell such debt to an unaffiliated third party or hold it in inventory.
The debt service coverage ratios described above under ‘‘—Debt Service Coverage Ratio’’ and the loan-to-value ratios described above under ‘‘—Loan-to-Value Ratio’’ may be significantly below 1.20x and significantly above 80%, respectively, when calculated taking into account the existence of additional debt secured by the related mortgaged property or directly or indirectly by equity interests in the related borrower.
Assessments of Property Condition. As part of the underwriting process, Nomura will analyze the condition of the real property for a prospective multifamily or commercial mortgage loan. To aid in that analysis, Nomura may, subject to certain exceptions, inspect or retain a third party to inspect the property and will in most cases obtain the property assessments and reports described below.
Appraisals. Nomura will, in most cases, require that the real property for a prospective multifamily or commercial mortgage loan be appraised by a state certified appraiser, an appraiser belonging to the Appraisal Institute, a membership association of professional real estate
S-151
appraisers, or an otherwise qualified appraiser. In addition, Nomura will generally require that those appraisals be conducted in accordance with the Uniform Standards of Professional Appraisal Practices developed by The Appraisal Foundation, a not-for-profit organization established by the appraisal profession. Furthermore, the appraisal report will usually include or be accompanied by a separate letter that includes a statement by the appraiser that the guidelines in Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 were followed in preparing the appraisal. In some cases, however, Nomura may establish the value of the subject real property based on a cash flow analysis, a recent sales price or another method or benchmark of valuation.
Environmental Assessment. Nomura may require a Phase I environmental assessment with respect to the real property for a prospective multifamily or commercial mortgage loan. However, when circumstances warrant, Nomura may utilize an update of a prior environmental assessment, a transaction screen or a desktop review. Alternatively, Nomura might forego an environmental assessment in limited circumstances, such as when it has obtained the benefits of an environmental insurance policy or an environmental guarantee. Furthermore, an environmental assessment conducted at any particular real property will not necessarily cover all potential environmental issues. For example, an analysis for radon, lead-based paint and lead in drinking water will usually be conducted only at multifamily rental properties and only when Nomura or the environmental consu ltant believes that special circumstances warrant such an analysis.
Depending on the findings of the initial environmental assessment, Nomura may require additional record searches or environmental testing, such as a Phase II environmental assessment with respect to the subject real property.
Engineering Assessment. In connection with the origination process, Nomura may require that an engineering firm inspect the real property for any prospective multifamily or commercial mortgage loan to assess the structure, exterior walls, roofing, interior structure and/or mechanical and electrical systems. Based on the resulting report, Nomura will determine the appropriate response, if any, to any recommended repairs, corrections or replacements and any identified deferred maintenance.
Seismic Report. If the subject real property consists of improvements located in California or in seismic zones 3 or 4, Nomura may require a report to establish the probable maximum or bounded loss for the improvements at the property as a result of an earthquake. If that loss is in excess of 20% of the estimated replacement cost for the improvements at the property, Nomura may require retrofitting of the improvements or that the borrower obtain earthquake insurance if available at a commercially reasonable price. It should be noted, however, that because the seismic assessments may not necessarily have used the same assumptions in assessing probable maximum loss, it is possible that some of the real properties that were considered unlikely to experience a probable maximum loss in excess of 20% of estimated replacement cost might have been the sub ject of a higher estimate had different assumptions been used.
Zoning and Building Code Compliance. In connection with the origination of a multifamily or commercial mortgage loan, Nomura will generally consider whether the use and occupancy of the related real property 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: 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.
Where a property as currently operated is a permitted nonconforming use and/or structure and the improvements may not be rebuilt to the same dimensions or used in the same manner in the event of a major casualty, Nomura will consider whether—
| | |
| • | any major casualty that would prevent rebuilding has a sufficiently remote likelihood of occurring; |
S-152
| | |
| • | casualty insurance proceeds together with the value of any additional collateral would be available in an amount estimated by Nomura to be sufficient to pay off the related mortgage loan in full; |
| | |
| • | the real property, if permitted to be repaired or restored in conformity with current law, would in Nomura’s judgment constitute adequate security for the related mortgage loan; |
| | |
| • | whether a variance or other similar change in applicable zoning restrictions is potentially available, or whether the applicable governing entity is likely to enforce the related limitations; and/or |
| | |
| • | to require the related borrower to obtain law and ordinance insurance. |
Escrow Requirements. Based on its analysis of the subject real property, the borrower and the principals of the borrower, Nomura may require a borrower under a multifamily or commercial mortgage loan to fund various escrows for taxes and/or insurance, capital expenses, replacement reserves, environmental remediation and/or other matters. Nomura conducts a case-by-case analysis to determine the need for a particular escrow or reserve. Consequently, the aforementioned escrows and reserves are not established for every multifamily and commercial mortgage loan originated by Nomura and, in the case of some mortgage loans, no escrows or reserves will be established. Furthermore, Nomura may accept an alternative to a cash escrow or reserve from a borrower, such as a letter of credit or a guarantee from the borrower or an affiliate of the borrower or peri odic evidence that the items for which the escrow or reserve would have been established are being paid or addressed. In some cases, Nomura may determine that establishing an escrow or reserve is not warranted given the amounts that would be involved and Nomura’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.
Notwithstanding the foregoing discussion under this ‘‘—Nomura’s Underwriting Guidelines and Processes’’ section, Nomura may include mortgage loans in a trust fund which vary from, or do not comply with, Nomura’s underwriting guidelines. In addition, in some cases, Nomura may not have strictly applied these underwriting guidelines as the result of a case-by-case permitted exception based upon other compensating factors.
The Depositor
On the Closing Date, the Depositor will acquire the mortgage loans from each Mortgage Loan Seller and will simultaneously transfer the mortgage loans, without recourse, to the Trustee for the benefit of the Certificateholders. See ‘‘The Depositor’’ in the prospectus.
The Mortgage Loan Sellers
The Mortgage Loan Sellers are JPMCB, UBS Real Estate Securities Inc., Natixis Real Estate Capital Inc. and Nomura Credit & Capital, Inc. JPMorgan Chase Bank, N.A. is an affiliate of each of the Depositor and J.P. Morgan Securities Inc., one of the underwriters. Natixis Real Estate Capital Inc. is an affiliate of Natixis Securities North America Inc., one of the underwriters.
JPMorgan Chase Bank, N.A.
See ‘‘Transaction Parties—The Sponsors’’ in this prospectus supplement for a discussion relating to JPMorgan Chase Bank, N.A.
| |
| UBS | Real Estate Securities Inc. |
See ‘‘Transaction Parties—The Sponsors’’ in this prospectus supplement for a discussion relating to UBS Real Estate Securities Inc.
Natixis Real Estate Capital Inc.
See ‘‘Transaction Parties—The Sponsors’’ in this prospectus supplement for a discussion relating to Natixis Real Estate Capital Inc.
S-153
Nomura Credit & Capital, Inc.
See ‘‘Transaction Parties—The Sponsors’’ in this prospectus supplement for a discussion relating to Nomura Credit & Capital, Inc.
The Issuing Entity
J.P. Morgan Chase Commercial Mortgage Securities Trust 2007-LDP12, the issuing entity (the ‘‘Issuing Entity’’), will be a New York common law trust, formed on the Closing Date pursuant to the Pooling and Servicing Agreement. See ‘‘The Issuing Entity’’ in the prospectus.
The Trustee, Certificate Registrar, Authenticating Agent and Custodian
LaSalle Bank National Association (‘‘LaSalle’’) will be the trustee, certificate registrar (in that capacity, the ‘‘Certificate Registrar’’), authenticating agent (in that capacity, the ‘‘Authenticating Agent’’) and custodian (in that capacity, the ‘‘Custodian’’) under the Pooling and Servicing Agreement. The Trustee’s corporate trust office is located at 135 South LaSalle Street, Suite 1625, Chicago, Illinois, 60603. Attention: Global Securities and Trust Services – J.P. Morgan 2007-LDP12 or at such other address as the Trustee may designate from time to time.
LaSalle is a national banking association formed under the federal laws of the United States of America. Its parent company, LaSalle Bank Corporation, is an indirect subsidiary of ABN AMRO Bank N.V., a Netherlands banking corporation. LaSalle has extensive experience serving as trustee on securitizations of commercial mortgage loans. Since January 1994, LaSalle has served as trustee or paying agent on over 700 commercial mortgage-backed security transactions involving assets similar to the mortgage loans. As of June 30, 2007, LaSalle serves as trustee or paying agent on over 470 commercial mortgage-backed securities transactions. The long-term unsecured debt of LaSalle is rated ‘‘A+’’ by S&P, ‘‘Aa3’’ by Moody’s and ‘‘AA–’’ by Fitch. The Depositor, the Mortgage Loan Sellers, the sponsors, the Master Servicer and the Special Servicer may maintain other banking relatio nships in the ordinary course of business with the Trustee.
As compensation for the performance of its routine duties, the Trustee will be paid a fee (the ‘‘Trustee Fee’’). The Trustee Fee will be payable monthly from amounts received in respect of the mortgage loans and will be equal to the product of a rate equal to 0.00077% per annum (the ‘‘Trustee Fee Rate’’) and the Stated Principal Balance of the mortgage loans and be computed in the same manner as interest is calculated on such mortgage loans. In addition, the Trustee will be entitled to recover from the trust fund all reasonable unanticipat ed expenses and disbursements incurred or made by it in the performance of its duties as the Trustee, Certificate Registrar, Authenticating Agent and Custodian in accordance with any of the provisions of the Pooling and Servicing Agreement, but not including routine expenses incurred in the ordinary course of performing its duties as Trustee, Certificate Registrar, Authenticating Agent and Custodian under the Pooling and Servicing Agreement, and not including any expense, disbursement or advance as may arise from its willful misfeasance, negligence or bad faith. The Trustee will be entitled to a fee with respect to the Logan Portfolio loans. See ‘‘Description of the Pooling Agreements—The Trustee,’’ ‘‘—Duties of the Trustee ,’’ ‘‘—Certain Matters Regarding the Trustee’’ and ‘‘—Resignation and Removal of the Trustee’’ in the prospectus.
In its capacity as custodian, LaSalle will hold the mortgage loan files (except with respect to the mortgage loan files for the Non-Serviced Mortgage Loans) exclusively for the use and benefit of the trust. The custodian will not have any duty or obligation to inspect, review or examine any of the documents, instruments, certificates or other papers relating to the mortgage loans delivered to it to determine that the same are valid. The disposition of the mortgage loan files will be governed by the Pooling and Servicing Agreement. LaSalle provides custodial services on over 1,100 residential, commercial and asset-backed securitization transactions and maintains almost 3.0 million custodial files in its two vault locations in Elk Grove, Illinois and Irvine, California. LaSalle’s two vault locations can maintain a total of approximately 6 million custody files. All custody files are segregated and maintained in secure and fire resistant facilities in complia nce with customary industry standards. The vault construction complies with Fannie Mae/Ginnie Mae guidelines applicable to document custodians. LaSalle maintains disaster
S-154
recovery protocols to ensure the preservation of custody files in the event of force majeure and maintains, in full force and effect, such fidelity bonds and/or insurance policies as are customarily maintained by banks which act as custodians. LaSalle uses unique tracking numbers for each custody file to ensure segregation of collateral files and proper filing of the contents therein and accurate file labeling is maintained through a monthly reconciliation process. LaSalle uses a proprietary collateral review system to track and monitor the receipt and movement internally or externally of custody files and any release or reinstatement of collateral.
Using information set forth in this prospectus supplement, the Trustee will develop the cashflow model for the trust. Based on the monthly loan information provided by the Master Servicer, the Trustee will calculate the amount of principal and interest to be paid to each class of certificates on each Distribution Date. In accordance with the cashflow model and based on the monthly loan information provided by the Master Servicer, the Master Servicer will perform distribution calculations, remit distributions on the Distribution Date to certificateholders and prepare a monthly statement to certificateholders detailing the payments received and the activity on the Mortgage Loans during the collection period. In performing these obligations, the Trustee will be able to conclusively rely on the information provided to it by the Master Servicer, and the Trustee will not be required to recompute, recalculate or verify the information provided to it by the Master Servicer.
On April 22, 2007, ABN AMRO Holding N.V. agreed to sell ABN AMRO North America Holding Company, the indirect parent of LaSalle Bank National Association, to Bank of America Corporation. The proposed sale currently includes all parts of the Global Securities and Trust Services group within LaSalle engaged in the business of acting as trustee, securities administrator, master servicer, custodian, collateral administrator, securities intermediary, fiscal agent and issuing and paying agent in connection with securitization transactions.
The contract between ABN AMRO Bank N.V. and Bank of America Corporation was filed on Form 6-K with the Securities and Exchange Commission on April 25, 2007. The contract provides that the sale of LaSalle Bank is subject to regulatory approvals and other customary closing conditions.
LaSalle Bank National Association and Natixis Real Estate Capital Inc., formerly known as IXIS Real Estate Capital Inc., are parties to a custodial agreement whereby LaSalle, for consideration, provides custodial services to Natixis RE for certain commercial mortgage loans originated or purchased by it. Pursuant to this custodial agreement, LaSalle is currently providing custodial services for some or all of the mortgage loans to be sold by Natixis RE to the Depositor in connection with this securitization. The terms of the custodial agreement are customary for the commercial mortgage-backed securitization industry providing for the delivery, receipt, review and safekeeping of mortgage loan files.
LaSalle Bank National Association and UBS Real Estate Securities Inc. (‘‘UBSREI’’) are parties to a custodial agreement whereby LaSalle, for consideration, provides custodial services to UBSREI for certain commercial mortgage loans originated or purchased by it. Pursuant to this custodial agreement, LaSalle is currently providing custodial services for some of the mortgage loans to be sold by UBSREI to the Depositor in connection with this securitization. The terms of the custodial agreement are customary for the commercial mortgage-backed securitization industry providing for the delivery, receipt, review and safekeeping of mortgage loan files.
The Trustee and its directors, officers, employees, agents and controlling persons will be entitled to indemnification from the trust fund against any loss, liability or expense incurred without negligence, bad faith or willful malfeasance on its part, arising out of, or in connection with the Pooling and Servicing Agreement, the Certificates and the mortgage loans.
The Master Servicer
General
Wells Fargo Bank, N.A., a national banking association (‘‘Wells Fargo Bank’’) will be the master servicer (the ‘‘Master Servicer’’) under the Pooling and Servicing Agreement.
S-155
Wells Fargo Bank
In its capacity as Master Servicer, Wells Fargo Bank will be the master servicer and in this capacity will be responsible for the master servicing and administration of the mortgage loans pursuant to the pooling and servicing agreement (except that Wells Fargo Bank in that capacity will play a limited role in the servicing of the non-serviced mortgage loans). The principal commercial mortgage servicing offices of Wells Fargo Bank are located at 45 Fremont Street, 2nd Floor, San Francisco, California 94105.
Wells Fargo Bank has originated and serviced commercial mortgage loans since before 1975 and has serviced securitized commercial mortgage loans since 1993. Wells Fargo Bank is approved as a master servicer, primary servicer and special servicer for commercial mortgage-backed securities rated by Moody’s, Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (‘‘S&P’’) and Fitch, Inc. (‘‘Fitch’’). Moody’s does not assign specific ratings to servicers. S&P has assigned to Wells Fargo Bank the ratings of STRONG as a primary servicer and as a master servicer and ABOVE AVERAGE as a special servicer. Fitch has assigned to Wells Fargo Bank the ratings of CMS2 as a master servicer, CPS1 as a primary servicer and CSS1 as a special servicer. S&P’s and Fitch’s ratings of a servicer are based on an examination of many factors, including the servicer’ s financial condition, management team, organizational structure and operating history.
As of March 31, 2007, the commercial mortgage servicing group of Wells Fargo Bank was responsible for servicing approximately 12,165 commercial and multifamily mortgage loans with an aggregate outstanding principal balance of approximately $107.8 billion, including approximately 10,812 loans securitized in approximately 97 commercial mortgage-backed securitization transactions with an aggregate outstanding principal balance of approximately $103.0 billion, and also including loans owned by institutional investors and government sponsored entities such as Freddie Mac. The properties securing these loans are located in all 50 states and include retail, office, multifamily, industrial, hospitality and other types of income-producing properties. According to the Mortgage Bankers Association of America, as of December 31, 2006, Wells Fargo Bank was the fourth largest commercial mortgage servicer in terms of the aggregate outstanding principal balance of loans being m aster and/or primary serviced in commercial mortgage-backed securities transactions.
Wells Fargo Bank has developed policies, procedures and controls for the performance of its master servicing obligations in compliance with applicable servicing agreements, servicing standards and the servicing criteria set forth in Item 1122 of Regulation AB. These policies, procedures and controls include, among other things, measures for notifying borrowers of payment delinquencies and other loan defaults and for working with borrowers to facilitate collections and performance prior to the occurrence of a servicing transfer event.
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 Bank may appoint one or more sub-servicers to perform all or a portion of its duties under the Pooling and Servicing Agreement. Wells Fargo Bank monitors and reviews the performance of sub-servicers appointed by it.
Wells Fargo Bank has received an issuer rating of ‘‘Aaa’’ from Moody’s. Wells Fargo Bank’s long term deposits are rated ‘‘Aaa’’ by Moody’s, ‘‘AA’’ by S&P and ‘‘AA+’’ by Fitch.
Wells Fargo & Company is the holding company for Wells Fargo Bank. Wells Fargo & Company files reports with the Securities and Exchange Commission as required under the Securities Exchange Act of 1934, as amended. Such reports include information regarding Wells Fargo Bank and may be obtained at the website maintained by the Securities and Exchange Commission at www.sec.gov.
The information set forth in this prospectus supplement regarding the Master Servicer has been provided by it.
S-156
The Special Servicer
J.E. Robert Company, Inc. (the ‘‘Special Servicer’’), a Virginia corporation, will initially be appointed as Special Servicer of all of the mortgage loans (other than the Non-Serviced Mortgage Loans), and as such, will be responsible for servicing the Specially Serviced Mortgage Loans and REO Properties. JER Investors Trust Inc., an affiliate of the Special Servicer, is anticipated to be the operating advisor and the purchaser of certain of the non-offered certificates with respect to the transaction described in this prospectus supplement. The principal offices of the Special Servicer are located at 1650 Tysons Boulevard, Suite 1600, McLean, Virginia, and its telephone number is (703) 714-8000.
The Special Servicer, through its subsidiaries, affiliates and joint ventures is involved in the real estate investment, finance and management business and engages principally in:
| | |
| • | Acquiring, developing, repositioning, managing and selling commercial and multifamily real estate properties; |
| | |
| • | Equity and debt investments in, and recapitalizations of, operating companies with significant real estate assets; |
| | |
| • | Investing in high-yielding real estate loans; and |
| | |
| • | Investing in, and managing as special servicer, unrated, non-investment grade and investment grade securities issued pursuant to commercial mortgage loan securitization transactions. |
In the ordinary course of business for the Special Servicer and its affiliates, the assets of the Special Servicer and its affiliates may, depending upon the particular circumstances, including the nature and location of such assets, compete with the mortgaged real properties securing the underlying mortgage loans for, among other things, tenants, purchasers and financing.
The Special Servicer has substantial experience in working out mortgage loans and has been engaged in investing and managing commercial real estate assets since 1981 and servicing commercial mortgage loan securitization assets since 1992. The Special Servicer has a special servicer rating of ‘‘CSS1’’ from Fitch. The Special Servicer is also on S&P’s Select Servicer list as a U.S. Commercial Mortgage Special Servicer and is ranked ‘‘STRONG’’ by S&P. The ratings of the Special Servicer are based on an examination of many factors, including its financial condition, management team, organizational structure and operating history.
The number of commercial mortgage loan securitizations serviced by the Special Servicer has increased from 10 as of December 31, 2003 to 21 as of December 31, 2006. The Special Servicer acted as special servicer with respect to: (a) 10 commercial mortgage loan securitizations containing over 250 mortgage loans as of December 31, 2003, with an aggregate outstanding principal balance in excess of $1.6 billion; (b) 13 commercial mortgage loan securitizations containing over 550 mortgage loans as of December 31, 2004, with an aggregate outstanding principal balance in excess of $5.0 billion; (c) 17 commercial mortgage loan securitizations containing over 1,800 mortgage loans as of December 31, 2005, with an aggregate outstanding principal balance in excess of $21.7 billion; and (d) 21 commercial mortgage loan securitizations containing over 3,000 mortgage loans as of December 31, 2006, with a n aggregate outstanding principal balance in excess of $37.6 billion.
Since its inception in 1981 and through December 31, 2006, the Special Servicer has resolved approximately 1,790 mortgage loans, with an aggregate principal balance of approximately $2.2 billion. Over the past three years, from 2004 through 2006, the Special Servicer has resolved over $485 million of U.S. commercial and multifamily mortgage loans. As of December 31, 2006, the Special Servicer was administering approximately 9 assets as special servicer with an outstanding principal balance of approximately $50 million. Those commercial real estate assets include mortgage loans secured by the same type of income producing properties as those securing the mortgage loans backing the certificates.
All of the specially serviced commercial mortgage loans are serviced in accordance with the applicable procedures set forth in the related pooling and servicing agreement that governs
S-157
those assets. Certain of the duties of the Special Servicer and the provisions of the Pooling and Servicing Agreement regarding the Special Servicer, including without limitation information regarding the rights and obligations of the Special Servicer with respect to delinquencies, losses, bankruptcies and recoveries and the ability of the Special Servicer to waive or modify the terms of the Mortgage Loans are set forth in this prospectus supplement under ‘‘Servicing of the Mortgage Loans—Modifications, Waiver and Amendments,’’ ‘‘—Realization Upon Defaulted Mortgage Loans’’ and ‘‘—Rights Upon Event of Default.’’ Certain terms of the Pooling and Servicing Agreement regarding the Special Servicer’s removal, replacement, resignation or transfer are described in this prospectus supplement under ‘‘Servicing of the Mortgage Loans— Certain Matters Regarding the Master Servicer, the Special Servicer and the Depositor.’’ Certain limitations on the Special Servicer’s liability under the Pooling and Servicing Agreement are described in this prospectus supplement under ‘‘Servicing of the Mortgage Loans—General.’’ The Special Servicer will service the Specially Serviced Mortgage Loans in this transaction in accordance with the procedures set forth in the Pooling and Servicing Agreement, in accordance with the mortgage loan documents and applicable laws, and in each case, subject to the Servicing Standard. The Special Servicer is not aware of any unique factors involved in servicing the Mortgage Loans in this transaction.
The Special Servicer has developed policies, procedures and processes regarding its special servicing obligations in respect of commercial mortgage loans and the underlying real properties, including managing delinquent loans and loans subject to the bankruptcy of the borrower. These policies, procedures and processes require that all actions taken by the Special Servicer comply with the requirements of the applicable pooling and servicing agreements. During the past three years, there have been no material changes to the Special Servicer’s special servicing policies, procedures and processes. Included in these policies, procedures and processes is the requirement that the Special Servicer segregate and hold all funds collected and received in connection with the operation of each REO Property separate and apart from its own funds and general assets and shall establish and maintain with respect to each REO Property one or more accounts held in trust for th e benefit of the Certificateholders (and the holders of the related Companion Loans, if any). This account or accounts shall be an account meeting the requirements of the Pooling and Servicing Agreement. The funds in this account or accounts will not be commingled with the funds of the Special Servicer, or the funds of any of the Special Servicer’s other serviced assets that are not serviced pursuant to the Pooling and Servicing Agreement.
The Special Servicer 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.
The Special Servicer does not believe that its financial condition will have any adverse effect on the performance of its duties under the Pooling and Servicing Agreement and, accordingly, will not have any material impact on the mortgage pool performance or the performance of the Certificates. The Special Servicer does not have any advancing obligations for principal and interest with respect to the commercial mortgage loan securitizations as to which it acts as special servicer. The Special Servicer is permitted to make servicing advances with respect to the mortgage loans as to which it acts as special servicer, at its option and in accordance with the terms of the applicable pooling and servicing agreements. The Special Servicer has made all advances required to be made on commercial mortgage loans serviced by it during the past three years and during the same period has not defaulted in respect of any such advance obligations.
The Special Servicer will not have any primary custodial responsibility for original documents evidencing the underlying mortgage loans. Under very limited circumstances set forth in the Pooling and Servicing Agreement, the Special Servicer may have physical custody of certain documents such as promissory notes as necessary for enforcement actions or sale transactions involving particular mortgage loans or REO Property. To the extent that the Special Servicer has custody of any such documents, such documents will be maintained in a manner consistent with the Servicing Standards and the Special Servicer’s policies, procedures and processes.
S-158
From time-to-time, the Special Servicer may become a party to lawsuits and other legal proceedings arising in the ordinary course of business. The Special Servicer does not believe that any such lawsuits or legal proceedings would, individually or in aggregate, have a material adverse effect on its business or its ability to serve as special servicer in this or any other transactions. There are currently no legal proceedings pending and no legal proceedings known to be contemplated by governmental authorities, against the Special Servicer, or of which any of its property is the subject, that is material to the Certificateholders.
The Special Servicer is not an affiliate of the Depositor, the Sponsors, the trust, the Master Servicer, the Trustee or any Mortgage Loan Seller of any underlying Mortgage Loans identified in this prospectus supplement. There are no specific relationships involving or relating to this transaction or the securitized mortgage loans between the Special Servicer, on the one hand, and the Depositor, the Sponsors or the trust, on the other hand. In addition, there are no business relationships, agreements, arrangements, transactions or understandings that would have been entered into outside the ordinary course of business or on terms other than would be obtained in an arm’s length transaction with an unrelated third party, apart from this transaction, between the Special Servicer, on the one hand, and the Depositor, the Master Servicer, the Sponsors or the trust, on the other hand, that currently exist or that existed during the past two years.
No securitization transaction involving commercial or multifamily mortgage loans in which the Special Servicer was acting as special servicer has experienced an event of default as a result of any action or inaction performed by the Special Servicer. In addition, there has been no previous disclosure of material non-compliance with servicing criteria by the Special Servicer with respect to any other securitization transaction involving commercial or multifamily mortgage loans in which the Special Servicer was acting as special servicer.
The information set forth herein regarding the Special Servicer has been provided by the Special Servicer.
Replacement of the Special Servicer
The Special Servicer may be removed, and a successor special servicer appointed, at any time by the Directing Certificateholder; provided that each Rating Agency confirms in writing that the replacement of the Special Servicer, in and of itself, will not cause a qualification, withdrawal or downgrade of the then-current ratings assigned to any Class of Certificates.
Servicing and Other Compensation and Payment of Expenses
The Master Servicer, the Special Servicer and the Trustee will be entitled to payment of certain fees as compensation for services performed under the Pooling and Servicing Agreement. Certain additional fees and costs payable by the related borrowers are allocable to the Master Servicer, the Special Servicer and the Trustee, but such amounts are not payable from amounts that the trust is entitled to receive.
The table below summarizes the related fees and expenses to be paid from the assets of the trust and the recipient, general purpose and frequency of payments for those fees and expenses:
S-159
| | | | | | | | | |
| Type/Recipient(1) | | | Amount | | | Source(2) | | | Frequency |
| Fees | | | | | | | |||
| Servicing Fee / Master Servicer | | | With respect to the pool of mortgage loans in the trust, the product of the monthly portion of the related annual Servicing Fee Rate(3) calculated on the outstanding principal amount of each mortgage loan in the trust. | | | First, out of recoveries of interest with respect to that mortgage loan and then, if the related mortgage loan and any related REO Property has been liquidated, out of general collections on deposit in the Certificate Account. | | | Monthly |
| Special Servicing Fee / Special Servicer | | | With respect to each mortgage loan that is being specially serviced or as to which the related Mortgaged Property has become an REO Property, the product of the monthly portion of the annual Special Servicing Fee Rate(4) computed on the basis of the same principal amount in respect of which any related interest payment is due on such mortgage loan or REO Loan. | | | First, from any revenues received with respect to the related mortgage loan or any related REO Property, and then from general funds on deposit in the Certificate Account. | | | Monthly |
| Workout Fee / Special Servicer | | | With respect to each mortgage loan that is a Corrected Mortgage Loan, the Workout Fee Rate of 1.00% multiplied by all payments of interest and principal received on the subject mortgage loan for so long as it remains a Corrected Mortgage Loan. | | | Out of each collection of interest, principal, and prepayment consideration received on the related mortgage loan. | | | Time to time |
| Liquidation Fee / Special Servicer(5) | | | With respect to any Specially Serviced Mortgage Loan for which the Special Servicer obtains a full or partial payment of any liquidation proceeds an amount calculated by application of a Liquidation Fee Rate of 1.00% to the related payment or proceeds (exclusive of default interest). | | | First, from any Liquidation Proceeds and any other revenues received with respect to the related mortgage loan or any related REO Property and then from general funds on deposit in the Certificate Account. | | | Time to time |
| Trustee Fee / Trustee | | | With respect to each Distribution Date, an amount equal to the product of the monthly portion of the annual Trustee Fee Rate(6) multiplied by the total outstanding principal amount of each mortgage loan in the trust. | | | Out of general funds on deposit in the Certificate Account. | | | Monthly |
S-160
| | | | | | | | | |
| Type/Recipient(1) | | | Amount | | | Source(2) | | | Frequency |
| Servicing Advances / Master Servicer, Special Servicer or Trustee | | | To the extent of funds available, the amount of any servicing advances. | | | First, from funds collected with respect to the related mortgage loan and then out of general funds on deposit in the Certificate Account, subject to certain limitations, and, under certain circumstances, from collections on the related Companion Loans. | | | Time to time |
| Interest on Servicing Advances / Master Servicer, Special Servicer or Trustee | | | At a rate per annum equal to the Reimbursement Rate calculated on the number of days the related Advance remains unreimbursed. | | | First, out of default interest and late payment charges on the related mortgage loan and then, after or at the same time that advance is reimbursed, out of any other amounts then on deposit in the Certificate Account, and, under certain circumstances, from collections on the related Companion Loan. | | | Monthly |
| P&I Advances / Master Servicer and Trustee | | | To the extent of funds available, the amount of any P&I Advances. | | | First, from funds collected with respect to the related mortgage loan and then out of general funds on deposit in the Certificate Account, subject to certain limitations. | | | Time to time |
| Interest on P&I Advances / Master Servicer and Trustee | | | At a rate per annum equal to Reimbursement Rate. | | | First, out of default interest and late payment charges on the related mortgage loan and then, after or at the same time that advance is reimbursed, out of any other amounts then on deposit in the Certificate Account. | | | Monthly |
| Indemnification Expenses / Trustee, Depositor, Master Servicer or Special Servicer and any director, officer, employee or agent of any of the foregoing parties | | | Amount to which such party is entitled for indemnification under the Pooling and Servicing Agreement. | | | Out of general funds on deposit in the Certificate Account, subject to certain limitations. | | | Time to time |
| |
| |
|
| (1) | If the Trustee succeeds to the position of the Master Servicer, it will be entitled to receive the same fees and expenses of the Master Servicer described in this prospectus supplement less in certain cases a portion of the Servicing Fee as described below. |
| (2) | Unless otherwise specified, the fees and expenses shown in this table are paid (or retained by the Master Servicer or the Trustee in the case of amounts owed to any of them) prior to distributions on the Certificates. |
| (3) | The Servicing Fee for each mortgage loan will range, on a loan-by-loan basis, from 0.02000% per annum to 0.13500% per annum, as described below. |
| (4) | The Special Servicing Fee Rate for each mortgage loan will equal 0.25% per annum, as described in this ‘‘—Servicing and Other Compensation and Payment of Expenses’’ section. |
| (5) | Circumstances as to when a Liquidation Fee is not payable are set forth in this ‘‘—Servicing and Other Compensation and Payment of Expenses’’ section. |
| (6) | The Trustee Fee Rate will equal 0.00077% per annum, as described above under ‘‘—The Trustee, Certificate Registrar, Authenticating Agent and Custodian.’’ |
S-161
The fee of the Master Servicer (the ‘‘Servicing Fee’’) will be payable monthly from amounts received in respect of the mortgage loans (including the Non-Serviced Mortgage Loans) and the Companion Loans (to the extent permitted under the related intercreditor agreement), and will accrue at a rate (the ‘‘Servicing Fee Rate’’), equal to a per annum rate ranging from 0.02000% to 0.13500%. The Servicing Fee Rate includes, in the case of the Non-Servicing Loans, the primary servicing fee payable to the Servicer under the JPMCC 2007-LDP11 Pooling and Servicing Agreement. As of the Cut-off Date, the weighted average Servicing Fee Rate will be approximately 0.25% per annum. In addition to the Servicing Fee, the Master Servicer will be entitled to retain, as additional servicing compensation, (1) a specified percentage of application, defeasance and certain non-material modification, waiver and consent fees; provided, with respect to the non-material modification, waiver and consent fees, the consent of the Special Servicer is not required for the related transaction; (2) a specified percentage of all assumption (subject to certain sub-servicing agreements), extension, certain modification, waiver, consent and earnout fees, in each case, with respect t o all mortgage loans and the Companion Loans (to the extent permitted under the related intercreditor agreement) that are not Specially Serviced Mortgage Loans, but arise from a transaction that requires the processing and/or approval of the Special Servicer and (3) late payment charges and default interest paid by the borrowers (that accrued while the related mortgage loans and the related Companion Loans (to the extent permitted under the related intercreditor agreement) were not Specially Serviced Mortgage Loans), but only to the extent such late payment charges and default interest are not needed to pay interest on Advances or certain additional trust fund expenses (including Special Servicing Fees, Liquidation Fees and Workout Fees) incurred with respect to the related mortgage loans or the related Companion Loans (to the extent applicable) since the Closing Date. The Master Servicer is also entitled to retain any interest earned on any servicing escrow account to the extent the interest is not req uired to be paid to the related borrowers.
The Servicing Fee is calculated on the Stated Principal Balance of the mortgage loans (including the Non-Serviced Mortgage Loans) and the related Companion Loans and in the same manner as interest is calculated on the mortgage loans and the Companion Loans. The Servicing Fee for each mortgage loan is included in the Administrative Cost Rate listed for that mortgage loan on Annex A-1 to this prospectus supplement. Any Servicing Fee Rate calculated on an Actual/360 Basis will be recomputed on a 30/360 Basis for purposes of calculating the Net Mortgage Rate. With respect to the AB Subordinate Companion Loans, the Servicing Fee, if any, will be computed and allocated as provided in the related AB Intercreditor Agreement.
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.
Each of the Non-Serviced Mortgage Loans is being serviced under the JPMCC 2007-LDP11 Pooling and Servicing Agreement (including those occasions under the JPMCC 2007-LDP11 Pooling and Servicing Agreement when the servicing of such Non-Serviced Mortgage Loan has been transferred from the JPMCC 2007-LDP11 Master Servicer to the JPMCC 2007-LDP11 Special Servicer). Accordingly, in its capacity as the Special Servicer under the Pooling and Servicing Agreement, the Special Servicer will not be entitled to receive any servicing compensation for any Non-Serviced Mortgage Loan. Only the JPMCC 2007-LDP11 Special Servicer will be entitled to special servicing compensation on each Non - -Serviced Mortgage Loan.
The ‘‘Special Servicing Fee’’ will accrue with respect to each Specially Serviced Mortgage Loan or REO loan for each distribution date at a rate equal to the special servicing fee rate equal to a per annum rate of 0.25% (the ‘‘Special Servicing Fee Rate’’) and will be payable monthly from the trust fund. Each Non-Serviced Loan will be subject to a special servicing fee under the JPMCC JPMCC 2007-LDP II Pooling and Servicing Agreement if transferred to special servicing which will accrue at a rate equal to 0.25% per annum.
The ‘‘Workout Fee’’ will generally be payable with respect to each Corrected Mortgage Loan and will be calculated by application of a ‘‘Workout Fee Rate’’ of 1.0% to each collection of interest and principal (including scheduled payments, prepayments, balloon payments, and
S-162
payments at maturity) received on the respective mortgage loan for so long as it remains a Corrected Mortgage Loan. The Workout Fee with respect to any Corrected Mortgage Loan will cease to be payable if the Corrected Mortgage Loan again becomes a Specially Serviced Mortgage Loan but will become payable again if and when the mortgage loan again becomes a Corrected Mortgage Loan.
If the Special Servicer is terminated (other than for cause) or resigns, it shall retain the right to receive any and all Workout Fees payable with respect to a mortgage loan that became a Corrected Mortgage Loan during the period that it acted as Special Servicer and remained a Corrected Mortgage Loan at the time of that termination or resignation, but such fee will cease to be payable if the Corrected Mortgage Loan again becomes a Specially Serviced Mortgage Loan. The successor special servicer will not be entitled to any portion of those Workout Fees. If the Special Servicer resigns or is terminated other than for cause, it will receive any Workout Fees payable on Specially Serviced Mortgage Loans for which the resigning or terminated Special Servicer had cured the event of default through a modification, restructuring or workout negotiated by the Special Servicer and evidenced by a signed writing, but which had not as of the time the Special Servicer resigne d or was terminated become a Corrected Mortgage Loan solely because the borrower had not made three consecutive timely Periodic Payments and which subsequently becomes a Corrected Mortgage Loan as a result of the borrower making such three consecutive timely Periodic Payments. Each Non-Serviced Mortgage Loan will be subject to a workout fee pursuant to the JPMCC 2007-LDP11 Pooling and Servicing Agreement, which will accrue at a rate equal to 1.0% of each collection of principal and interest.
A ‘‘Liquidation Fee’’ will be payable with respect to each Specially Serviced Mortgage Loan as to which the Special Servicer obtains a full or discounted payoff (or unscheduled partial payment to the extent such prepayment is required by the Special Servicer as a condition to a workout) from the related borrower and, except as otherwise described below, with respect to any Specially Serviced Mortgage Loan or REO Property as to which the Special Servicer receives any Liquidation Proceeds or Insurance and Condemnation Proceeds. The Liquidation Fee for each Specially Serviced Mortgage Loan will be payable from, and will be calculated by application of a ‘‘Liquidation Fee Rate’’ of 1.0% to the related payment or proceeds. Notwithstanding anything to the contrary described above, no Liquidation Fee will be payable based upon, or out of, Liquidation Proceeds received in connection with (i) the repurchase of any mortgage loan by a Mortgage Loan Seller for a breach of representation or warranty or for defective or deficient mortgage loan documentation within the time period provided for such repurchase (including any applicable extension thereof), (ii) the purchase of any Specially Serviced Mortgage Loan by the majority holder of the Controlling Class, the Special Servicer or either Master Servicer, or with respect to any AB Mortgage Loan, the holder of the related AB Subordinate Companion Loan or with respect to a mortgage loan that is subject to mezzanine indebtedness, the holder of the related mezzanine loan; provided that with respect to a m ortgage loan that is subject to mezzanine indebtedness, the purchase occurs within the time period provided in the underlying intercreditor agreement or, if no such time period is specified, 60 days from the date the related mortgage loan becomes a Specially Serviced Mortgage Loan), or (iii) the purchase of all of the mortgage loans and REO Properties in connection with an optional termination of the trust fund. Each Non-Serviced Mortgage Loan will be subject to a liquidation fee pursuant to the JPMCC 2007-LDP11 Pooling and Servicing Agreement, which will accrue at a rate equal to 1.0% of the related payment. The Special Servicer may not receive a Workout Fee and a Liquidation Fee with respect to the same proceeds collected on a mortgage loan.
Any Liquidation Fees in respect of any Pari Passu Mortgage Loan will be payable out of, and based on, collections on the applicable Whole Loan.
The Special Servicer will also be entitled to additional servicing compensation in the form of all application fees with respect to assumptions, assumption fees, extensions and modifications and all defeasance fees, in each case, received with respect to the Specially Serviced Mortgage Loans, and a specified percentage of all application, assumption, extension, certain modification, waiver, consent and earnout fees received with respect to all mortgage loans (except for the
S-163
Non-Serviced Mortgage Loans) that are not Specially Serviced Mortgage Loans and that are processed by and/or for which the Special Servicer’s consent or approval is required. The Special Servicer will also be entitled to late payment charges and default interest paid by the borrowers and accrued while the related mortgage loans were Specially Serviced Mortgage Loans and that are not needed to pay interest on Advances or certain additional trust fund expenses with respect to the related mortgage loans since the Closing Date. The Special Servicer will not be entitled to retain any portion of Excess Interest paid on the ARD Loan.
Although the Master Servicer and the Special Servicer are each required to service and administer the pool of mortgage loans in accordance with the Servicing Standards above and, accordingly, without regard to their rights to receive compensation under the Pooling and Servicing Agreement, additional servicing compensation in the nature of assumption and modification fees may under certain circumstances provide the Master Servicer or the Special Servicer, as the case may be, with an economic disincentive to comply with this standard.
As and to the extent described in this prospectus supplement under ‘‘Description of the Certificates—Advances’’, the Master Servicer and the Special Servicer will be entitled to receive interest on Advances, which will be paid contemporaneously with the reimbursement of the related Advance.
Each of the Master Servicer and the Special Servicer will be required to pay its overhead and any general and administrative expenses incurred by it in connection with its servicing activities under the Pooling and Servicing Agreement. Neither the Master Servicer nor the Special Servicer will be entitled to reimbursement for any expenses incurred by it except as expressly provided in the Pooling and Servicing Agreement. The Master Servicer or the Special Servicer, as applicable, will be responsible for all fees payable to any sub-servicers. See ‘‘Description of the Certificates—Distributions’’ in this prospectus supplement and ‘‘Description of the Pooling Agreements—Certificate Account’’ and ‘‘—Servicing Compensation and Payment of Expenses’’ in the prospectus.
If a borrower prepays a mortgage loan, in whole or in part, after the due date but on or before the Determination Date in any calendar month, the amount of interest (net of related Servicing Fees 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, constitute a ‘‘Prepayment Interest Excess.’’ Conversely, if a borrower prepays a mortgage loan, in whole or in part, after the Determination Date (or, with respect to each mortgage loan 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) on such prepayment will constitute a ‘‘Prepayment Interest Shortfall.’’ Prepayment Interest Excesses (to the extent not offset by Prepayment Interest Shortfalls) collected on the mortgage loans will be retained by the Master Servicer as additional servicing compensation.
The Master Servicer will be required to deliver to the Trustee for deposit in the Distribution Account on the Master Servicer Remittance Date, without any right of reimbursement thereafter, a cash payment (a ‘‘Compensating Interest Payment’’) in an amount equal to the lesser of (i) the aggregate amount of Prepayment Interest Shortfalls incurred in connection with voluntary principal prepayments received in respect of the mortgage loans (other than Specially Serviced Mortgage Loans) it services for the related Distribution Date, and (ii) the aggregate of (A) that portion of its Servicing Fees for the related Distribution Date that is, in the case of each and every mortgage loan and REO Loan it services for which such Servicing Fees are being paid in such Due Period, calculated at 0.01% per annum and (B) all Prepayment Interest Excesses received in respect of the mortgage loans it services for the related Distribution Date and (C) to the extent earned on principal prepayments, net investment earnings received by the Master Servicer during such Due Period with respect to the mortgage loan it services subject to such prepayment. If a Prepayment Interest Shortfall occurs as a result of the Master Servicer’s allowing the related borrower to deviate from the terms of the related mortgage loan documents regarding principal
S-164
prepayments (other than (X) subsequent to a default under the related mortgage loan documents, (Y) pursuant to applicable law or a court order, or (Z) at the request or with the consent of the Directing Certificateholder), then for purposes of calculating the Compensating Interest Payment for the related Distribution Date, the amount in clause (ii) above shall be the aggregate of (A) all Servicing Fees for such Due Period earned by that Master Servicer, (B) all Prepayment Interest Excesses with respect to the Master Servicer and (C) to the extent earned on principal prepayments, net investment earnings payable to the Master Servicer for such Due Period received by the Master Servicer during such Due Period with respect to the mortgage loan subject to such prepayment. In no event will the rights of the Certificateholders to the offset of the aggregate Prepayment Interest Shortfalls be cumulative.
S-165
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 and the Trustee (the ‘‘Pooling and Servicing Agreement’’) and will represent in the aggregate the entire beneficial ownership interest in the trust fund consisting 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, in the case of any mortgage loan with a split loan structure, only to the extent of the trust fund’s interest therein; (3) those funds or assets as from time to time are deposited in the Certificate Accou nt, the Distribution Account, the Interest Reserve Account, the Excess Interest Distribution Account, the Gain on Sale Reserve Account or the REO Account, 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 the Purchase Agreements 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.
The Depositor’s Commercial Mortgage Pass-Through Certificates, Series 2007-LDP12 (the ‘‘Certificates’’) will consist of the following classes (each, a ‘‘Class’’): the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A Certificates (collectively, the ‘‘Class A Certificates’’), the Class X, Class A-M, Class A-J, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T, Class NR, Class S, Class R and Class LR Certificates. The Class A Certificates and the Class X Certificates are referred to collectively in this prospectus supplement as the ‘‘Senior Certificates.’’ The Class A-M, Class A-J, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T and Class NR Certificates are referred to collectively in this prospectus supplement as the ‘‘Subordinate Certificates.’’ The Class A-M, Class A-J, Class B, Class C, Class D, Class E and Class& nbsp;F Certificates are referred to in this prospectus supplement as the ‘‘Subordinate Offered Certificates.’’ The Class R and Class LR Certificates are referred to collectively in this prospectus supplement as the ‘‘Residual Certificates.’’
Only the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB, Class A-1 A, Class X, Class A-M, Class A-J, Class B, Class C, Class D, Class E and Class F Certificates are offered hereby (collectively, the ‘‘Offered Certificates’’). The Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T, Class NR, Class S, Class R and Class LR Certificates (collectively, the ‘‘Non-Offered Certificates’’) have not been registered under the Securities Act of 1933, as amended, and are not offered hereby.
The ‘‘Certificate Balance’’ of any Class of Certificates (other than the Class S Certificates, Class X Certificates and Residual 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 trust fund. On each Distribution Date, the Certificate Balance of each Class of Certificates (other than the Class S Certificates, Class X Certificates and Residual Certificates) will be reduced by any distributions of principal actually made on, and any Collateral Support Deficit actually allocated to, that Class of Certificates (other than the Class S Certificates, Class X Certificates and Residual Certificates) on that Distribution Date. With respect to any Class of Certificates that has unreimbursed Collateral Support Deficit allocated to such Class, the Certificate Balance of such Class may be increased by the amount of any recoveries of Nonrecoverable Advances, up to the unreimbursed Collateral Support Deficit for such Class, allocated in accordance with the distribution priorities described under ‘‘—Distributions—Priority’’ below.
The Class S Certificates, Class X Certificates and the Residual Certificates will not have Certificate Balances or entitle their holders to distributions of principal.
S-166
The Class X Certificates will not have a Certificate Balance, but will represent the right to receive distributions of interest in an amount equal to the aggregate interest accrued on their notional amount (the ‘‘Notional Amount’’). The Notional Amount of the Class X Certificates will equal the aggregate of the Certificate Balances of each Class of Certificates (other than the Class X, Class S, Class R and Class LR Certificates) (the ‘‘Principal Balance Certificates’’) outstanding from time-to-time. The initial Notional Amount of the Class X Certificates will be approximately $2,504,667,937.
The Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T and Class NR Certificates will have an aggregate initial Certificate Balance of approximately $194,111,937.
The Class S Certificates will not have a Certificate Principal Balance and will be entitled to receive only Excess Interest received on the ARD Loan.
The Offered Certificates will be maintained and transferred in book-entry form and issued in denominations of $10,000 initial Certificate Balance (other than the Class X Certificates), and integral multiples of $1 in excess of that amount. The Class X Certificates will be issued, maintained and transferred only in minimum denominations of authorized initial Notional Amount of not less than $1,000,000, and in integral multiples of $1 in excess thereof. The ‘‘Percentage Interest’’ evidenced by any Certificate (other than the Residual Certificates) is equal to its initial denomination as of the Closing Date, divided by the initial Certificate Balance or Notional Amount of the Class to which it belongs.
The Offered Certificates will initially be represented by one or more global certificates registered in the name of the nominee of The Depository Trust Company (‘‘DTC’’). The Depositor has been informed by DTC that DTC’s nominee will be Cede & Co. No person acquiring an interest in the Offered Certificates (this person, a ‘‘Certificate Owner’’) will be entitled to receive an Offered Certificate in fully registered, certificated form, a definitive certificate, representing its interest in that Class, except as set forth under ‘‘—Book-Entry Registration and Definitiv e 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 Certificate Owners through its participating organizations (together with Clearstream Banking, société anonyme (‘‘Clearstream’’) and Euroclear Bank, as operator of the Euroclear System (‘‘Euroclear’’) participating organizations, the ‘‘Par ticipants’’), and all references in this prospectus supplement to payments, notices, reports and statements to holders of the 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 Certificate Owners through DTC and its Participants in accordance with DTC procedures. See ‘‘Description of the Certificates— Book-Entry Registration and Definitive Certificates’’ in the prospectus.
Until definitive certificates are issued, interests in any Class of Offered Certificates will be transferred on the book-entry records of DTC and its Participants.
Book-Entry Registration and Definitive Certificates
General. Certificate Owners may hold their Certificates through DTC (in the United States) or Clearstream or Euroclear (in Europe) if they are Participants in that system, or indirectly through organizations that are Participants in those systems. Clearstream and Euroclear will hold omnibus positions on behalf of the Clearstream Participants and the Euroclear Participants, respectively, through customers’ securities accounts in Clearstream’s and Euroclear’s names on the books of their respective depositories (collectively, the ‘‘Depositories’’), which in turn will hold those positions in customers’ securities accounts in the Depositories’ names on the books of DTC. DTC is a limited purpose trust company organized under the New York Banking Law, a ‘‘banking organization’’ within the meaning of the New York Banking Law, a member of the Federal Reserve System, a ‘‘clearing corporation’’ within the meaning of the New York Uniform Commercial Code and a ‘‘clearing agency’’ registered pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. DTC was created to hold securities for its Participants and to
S-167
facilitate the clearance and settlement of securities transactions between Participants through electronic computerized book-entries, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations (‘‘Direct Participants’’). 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 their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly through Clearstream Participants or Euroclear Participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of the relevant European international clearing system by its Depository; however, these cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in that system in accordance with its rules and procedures. If the transaction complies with all relevant requirements, Euroclear or Clearstream, as the case may be, will then deliver instructions to the Depository to take action to effect final settlement on its behalf.
Because of time-zone differences, it is possible that credits of securities in Clearstream or Euroclear as a result of a transaction with a DTC Participant will be made during the subsequent securities settlement processing, dated the business day following the DTC settlement date, and those credits or any transactions in those securities settled during this processing will be reported to the relevant Clearstream Participant or Euroclear Participant on that business day. Cash received in Clearstream or Euroclear as a result of sales of securities by or through a Clearstream Participant or a Euroclear Participant to a DTC Participant will be received with value on the DTC settlement date but, due to time-zone differences, may be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC.
Certificate Owners that are not Direct or Indirect Participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, the Offered Certificates may do so only through Direct and Indirect Participants. In addition, Certificate Owners will receive all distributions of principal of and interest on the Offered Certificates from the Trustee through DTC and its Direct and Indirect Participants. Accordingly, Certificate Owners may experience delays in their receipt of payments, since those payments will be forwarded by the Trustee to Cede & Co., as nominee of DTC. DTC will forward those payments to its Participants, which thereafter will forward them to Indirect Participants or beneficial owners of Offered Certificates. Except as otherwise provided under ‘‘—Reports to Certificateholders; Certain Available Information’’ below, Certificate Owners will not be recognized by the Trustee, the Special Servicer or the Master Servicer as holders of record of Certificates and Certificate Owners will be permitted to receive information furnished to Certificateholders and to exercise the rights of Certificateholders only indirectly through DTC and its Direct and Indirect Participants.
Under the rules, regulations and procedures creating and affecting DTC and its operations (the ‘‘Rules’’), DTC is required to make book-entry transfers of the Offered Certificates among Participants and to receive and transmit distributions of principal of, and interest on, the Offered Certificates. Direct and Indirect Participants with which Certificate Owners have accounts with respect to the Offered Certificates similarly are required to make book-entry transfers and receive and transmit the distributions on behalf of their respective Certificate Owners. Accordingly, although Certificate Owners will not possess physical certificates evidencing their interests in the Offered Certificates, the Rules provide a mechanism by which Certificate Owners, through their Direct and Indirect Participants, will receive distribution s and will be able to transfer their interests in the Offered Certificates.
S-168
Because DTC can only act on behalf of Participants, who in turn act on behalf of Indirect Participants and certain banks, the ability of Certificateholders to pledge the Certificates to persons or entities that do not participate in the DTC system, or to otherwise act with respect to the Certificates, may be limited due to the lack of a physical certificate for the Certificates.
DTC has advised the Depositor that it will take any action permitted to be taken by a holder of an Offered Certificate under the Pooling and Servicing Agreement only at the direction of one or more Participants to whose accounts with DTC the Offered Certificates are credited. DTC may take conflicting actions with respect to other undivided interests to the extent that those actions are taken on behalf of Participants whose holdings include the undivided interests.
Although DTC, Euroclear and Clearstream have implemented the foregoing procedures in order to facilitate transfers of interests in global certificates among Participants of DTC, Euroclear and Clearstream, they are under no obligation to perform or to continue to comply with the foregoing procedures, and the foregoing procedures may be discontinued at any time.
None of the Depositor, the Master Servicer, the underwriters, the Special Servicer or the Trustee will have any liability for any actions taken by DTC, Euroclear or Clearstream, their respective Direct or Indirect Participants or their nominees, including, without limitation, actions for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Offered Certificates held by Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any records relating to that beneficial ownership interest. The information in this prospectus supplement concerning DTC, Clearstream and Euroclear and their book-entry systems has been obtained from sources believed to be reliable, but the Depositor takes no responsibility for the accuracy or completeness of the information.
Definitive Certificates. Definitive certificates will be issued to Certificate Owners or their nominees, respectively, rather than to DTC or its nominee, only under the limited conditions set forth under ‘‘Description of the Certificates—Book-Entry Registration and Definitive Certificates’’ in the prospectus.
Upon the occurrence of certain events, as described in the prospectus under ‘‘Description of the Certificates—Book-Entry Registration and Definitive Certificates,’’ the Trustee is required to notify, through DTC, Direct Participants who have ownership of Offered Certificates as indicated on the records of DTC of the availability of definitive certificates. Upon surrender by DTC of the global certificates representing the Offered Certificates and upon receipt of instructions from DTC for re-registration, the Trustee will reissue the Offered Certificates as definitive certificates issued in the respective Certificate Balances or Notional Amounts, as applicable, owned by individual Certificate Owners, and thereafter the Trustee, the Special Servicer and the Master Servicer will recognize th e holders of those definitive certificates as Certificateholders under the Pooling and Servicing Agreement.
For additional information regarding DTC and Certificates maintained on the book-entry records of DTC, see ‘‘Description of the Certificates—Book-Entry Registration and Definitive Certificates’’ in the prospectus.
Distributions
Method, Timing and Amount. Distributions on the Certificates are required to be made by the Trustee, to the extent of available funds, on the 15th day of each month or, if the 15th day is not a business day, then on the next succeeding business day, commencing in September 2007 (each, a ‘‘Distribution Date’’). The ‘‘Determination Date’’ for any Distribution Date will be the fourth business day prior to the related Distribution Date. All distributions (other than the final distribution on any Certificate) are required to be made to the Certificateholders in whose na mes 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
S-169
bank or other entity having appropriate facilities therefor, if the Certificateholder has provided the Trustee 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. All distributions made with respect to a Class of Certificates will be allocated pro rata among the outstanding Certificates of that Class based on their respective Percentage Interests.
The Master Servicer is required to establish and maintain, or cause to be established and maintained, one or more accounts (collectively, the ‘‘Certificate Account’’) as described in the Pooling and Servicing Agreement. The Master Servicer is required to deposit in its Certificate Account on a daily basis (and in no event later than the business day following receipt in available funds) all payments and collections due after the Cut-off Date and other amounts received or advanced with respect to the mortgage loans (for which it is acting as the Master Servicer) (including, without limitation, all proceeds received under any hazard, title or other insurance policy that provides coverage with respect to a Mortgaged Property or the related mortgage loan or in connection with the full or partial condemnation of a Mortgaged Proper ty (the ‘‘Insurance and Condemnation Proceeds’’) and other amounts received and retained in connection with the liquidation of defaulted mortgage loans or property acquired by foreclosure or otherwise (the ‘‘Liquidation Proceeds’’)), and will be permitted to make withdrawals therefrom as set forth in the Pooling and Servicing Agreement. Notwithstanding the foregoing, the collections on each Whole Loan will be limited to the portion of such amounts that are payable to the holder of the mortgage loan included in the trust pursuant to the related intercreditor agreement.
The Trustee is required to establish and maintain accounts (the ‘‘Upper-Tier Distribution Account’’ and the ‘‘Lower-Tier Distribution Account,’’ each of which may be sub-accounts of a single account (collectively, the ‘‘Distribution Account’’)), in the name of the Trustee and for the benefit of the Certificateholders. On each Distribution Date, the Trustee is required to apply amounts on deposit in the Upper-Tier Distribution Account (which will include all funds that were remitted by the Master Servicer from the Certificate Account plus, among other th ings, any P&I Advances less amounts, if any, distributable to the Class LR Certificates as set forth in the Pooling and Servicing Agreement) generally to make distributions of interest and principal from the Available Distribution Amount to the Certificateholders as described in this prospectus supplement. Each of the Certificate Account and the Distribution Account will conform to certain eligibility requirements set forth in the Pooling and Servicing Agreement.
The Master Servicer, the Special Servicer and the Trustee will be entitled to payment of certain fees as compensation for its services performed under the Pooling and Servicing Agreement.
Certain additional fees and costs payable by the related borrowers are allocable to the Master Servicer, the Special Servicer and the Trustee, but such amounts are not payable from amounts that the trust fund is entitled to receive. See ‘‘Transaction Parties— Servicing and Other Compensation and Payment of Expenses’’ in this prospectus supplement.
The Trustee is required to establish and maintain an ‘‘Interest Reserve 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 Certificates. 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 (unless, in either case, the related Distribution Date is the final Distribution Date), the Trustee 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 ‘‘Withheld Loans’’), in an amount equal to one day’s interest at the Net Mortgage Rate for
S-170
each Withheld Loan on its Stated Principal Balance as of the Distribution Date in the month preceding the month in which the related Master Servicer Remittance Date occurs, to the extent a Periodic Payment or P&I Advance 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 Trustee 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 Distribution Account.
The Trustee is required to establish and maintain an ‘‘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 S Certificates. Prior to the applicable Distribution Date, the Master Servicer is required to remit to the Trustee for deposit into the Excess Interest Distribution Account an amount equal to the Excess Interest received by the Master Servicer prior to the related Determination Date.
The Trustee is required to establish and maintain a ‘‘Class LR 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 LR Certificates. Prior to the applicable Distribution Date, the Master Servicer is required to remit to the Trustee for deposit into the Class LR Distribution Account any distributions with respect to the residual interests in the Loan REMICs received by the Master Servicer prior to the related Determination Date.
The Trustee is required to establish and maintain an account (the ‘‘Gain on Sale Reserve Account’’), which may be a sub-account of the Distribution Account, in the name of the Trustee on behalf of the Certificateholders. To the extent that gains realized on sales of Mortgaged Properties, if any, are not used to offset Collateral Support Deficits previously allocated to the Certificates, such gains will be held and applied to offset future Collateral Support Deficits, if any.
The Master Servicer is authorized but not required to direct the investment of funds held in the Certificate Account in U.S. government securities and other obligations that are acceptable to each of 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 Pooling and Servicing Agreement. Funds held in the Lower-Tier Distribution Account, the Upper-Tier Distribution Account, the Interest Reserve Account, Excess Interest Distribution Account and the Gain on Sale Reserve Account may be invested by the Trustee in Permitted Investments. The Trustee will be entitled to retain any interest or other income earned on su ch funds and the Trustee will be required to bear any losses resulting from the investment of such funds, as provided in the Pooling and Servicing Agreement.
The aggregate amount available for distribution to the Certificateholders (other than the holders of the Class S Certificates) to the extent described in this prospectus supplement on each Distribution Date (the ‘‘Available Distribution Amount’’) will, in general, equal the sum of the following amounts (without duplication):
(x) the total amount of all cash received on the mortgage loans and any REO Properties that is on deposit in the Certificate Account, the Lower-Tier Distribution Account and, without duplication, the REO Account (and with respect to each Non-Serviced Mortgage Loan, only to the extent received by the Trustee pursuant to the JPMCC 2007-LDP11 Pooling and Servicing Agreement), as of the related Master Servicer Remittance Date, exclusive of (without duplication):
(1) all scheduled payments of principal and/or interest (the ‘‘Periodic Payments’’) and balloon payments collected but due on a due date subsequent to the related Due Period, excluding interest relating to periods prior to, but due after, the Cut-off Date;
(2) all unscheduled payments of principal (including prepayments), unscheduled interest, Liquidation Proceeds, Insurance and Condemnation Proceeds and other
S-171
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);
(3) all amounts in the Certificate Account that are due or reimbursable to any person other than the Certificateholders;
(4) with respect to each Withheld 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 Certificate Account;
(5) Excess Interest;
(6) all Yield Maintenance Charges;
(7) all amounts deposited in the Certificate Account, the Lower-Tier Distribution Account and, without duplication, the REO Account in error; and
(8) any accrued interest on a mortgage loan allocable to the default interest rate for such mortgage loan, to the extent permitted by law, as more particularly defined in the related mortgage loan documents, excluding any interest calculated at the Mortgage Rate for the related mortgage loan;
(y) all P&I Advances made by the Master Servicer with respect to the Distribution Date (net of certain amounts that are due or reimbursable to persons other than the Certificateholders). See ‘‘Description of the Pooling Agreements—Certificate Account’’ in the prospectus; and
(z) with respect to the Distribution Date occurring in each March (or February if the related Distribution Date is the final Distribution Date), the related Withheld Amounts required to be deposited in the Lower-Tier Distribution Account pursuant to the Pooling and Servicing Agreement.
The ‘‘Due Period’’ for each Distribution Date and any mortgage loan will be the period commencing on the day immediately following the due date for the mortgage loan in the month preceding the month in which that Distribution Date occurs and ending on and including the due date for the mortgage loan in the month in which that Distribution Date occurs; provided that the first Due Period with respect to any mortgage loan with its first due date after August 2007 will begin on the day immediately following the Cut-off Date of such mortgage loan.
Notwithstanding the foregoing, in the event that the last day of a Due Period (or applicable grace period) is not a business day, any Periodic Payments received with respect to the mortgage loans relating to the related Due Period on the business day immediately following that day will be deemed to have been received during that Due Period and not during any other Due Period.
Priority. On each Distribution Date, for so long as the Certificate Balances or Notional Amount of the Certificates has not been reduced to zero, the Trustee is required to apply amounts on deposit in the Upper-Tier Distribution Account, to the extent of the Available Distribution Amount, in the following order of priority:
First, to pay interest, concurrently, (i) on the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-SB Certificates, pro rata, from the portion of the Available Distribution Amount for such Distribution Date attributable to mortgage loans in Loan Group 1 up to an amount equal to the aggregate Interest Distribution Amount for those Classes; (ii) on the Class A-1A Certificates from the portion of the Available Distribution Amount for such Distribution Date attributable to mortgage loans in Loan Group 2 up to an amount equal to the aggregate Interest Distribution Amount for such Class; and (iii) on the Class X Certificates from the portion of the Available Distribution Amoun t for such Distribution Date up to an amount equal to the aggregate Interest Distribution Amount for such Class, without regard to Loan Group, in each case based upon their respective entitlements to interest for that Distribution Date; provided, however, on any
S-172
Distribution Date where the Available Distribution Amount (or applicable portion of the Available Distribution Amount) is not sufficient to make distributions in full to the related Classes as described above, the Available Distribution Amount will be allocated among the above Classes without regard to Loan Group, pro rata, in accordance with the respective amounts of Distributable Certificate Interest in respect of such Classes on such Distribution Date, in an amount equal to all Interest Distribution Amounts in respect of each such Class for such Distribution Date;
Second, to the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-SB and Class A-1A Certificates, in reduction of the Certificate Balances of those Classes, concurrently: (i)(A) first, to the Class A-SB Certificates, in an amount equal to the Group 1 Principal Distribution Amount for such Distribution Date and, after the Certificate Balance of the Class A-1A Certificates has been reduced to zero, the Group 2 Principal Distribution Amount for such Distribution Date remaining after payments specified in clause (ii) below have been made on such Distribution Date, until the Certificate Balance of the Class A-SB Certificates is reduced to the Class A-SB Planned Principal Balance, (B) then, to the Class A-1 Certificates, in an amount equal to the Group 1 Principal Distribution Amount (or the portio n of it remaining after payments specified in clause (i)(A) above have been made) for such Distribution Date and, after the Certificate Balance of the Class A-1A Certificates has been reduced to zero, the Group 2 Principal Distribution Amount remaining after payments specified in clause (i)(A) above and clause (ii) below have been made on such Distribution Date, until the Certificate Balance of the Class A-1 Certificates is reduced to zero, (C) to the Class A-2 Certificates in an amount equal to the Group 1 Principal Distribution Amount (or the portion of it remaining after payments specified in clauses (i)(A) and (B) above have been made) for such Distribution Date and, after the Certificate Balance of the Class A-1A Certificates has been reduced to zero, the Group 2 Principal Distribution Amount remaining after payments specified in clauses (i)(A) and (B) above and clause (ii) below have been made on such Distribution Date , until the Certificate Balance of the Class A-2 Certificates is reduced to zero, (D) then to the Class A-3 Certificates, in an amount equal to the Group 1 Principal Distribution Amount (or the portion of it remaining after payments specified in clauses (i)(A), (B) and (C) above have been made) for such Distribution Date and, after the Certificate Balance of the Class A-1A Certificates is reduced to zero, the Group 2 Principal Distribution Amount remaining after payments specified in clauses (i)(A), (B) and (C) above and clause (ii) below have been made on such Distribution Date, until the Certificate Balance of the Class A-3 Certificates is reduced to zero, (E) then, to the Class A-4 Certificates, in an amount equal to the Group 1 Principal Distribution Amount (or the portion of it remaining after payments specified in clauses (i)(A), (B), (C) and (D) above have been made) for such Distribution Date and, after the Certificate Ba lance of the Class A-1A Certificates has been reduced to zero, the Group 2 Principal Distribution Amount remaining after payments specified in clauses (i)(A), (B), (C) and (D) above and clause (ii) below have been made on such Distribution Date, until the Certificate Balance of the Class A-4 Certificates is reduced to zero, and (F) to the Class A-SB Certificates, in an amount equal to the Group 1 Principal Distribution Amount (or the portion of it remaining after payments specified in clauses (i)(A), (B), (C), (D) and (E) above have been made) for such Distribution Date and, after the Certificate Balance of the Class A-1A Certificates has been reduced to zero, the Group 2 Principal Distribution Amount remaining after payments specified in clauses (i)(A), (B), (C), (D) and (E) above and clause (ii) below have been made on such Distribution Date, until the Certificate Balance of the Class A-SB Certificates has been reduced to zero; and (ii) to the Class A-1A Certificates, in an amount equal to the Group 2 Principal Distribution Amount and, after the Certificate Balances of the Class A-4 and Class A-SB Certificates have been reduced to zero, the Group 1 Principal Distribution Amount remaining after payments specified in clauses (i)(A), (B), (C), (D), (E) and (F) above have been made on such Distribution Date, until the Certificate Balance of the Class A-1A Certificates is reduced to zero;
Third, to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A Certificates, pro rata (based upon the aggregate unreimbursed Collateral Support Deficit allocated to each
S-173
Class), until all amounts of Collateral Support Deficit previously allocated to those Classes, but not previously reimbursed, have been reimbursed in full;
Fourth, to the Class A-M Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Fifth, to the Class A-M Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates to zero, an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates), until the Certificate Balance of that Class is reduced to zero;
Sixth, to the Class A-M Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class A-M Certificates, but not previously reimbursed, have been reimbursed in full;
Seventh, to the Class A-J Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Eighth, to the Class A-J Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates and Class A-M Certificates to zero, to the Class A-J Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates and Class A-M Certificates on that Distribution Date), until the Certificate Balance of that Class is reduced to zero;
Ninth, to the Class A-J Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class A-J Certificates, but not previously reimbursed, have been reimbursed in full;
Tenth, to the Class B Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Eleventh, to the Class B Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates, Class A-M Certificates and Class A-J Certificates to zero, to the Class B Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates, Class A-M Certificates and Class A-J Certificates on that Distribution Date), until the Certificate Balance of that Class is reduced to zero;
Twelfth, to the Class B Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class B Certificates, but not previously reimbursed, have been reimbursed in full;
Thirteenth, to the Class C Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Fourteenth, to the Class C Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates, Class A-M Certificates, Class A-J Certificates and Class B Certificates to zero, to the Class C Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates, Class A-M Certificates, Class A-J Certificates and Class B Certificates on that Distribution Date), until the Certificate Balance of that Class is reduced to zero;
Fifteenth, to the Class C Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class C Certificates, but not previously reimbursed, have been reimbursed in full;
Sixteenth, to the Class D Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Seventeenth, to the Class D Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates and Class C Certificates to zero, to the
S-174
Class D Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates and Class C Certificates on that Distribution Date), until the Certificate Balance of that Class is reduced to zero;
Eighteenth, to the Class D Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class D Certificates, but not previously reimbursed, have been reimbursed in full;
Nineteenth, to the Class E Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Twentieth, to the Class E Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates and Class D Certificates to zero, to the Class E Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates and Class D Certificates on that Distribution Date), until the Certificate Balance of that Class is reduced to zero;
Twenty-first, to the Class E Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class E Certificates, but not previously reimbursed, have been reimbursed in full;
Twenty-second, to the Class F Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Twenty-third, to the Class F Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates and Class E Certificates to zero, to the Class F Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates and Class E Certificates on that Distribution Date), until the Certificate Balance of that Class is reduced to zero;
Twenty-fourth, to the Class F Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class F Certificates, but not previously reimbursed, have been reimbursed in full;
Twenty-fifth, to the Class G Certificates, in respect of interest up to an amount equal to the Interest Distribution Amount for that Class;
Twenty-sixth, to the Class G Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates and Class F Certificates to zero, to the Class G Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates and Class F Certificates on that Distribution Date), until the Certificate Balance of that Class is reduced to zero;
Twenty-seventh, to the Class G Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class G Certificates, but not previously reimbursed, have been reimbursed in full;
Twenty-eighth, to the Class H Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Twenty-ninth, to the Class H Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates, Class A-M
S-175
Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Certificates and Class G Certificates to zero, to the Class H Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Certificates and Class G Certificates on that Distribution Date), until the Certificate Balance of that Class is reduced to zero;
Thirtieth, the Class H Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class H Certificates, but not previously reimbursed, have been reimbursed in full;
Thirty-first, to the Class J Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Thirty-second, to the Class J Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Certificates, Class G Certificates and Class H Certificates to zero, to the Class J Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Certificates, Class G Certificates and Class H Certificates on that Distr ibution Date), until the Certificate Balance of that Class is reduced to zero;
Thirty-third, to the Class J Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class J Certificates, but not previously reimbursed, have been reimbursed in full;
Thirty-fourth, to the Class K Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Thirty-fifth, to the Class K Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Certificates, Class G Certificates, Class H Certificates and Class J Certificates to zero, to the Class K Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Certificates, Class G Certificates, Class H Cer tificates and Class J Certificates on that Distribution Date), until the Certificate Balance of that Class is reduced to zero;
Thirty-sixth, to the Class K Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class K Certificates, but not previously reimbursed, have been reimbursed in full;
Thirty-seventh, to the Class L Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Thirty-eighth, to the Class L Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Certificates, Class G Certificates, Class H Certificates, Class J Certificates and Class K Certificates to zero, to the Class L Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Certificates, Class G Ce rtificates, Class H Certificates, Class J Certificates and Class K Certificates on that Distribution Date), until the Certificate Balance of that Class is reduced to zero;
S-176
Thirty-ninth, to the Class L Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class L Certificates, but not previously reimbursed, have been reimbursed in full;
Fortieth, to the Class M Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Forty-first, to the Class M Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Certificates, Class G Certificates, Class H Certificates, Class J Certificates, Class K Certificates and Class L Certificates to zero, to the Class M Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Cert ificates, Class G Certificates, Class H Certificates, Class J Certificates, Class K Certificates and Class L Certificates on that Distribution Date), until the Certificate Balance of that Class is reduced to zero;
Forty-second, to the Class M Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class M Certificates, but not previously reimbursed, have been reimbursed in full;
Forty-third, to the Class N Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Forty-fourth, to the Class N Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Certificates, Class G Certificates, Class H Certificates, Class J Certificates, Class K Certificates, Class L Certificates and Class M Certificates to zero, to the Class N Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Cer tificates, Class F Certificates, Class G Certificates, Class H Certificates, Class J Certificates, Class K Certificates, Class L Certificates and Class M Certificates on that Distribution Date), until the Certificate Balance of that Class is reduced to zero;
Forty-fifth, to the Class N Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class N Certificates, but not previously reimbursed, have been reimbursed in full;
Forty-sixth, to the Class P Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Forty-seventh, to the Class P Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Certificates, Class G Certificates, Class H Certificates, Class J Certificates, Class K Certificates, Class L Certificates, Class M Certificates and Class N Certificates to zero, to the Class P Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Ce rtificates, Class E Certificates, Class F Certificates, Class G Certificates, Class H Certificates, Class J Certificates, Class K Certificates, Class L Certificates, Class M Certificates and Class N Certificates on that Distribution Date), until the Certificate Balance of that Class is reduced to zero;
Forty-eighth, to the Class P Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class P Certificates, but not previously reimbursed, have been reimbursed in full;
S-177
Forty-ninth, to the Class Q Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Fiftieth, to the Class Q Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Certificates, Class G Certificates, Class H Certificates, Class J Certificates, Class K Certificates, Class L Certificates, Class M Certificates, Class N Certificates and Class P Certificates to zero, to the Class Q Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certifi cates, Class D Certificates, Class E Certificates, Class F Certificates, Class G Certificates, Class H Certificates, Class J Certificates, Class K Certificates, Class L Certificates, Class M Certificates, Class N Certificates and Class P Certificates on that Distribution Date), until the Certificate Balance of that Class is reduced to zero;
Fifty-first, to the Class Q Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class Q Certificates, but not previously reimbursed, have been reimbursed in full;
Fifty-second, to the Class T Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Fifty-third, to the Class T Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Certificates, Class G Certificates, Class H Certificates, Class J Certificates, Class K Certificates, Class L Certificates, Class M Certificates, Class N Certificates, Class P Certificates and Class Q Certificates to zero, to the Class T Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Cert ificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Certificates, Class G Certificates, Class H Certificates, Class J Certificates, Class K Certificates, Class L Certificates, Class M Certificates, Class N Certificates, Class P Certificates and Class Q Certificates on that Distribution Date), until the Certificate Balance of that Class is reduced to zero;
Fifty-fourth, to the Class T Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class T Certificates, but not previously reimbursed, have been reimbursed in full;
Fifty-fifth, to the Class NR Certificates, in respect of interest, up to an amount equal to the Interest Distribution Amount for that Class;
Fifty-sixth, to the Class NR Certificates, in reduction of the Certificate Balance of that Class following reduction of the Certificate Balances of the Class A Certificates, Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Certificates, Class G Certificates, Class H Certificates, Class J Certificates, Class K Certificates, Class L Certificates, Class M Certificates, Class N Certificates, Class P Certificates, Class Q Certificates and Class T Certificates to zero, to the Class NR Certificates an amount equal to the Principal Distribution Amount (or the portion of it remaining after distributions on the Class A Certificates, Class A-M Certificates, Class A-J Ce rtificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates, Class F Certificates, Class G Certificates, Class H Certificates, Class J Certificates, Class K Certificates, Class L Certificates, Class M Certificates, Class N Certificates, Class P Certificates, Class Q Certificates and Class T Certificates on that Distribution Date), until the Certificate Balance of that Class is reduced to zero;
Fifty-seventh, to the Class NR Certificates, until all amounts of Collateral Support Deficit previously allocated to the Class NR Certificates, but not previously reimbursed, have been reimbursed in full; and
S-178
Fifty-eighth, to the Class R Certificates, the amount, if any, of the Available Distribution Amount remaining in the Upper-Tier Distribution Account, and to the Class LR Certificates, the amount remaining in the Lower-Tier Distribution Account with respect to that Distribution Date.
Reimbursement of previously allocated Collateral Support Deficit 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.
Notwithstanding the distribution priority second set forth above, on and after the Distribution Date on which the Certificate Balances of the Subordinate Certificates have all been reduced to zero as a result of the allocation of mortgage loan losses to those certificates (that date, the ‘‘Cross-Over Date’’), the Principal Distribution Amount will be distributed pursuant to clause (i), (ii) and (iii) of priority second set forth above, pro rata (based upon their respective Certificate Balances), among the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A Certificates without regard to the priorities set forth above a nd without regard to Loan Group 1 or Loan Group 2 or the Class A-SB Planned Principal Balance.
Pass-Through Rates. The interest rate (the ‘‘Pass-Through Rate’’) applicable to each Class of Certificates (other than the Class S and the Residual Certificates) for any Distribution Date will equal the rates set forth below:
The Pass-Through Rate on the Class A-1 Certificates is a per annum rate equal to 5.73800%.
The Pass-Through Rate on the Class A-2 Certificates is a per annum rate equal to 5.82700%.
The Pass-Through Rate on the Class A-3 Certificates is a per annum rate equal to the WAC Rate minus 0.07200%.
The Pass-Through Rate on the Class A-4 Certificates is a per annum rate equal to 5.88200%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class A-SB Certificates is a per annum rate equal to 5.83300%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class A-1A Certificates is a per annum rate equal to 5.85000%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class A-M Certificate is a per annum rate equal to the WAC Rate.
The Pass-Through Rate on the Class A-J Certificates is a per annum rate equal to the WAC Rate.
The Pass-Through Rate on the Class B Certificates is a per annum rate equal to the WAC Rate.
The Pass-Through Rate on the Class C Certificates is a per annum rate equal to the WAC Rate.
The Pass-Through Rate on the Class D Certificates is a per annum rate equal to the WAC Rate.
The Pass-Through Rate on the Class E Certificates is a per annum rate equal to the WAC Rate.
The Pass-Through Rate on the Class F Certificates is a per annum rate equal to the WAC Rate.
The Pass-Through Rate on the Class G Certificates is a per annum rate equal to the WAC Rate.
The Pass-Through Rate on the Class H Certificates is a per annum rate equal to the WAC Rate.
The Pass-Through Rate on the Class J Certificates is a per annum rate equal to the WAC Rate.
The Pass-Through Rate on the Class K Certificates is a per annum rate equal to the WAC Rate.
The Pass-Through Rate on the Class L Certificates is a per annum rate equal to 5.12500%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class M Certificates is a per annum rate equal to 5.12500%, subject to a maximum rate equal to the WAC Rate.
S-179
The Pass-Through Rate on the Class N Certificates is a per annum rate equal to 5.12500%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class P Certificates is a per annum rate equal to 5.12500%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class Q Certificates is a per annum rate equal to 5.12500%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class T Certificates is a per annum rate equal to 5.12500%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class NR Certificates is a per annum rate equal to 5.12500%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate applicable to the Class X Certificates for the initial Distribution Date will equal approximately 0.27528% per annum. The Pass-Through Rate for the Class X 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 all of the other Certificates (other than the Class S, Class R and Class LR Certificates) weighted on the basis of their respective Certificate Balances immediately prior to that Distribution Date.
The Pass-Through Rate on each Class of Offered Certificates for the first Distribution Date is expected to be as set forth on page S-9 of this prospectus supplement.
The ‘‘WAC Rate’’ with respect to any Distribution Date is equal to the weighted average of the applicable Net Mortgage Rates for the mortgage loans weighted on the basis of their respective Stated Principal Balances as of the Closing Date, in the case of the first Distribution Date, or, for all other Distribution Dates, the preceding Distribution Date.
The ‘‘Net Mortgage Rate’’ for each mortgage loan is equal to the related Mortgage Rate in effect from time to time, less the related Administrative Cost Rate; provided, however, for purposes of calculating Pass-Through Rates, the Net Mortgage Rate for any mortgage loan will be determined without regard to any modification, waiver or amendment of the terms of the 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-Th rough Rate on the Certificates, the Net Mortgage Rate of the 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, with respect to each Withheld 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 (in either case, unless the related Distribution Date is the final Distribution Date) or in February in any year which is a leap year will be the per annum rate stated in the related Mortgage Note less the related Administrative Cost Rate, 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 the amounts withheld for the immediately preceding February and, if applicable, January.
‘‘Administrative Cost Rate’’ as of any date of determination and with respect to any mortgage loan will be equal to the sum of the Servicing Fee Rate and the Trustee Fee Rate.
‘‘Mortgage Rate’’ with respect to any mortgage loan is the per annum rate at which interest accrues on the mortgage loan as stated in the related Mortgage Note in each case without giving effect to any default rate or an increased interest rate.
‘‘Excess Interest’’ with respect to the ARD Loan is the interest accrued at the related Revised Rate in respect of the ARD Loan in excess of the interest accrued at the related Initial Rate, plus any related interest, to the extent permitted by applicable law.
S-180
Interest Distribution Amount. Interest will accrue for each Class of Certificates (other than the Class S Certificates and the Residual Certificates) during the related Interest Accrual Period. The ‘‘Interest Distribution Amount’’ of any Class of Certificates (other than the Class S Certificates and the Residual Certificates) for any Distribution Date is an amount equal to the sum of all Distributable Certificate Interest in respect of that Class of Certificates for that Distribution Date and, to the extent not previously paid, for all prior Distribution Dates and any Accrued Interest from Recoveries for such Class of Certificates to the extent not previously paid, for all prior Distribution Dates.
‘‘Accrued Interest from Recoveries’’ in respect of each Distribution Date and any Class of Certificates (other than the Class X and Class S Certificates and the Residual Certificates) that had an increase to its Certificate Balance as a result of a recovery of Nonrecoverable Advances, an amount equal to interest at the Pass-Through Rate applicable to that Class on the amount of such increase to its Certificate Balance accrued from the Distribution Date on which the related Collateral Support Deficit was allocated to such Class as a result of the reimbursement of Nonrecoverable Advances from the trust to, but not including, the Distribution Date on which the Certificate Balance was so increased.
The ‘‘Interest Accrual Period’’ in respect of each Class of Certificates (other than the Class S Certificates and the Residual Certificates) for each Distribution Date will be the calendar month prior to the month in which that Distribution Date occurs and will be calculated on a 30/360 Basis.
The ‘‘Distributable Certificate Interest’’ in respect of each Class of Certificates (other than the Class S Certificates and the Residual Certificates) for each Distribution Date is equal to one month’s interest at the Pass-Through Rate applicable to that Class of Certificates for that Distribution Date accrued for the related Interest Accrual Period on the related Certificate Balance or Notional Amount, as the case may be, outstanding immediately prior to that Distribution Date, reduced (other than in the case of the Class X Certificates) (to not less than zero) by such Class of Certificates’ allocable share (calculated as described below) of the aggregate of any Prepayment Interest Shortfalls resulting from any principal prepayments made on the mortgage loans during the related Due Period that are not covered by the Master Servicer’s Compensating Interest Payment for the related Distribution Date (the aggregate of the Prepayment Interest Shortfalls that are not so covered, as to the related Distribution Date, the ‘‘Net Aggregate Prepayment Interest Shortfall’’).
The portion of the Net Aggregate Prepayment Interest Shortfall for any Distribution Date that is allocable to each Class of Certificates (other than the Class S, Class X and the Residual Certificates) will equal the product of (a) the Net Aggregate Prepayment Interest Shortfall, multiplied by (b) a fraction, the numerator of which is equal to the Interest Distribution Amount in respect of that Class of Certificates, for the related Distribution Date, and the denominator of which is equal to the aggregate Interest Distribution Amount in respect of all Classes of Certificates (other than the Class S, Class X and the Residual Certificates) for the related Distribution Date.
Principal Distribution Amount. So long as (i) either the Class A-4 or the Class A-SB Certificates and (ii) the Class A-1A Certificates remain outstanding, the Principal Distribution Amount for each Distribution Date as it relates to distributions to the Class A Certificates will be calculated on a Loan-Group-by- Loan Group basis. On each Distribution Date after the Certificate Balance of either (i) each of the Class A-4 and Class A-SB Certificates or (ii) the Class A-1A Certificates has been reduced to zero (other than as a result of losses), a single Principal Distribution Amount will be calculated in the aggregate for both Loan Groups. The ‘‘Principal Distribution Amount’’ for any Distribution Date is an amount equal to the sum of (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 by the amount of any reimbursements of (i) Nonrecoverable Advances, with interest on such
S-181
Nonrecoverable Advances 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 (ii) 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 that, in the case of clause (i) and (ii) above, if any of the amounts that were reimbursed from principal collections on the mortgage loans are subsequently recovered on the related mortgage loan, such recovery will increase the Principal Distribution Amount for the Distribution Date related to the period in which such recove ry occurs).
The ‘‘Group 1 Principal Distribution Amount’’ for any Distribution Date is an amount equal to the sum of (a) the Group 1 Principal Shortfall for that Distribution Date, (b) the Scheduled Principal Distribution Amount for Loan Group 1 for that Distribution Date, and (c) the Unscheduled Principal Distribution Amount for Loan Group 1 for that Distribution Date; provided that the Group 1 Principal Distribution Amount for any Distribution Date will be reduced by the amount of any reimbursements of (i) Nonrecoverable Advances, plus interest on such Nonrecoverable Advances, that are paid or reimbursed from principal collections on the mortgage loans in Loan Group 1 in a period during which such principal collections would have otherwise been included in the Group 1 Principal Distribution Amount for that Distribution Date, (ii) Workout-Delayed Reimbursement Amounts that are paid or reimbursed from principal collections on the mortgage loans in Loan Group 1 in a period during which such principal collections would have otherwise been included in the Group 1 Principal Distribution Amount for that Distribution Date and (iii) following the reimbursements described in clauses (i) and (ii), the excess, if any of (A) the total amount of Nonrecoverable Advances and Workout-Delayed Reimbursement Amounts, plus interest on such Nonrecoverable Advances and Workout-Delayed Reimbursement Amounts, that would have been paid or reimbursed from principal collections on the mortgage loans in Loan Group 2 as described in clauses (i) and (ii) of the definition of ‘‘Group 2 Principal Distrib ution Amount’’ had the aggregate amount available for distribution of principal with respect to Loan Group 2 been sufficient to make such reimbursements in full, over (B) the aggregate amount available for distribution of principal with respect to Loan Group 2 for that Distribution Date (provided, further, (i) that in the case of clauses (i) and (ii) above, if any of such amounts reimbursed from principal collections on the mortgage loans in Loan Group 1 are subsequently recovered on the related mortgage loan, subject to the application of any recovery to increase the Group 2 Principal Distribution Amount as required under clause (ii) of the definition of Group 2 Principal Distribution Amount, such recovery will be applied to increase the Group 1 Principal Distribu tion Amount for the Distribution Date related to the period in which such recovery occurs; and (ii) that in the case of clause (iii) above, if any of such amounts reimbursed from principal collections on the mortgage loans in Loan Group 2 are subsequently recovered on the related mortgage loan, such recovery will first be applied to increase the Group 1 Principal Distribution Amount up to such amounts and then to increase the Group 2 Principal Distribution Amount).
The ‘‘Group 2 Principal Distribution Amount’’ for any Distribution Date is an amount equal to the sum of (a) the Group 2 Principal Shortfall for that Distribution Date, (b) the Scheduled Principal Distribution Amount for Loan Group 2 for that Distribution Date and (c) the Unscheduled Principal Distribution Amount for Loan Group 2 for that Distribution Date; provided that the Group 2 Principal Distribution Amount for any Distribution Date will be reduced by the amount of any reimbursements of (i) Nonrecoverable Advances, plus interest on such Nonrecoverable Advances, that are paid or reimbursed from principal collections on the mortgage loans in Loan Group 2 in a period during which such principal collections would have otherwise been included in the Group 2 Principal Distribution Amount for that Distribution Date, (ii) Workout-Delayed Reimbursement Amounts that are paid or reimbursed from principal collections on the mortgage loans in Loan Group 2 in a period during which such principal collections would have otherwise been included in the Group 2 Principal Distribution Amount for
S-182
that Distribution Date and (iii) following the reimbursements described in clauses (i) and (ii), the excess, if any of (A) the total amount of Nonrecoverable Advances and Workout-Delayed Reimbursement Amounts, plus interest on such Nonrecoverable Advances and Workout-Delayed Reimbursement Amounts, that would have been paid or reimbursed from principal collections on the mortgage loans in Loan Group 1 as described in clauses (i) and (ii) of the definition of Group 1 Principal Distribution Amount had the aggregate amount available for distribution of principal with respect to Loan Group 1 been sufficient to make such reimbursements in full, over (B) the aggregate amount available for distribution of principal with respect to Loan Group 1 for that Distribution Date (provided, further, (I) that in the case of clauses (i) a nd (ii) above, if any of such amounts reimbursed from principal collections on the mortgage loans in Loan Group 2 are subsequently recovered on the related mortgage loan, subject to the application of any recovery to increase the Group 1 Principal Distribution Amount as required under clause (II) of the definition of Group 1 Principal Distribution Amount, such recovery will be applied to increase the Group 2 Principal Distribution Amount for the Distribution Date related to the period in which such recovery occurs; and (II) that in the case of clause (iii) above, if any of such amounts reimbursed from principal collections on the mortgage loans in Loan Group 1 are subsequently recovered on the related mortgage loan, such recovery will first be applied to increase the Group 2 Principal Distribution Amount up to such amounts and then to increase the Group 1 Principal Distribution Amount).
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) 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 Due Period and all Assumed Scheduled Payments for the related Due 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) or advanced by the Master Servicer or the Trustee, as applicable, and (b) all balloon payments 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, the last day of such grace period, as applicable, to the extent received by the Master Servicer as of the business day preceding the related 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, including late payments in respect of a delinquent balloon payment, regardless of the timing of those late payments, except to the extent those late payments are otherwise reimbursable to the Master Servicer or the Trustee, as the case may be, for prior Advances.
The ‘‘Unscheduled Principal Distribution Amount’’ for each Distribution Date will equal the aggregate of: (a) all prepayments of principal received on the mortgage loans as of the business day preceding the related Master Servicer Remittance Date; and (b) any other collections (exclusive of payments by borrowers) received on the mortgage loans and any REO Properties on or prior to the business day immediately preceding the related Master Servicer Remittance 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 shall be reduced by any unpaid Special Servicing Fees, Liquidation Fees, 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 Due Period and with respect to any mortgage loan that is delinquent in respect of its balloon payment (including any REO Loan as to which the balloon payment would have been past due), is an amount equal to the sum of (a) the principal portion of the Periodic Payment that would have been due on that mortgage loan on the related
S-183
due date based on the constant payment required by the 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 occurring in connection with a default or a bankruptcy modification, and (b) interest on the Stated Principal Balance of that mortgage loan at its Mortgage Rate (net of the applicable rate at which the Servicing Fee is calculated).
For purposes of the foregoing definition of Principal Distribution Amount, the term ‘‘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 distributed in respect of principal on the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB, Class A-1 A, Class A-M, Class A-J, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T and Class NR Certificates on the preceding Distribution Date. There will be no Principal Shortfall on the first Distribution Date.
For purposes of the foregoing definition of Group 1 Principal Distribution Amount, the term ‘‘Group 1 Principal Shortfall’’ for any Distribution Date means the amount, if any, by which (1) the lesser of (a) the Group 1 Principal Distribution Amount for the prior Distribution Date and (b) the aggregate Certificate Balance of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-SB Certificates exceeds (2) the aggregate amount distributed in respect of principal on the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-SB Certificates on the preceding Distribution Date. There will be no Group 1 Principal Shortfall on the first Distribution Date.
For purposes of the foregoing definition of Group 2 Principal Distribution Amount, the term ‘‘Group 2 Principal Shortfall’’ for any Distribution Date means the amount, if any, by which (1) the lesser of (a) the Group 2 Principal Distribution Amount for the prior Distribution Date and (b) the aggregate Certificate Balance of the Class A-1A Certificates, exceeds (2) the aggregate amount distributed in respect of principal on the Class A-1A Certificates on the preceding Distribution Date. There will be no Group 2 Principal Shortfall on the first Distribution Date.
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 D to this prospectus supplement. Such balances were calculated using, among other things, certain weighted average life assumptions. See ‘‘Yield and Maturity Considerations—Weighted Average Life’’ in this prospectus supplement. 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 D to this prospectus supplement. The re is no assurance, however, that the mortgage loans will perform in conformity with our assumptions. Therefore, there can be no assurance 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 Annex D. In particular, once the Certificate Balances of the Class A-1A, Class A-1, Class A-2, Class A-3 and Class A-4 Certificates have been reduced to zero, any portion of the Group 2 Principal Distribution Amount and/or Group 1 Principal Distribution Amount, as applicable, remaining on any Distribution Date, will be distributed on the Class A-SB Certificates until the Certificate Balance of the Class A-SB Certificates is reduced to zero.
Certain Calculations with Respect to Individual Mortgage Loans. The Stated Principal Balance of each mortgage loan outstanding at any time represents the principal balance of the mortgage loan ultimately due and payable to the Certificateholders. The ‘‘Stated Principal Balance’’ of each mortgage loan will initially equal its Cut-off Date Balance and, on each Distribution Date, will be reduced by the amount of principal payments received from the related borrower or advanced for such Distribution Date. The Stated Principal Balance of a mortgage loan may also be reduced in connection with any forced reduction of its actual unpaid principal balance imposed by a court presiding over a bankruptcy proceeding in which the related borrower is the debtor. See ‘‘Certain Legal Aspects of Mortgage Loans—Bankruptcy Laws’’ in the prospectus. If any mortgage loan is paid in full or the mortgage loan (or any Mortgaged Property acquired in respect of the mortgage loan) is otherwise liquidated, then, as of the first
S-184
Distribution Date that follows the end of the Due Period in which that payment in full or liquidation occurred and notwithstanding that a loss may have occurred in connection with any liquidation, the Stated Principal Balance of the mortgage loan will be zero.
For purposes of calculating distributions on, and allocations of, Collateral Support Deficit to the Certificates, as well as for purposes of calculating the Servicing Fee and Trustee Fee payable each month, each REO Property will be treated as if there exists with respect to such REO Property an outstanding mortgage loan (including any REO Property with respect to each Non-Serviced Mortgage Loan held pursuant to the JPMCC 2007-LDP11 Pooling and Servicing Agreement) (an ‘‘REO Loan’’), and all references to mortgage loan, mortgage loans and pool of mortgage loans in this prospectus supplement and in the 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 pre decessor mortgage 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 any portion of it payable or reimbursable to the Master Servicer or Special Servicer, 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 or Special 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.
Excess Interest. On each Distribution Date, the Trustee is required to distribute any Excess Interest received with respect to the ARD Loan on or prior to the related Determination Date to the Class S Certificates.
Allocation of Yield Maintenance Charges and Prepayment Premiums
On any Distribution Date, Yield Maintenance Charges, if any, collected in respect of the mortgage loans during the related Due Period will be required to be distributed by the Trustee to the holders of each Class of Offered Certificates (excluding the Class X Certificates) and the Class G, Class H, Class J and Class K Certificates in the following manner: the holders of each Class of Offered Certificates (excluding the Class X Certificates) and the Class G, Class H, Class J and Class K Certificates will be entitled to receive, with respect to the related Loan Group, as applicable, on each Distribution Date an amount of Yield Maintenance Charges equal to the product of (a) a fraction whose numerator is the amount of principal distributed to such Class on such Distribution Date and whose denominator is the total amount of principal distributed to all of the Certificates representing principal payments in respect of mortgage loans in Loan Group 1 or Loan Group 2, as applicable, on such Distribution Date, (b) the Base Interest Fraction for the related principal prepayment and such Class of Certificates and (c) the Yield Maintenance Charges collected on such principal prepayment during the related Due Period. If there is more than one such Class of Certificates entitled to distributions of principal with respect to the related Loan Group, as applicable, on any particular Distribution Date on which Yield Maintenance Charges are distributable, the aggregate amount of such Yield Maintenance Charges with respect to that Loan Group will be allocated among all such Classes of Certificates within the related Loan Group up to, and on a pro rata basis in accordance with, their respective entitlements thereto in accordance with the first sentence of this paragraph. Any Yield Maintenance Charges collected during the related Due Period remaining after such distributions will be distributed to the holders of the Class X Certificates
The ‘‘Base Interest Fraction’’ with respect to any principal prepayment on any mortgage loan and with respect to any Class of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB, Class A-1 A, Class A-M, Class A-J, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J and Class K Certificates is a fraction (A) whose numerator is the greater of (x) zero and (y) the difference between (i) the Pass-Through Rate on such Class of Certificates, and (ii) the Discount Rate used in calculating the Yield Maintenance Charge with respect to such principal prepayment and (B) whose denominator is the difference between (i) the Mortgage Rate on the related
S-185
mortgage loan and (ii) the Discount Rate used in calculating the Yield Maintenance Charge with respect to such principal prepayment; provided, however, under no circumstances will the Base Interest Fraction be greater than one. If such Discount Rate is greater than the Mortgage Rate on the related mortgage loan, then the Base Interest Fraction will equal zero.
Notwithstanding the foregoing, any prepayment premiums collected that are calculated under the related mortgage loan documents as a specified percentage of the amount being prepaid will be distributed to the Class X Certificates entirely.
For a description of Yield Maintenance Charges, see ‘‘Description of the Mortgage Pool— Certain Terms and Conditions of the Mortgage Loans—Prepayment Provisions’’ in this prospectus supplement. See also ‘‘Risk Factors—Risks Relating to Enforceability of Yield Maintenance Charges, Prepayment Premiums or Defeasance Provisions’’ and ‘‘Certain Legal Aspects of Mortgage Loans—Default Interest and Limitations on Prepayments’’ in the prosp ectus regarding the enforceability of Yield Maintenance Charges.
Assumed Final Distribution Date; Rated Final Distribution Date
The ‘‘Assumed Final Distribution Date’’ with respect to any Class of Offered Certificates is the Distribution Date on which the aggregate Certificate Balance of that Class of Certificates would be reduced to zero based on the assumptions set forth below. The Assumed Final Distribution Date will in each case be as follows:
| | | |
| Class Designation | | | Assumed Final Distribution Date |
| Class A-1 | | | October 15, 2011 |
| Class A-2 | | | August 15, 2012 |
| Class A-3 | | | August 15, 2014 |
| Class A-4 | | | July 15, 2017 |
| Class A-SB | | | October 15, 2016 |
| Class A-1A | | | July 15, 2017 |
| Class X | | | September 15, 2027 |
| Class A-M | | | August 15, 2017 |
| Class A-J | | | August 15, 2017 |
| Class B | | | August 15, 2017 |
| Class C | | | August 15, 2017 |
| Class D | | | August 15, 2017 |
| Class E | | | August 15, 2017 |
| Class F | | | August 15, 2017 |
The Assumed Final Distribution Dates set forth above were calculated without regard to any delays in the collection of balloon payments and without regard to a reasonable liquidation time with respect to any mortgage loans that may become delinquent. Accordingly, in the event of defaults on the mortgage loans, the actual final Distribution Date for one or more Classes of the Offered Certificates may be later, and could be substantially later, than the related Assumed Final Distribution Date(s).
In addition, the Assumed Final Distribution Dates set forth above were calculated on the basis of a 0% CPR and assuming the ARD Loan is prepaid in full on its Anticipated Repayment Dates. 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
S-186
factors, and we cannot assure you as to actual payment experience. Finally, the Assumed Final Distribution Dates were calculated assuming that there would not be an early termination of the trust fund.
The Rated Final Distribution Date for each Class of Offered Certificates will be February 15, 2051. See ‘‘Ratings’’ in this prospectus supplement.
Subordination; Allocation of Collateral Support Deficit
The rights of holders of each Class of Certificates to receive distributions of amounts collected or advanced on the mortgage loans will be subordinated, to the extent described in this prospectus supplement, to the rights of holders of each Class of Certificates with a higher distribution priority, such that:
| | |
| • | the rights of the holders of the Class NR Certificates will be subordinated to the rights of the holders of the Class T Certificates, |
| | |
| • | the rights of the holders of the Class T and Class NR Certificates will be subordinated to the rights of the holders of the Class Q Certificates, |
| | |
| • | the rights of the holders of the Class Q, Class T and Class NR Certificates will be subordinated to the rights of the holders of the Class P Certificates, |
| | |
| • | the rights of the holders of the Class P, Class Q, Class T and Class NR Certificates will be subordinated to the rights of the holders of the Class N Certificates, |
| | |
| • | the rights of the holders of the Class N, Class P, Class Q, Class T and Class NR Certificates will be subordinated to the rights of the holders of the Class M Certificates, |
| | |
| • | the rights of the holders of the Class M, Class N, Class P, Class Q, Class T and Class NR Certificates will be subordinated to the rights of the holders of the Class L Certificates, |
| | |
| • | the rights of the holders of the Class L, Class M, Class N, Class P, Class Q, Class T and Class NR Certificates will be subordinated to the rights of the holders of the Class K Certificates, |
| | |
| • | the rights of the holders of the Class K, Class L, Class M, Class N, Class P, Class Q, Class T and Class NR Certificates will be subordinated to the rights of the holders of the Class J Certificates, |
| | |
| • | the rights of the holders of the Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T and Class NR Certificates will be subordinated to the rights of the holders of the Class H Certificates, |
| | |
| • | the rights of the holders of the Class H, Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T and Class NR Certificates will be subordinated to the rights of the holders of the Class G Certificates, |
| | |
| • | the rights of the holders of the Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T and Class NR Certificates will be subordinated to the rights of the holders of the Class F Certificates, |
| | |
| • | the rights of the holders of the Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T and Class NR Certificates will be subordinated to the rights of the holders of the Class E Certificates, |
| | |
| • | the rights of the holders of the Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T and Class NR Certificates will be subordinated to the rights of the holders of the Class D Certificates, |
| | |
| • | the rights of the holders of the Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T and Class NR Certificates will be subordinated to the rights of the holders of the Class C Certificates, |
S-187
| | |
| • | the rights of the holders of the Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T and Class NR Certificates will be subordinated to the rights of the holders of the Class B Certificates, |
| | |
| • | the rights of the holders of the Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T and Class NR Certificates will be subordinated to the rights of the holders of the Class A-J Certificates, |
| | |
| • | the rights of the holders of the Class A-J, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T and Class NR Certificates will be subordinated to the rights of the holders of the Class A-M Certificates, and |
| | |
| • | the rights of the holders of the Class A-M, Class A-J, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T and Class NR Certificates will be subordinated to the rights of the holders of the Senior Certificates. |
This subordination is intended to enhance the likelihood of timely receipt by the holders of the Senior Certificates of the full amount of all interest payable in respect of the Senior Certificates on each Distribution Date, and the ultimate receipt by the holders of the Class A Certificates of principal in an amount equal to, in each case, the entire Certificate Balance of the Class A Certificates. Similarly, but to decreasing degrees, this subordination is also intended to enhance the likelihood of timely receipt by the holders of the Class A-M Certificates, the holders of the Class A-J Certificates, the holders of the Class B Certificates, the holders of the Class C Certificates and the holders of the Class D Certificates, the holders of the Class E Certificates, the holders of the Class F Certificates of the full amount of interest payable in respect of that Class of Certificates on each Distribution Date, and the ultimate receipt by the holders of the Class A-M Certificates, the holders of the Class A-J Certificates, the holders of the Class B Certificates, the holders of the Class C Certificates, the holders of the Class D Certificates, the holders of the Class E Certificates and the holders of the Class F Certificates of principal equal to the entire Certificate Balance of each of those Classes.
The protection afforded to the holders of each Class of Offered Certificates by each Class of Certificates that are subordinate to that Class will be accomplished by the application of the Available Distribution Amount on each Distribution Date in accordance with the order of priority described under ‘‘—Distributions’’ above and by the allocation of Collateral Support Deficits in the manner described below. No other form of credit support will be available for the benefit of the holders of the Offered Certificates.
After the Cross-Over Date has occurred, allocation of principal will be made to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A Certificates that are still outstanding, pro rata, without regard to Loan Groups or the Class A-SB Planned Principal Balance, until their Certificate Balances have been reduced to zero. Prior to the Cross-Over Date, allocation of principal will be made (i) with respect to Loan Group 1, first, to the Class A-SB Certificates until their Certificate Balance has been reduced to the Class A-SB Planned Principal Balance for the related Distribution Date, second, to the Class A-1 Certificates until their Certificate Balance has been reduced to zero, third, to the Class A-2 Certificates, until their Certificate Bal ance has been reduced to zero, fourth, to the Class A-3 Certificates, until their Certificate Balance is reduced to zero, fifth, to the Class A-4 Certificates until their Certificate Balance has been reduced to zero, sixth, to the Class A-SB Certificates until their Certificate Balance has been reduced to zero, and then, if the Class A-1A Certificates are still outstanding, to the Class A-1A Certificates until their Certificate Balance has been reduced to zero and (ii) with respect to Loan Group 2, to the Class A-1A Certificates until their Certificate Balance has been reduced to zero and then, if any of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-SB Certificates are still outstanding, first to the Class A-SB Certificates until their Certificate Balance has been reduced to the Class A-SB Planned Principal Balance, second, to the Class A-1 Certificates until their Certificate Balance has been reduced to zero, third, to t he Class A-2 Certificates, until their Certificate Balance has been
S-188
reduced to zero, fourth, to the Class A-3 Certificates, until their Certificate Balance has been reduced to zero, fifth, to the Class A-4 Certificates until their Certificate Balance has been reduced to zero and sixth, to the Class A-SB Certificates until their Certificate Balance has been reduced to zero.
Allocation to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A Certificates, for so long as they are outstanding, of the entire Principal Distribution Amount with respect to the related Loan Group for each Distribution Date will have the effect of reducing the aggregate Certificate Balance of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A Certificates at a proportionately faster rate than the rate at which the aggregate Stated Principal Balance of the pool of mortgage loans will decline. Therefore, as principal is distributed to the holders of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A Certificates, the percentage interest in the trust evidenced by the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A Certificates is decreased (with a correspo nding increase in the percentage interest in the trust evidenced by the Subordinate Certificates), thereby increasing, relative to their respective Certificate Balances, the subordination afforded the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A Certificates by the Subordinate Certificates.
Following retirement of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A Certificates, the successive allocation on each Distribution Date of the remaining Principal Distribution Amount to the Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates and Class F Certificates and the remaining Non-Offered Certificates (other than the Class S Certificates and the Residual Certificates), in that order, for so long as they are outstanding, will provide a similar, but diminishing benefit to the Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates and Class F Certificates as to the relative amount of subordination afforded by the outstanding Classes of Certificates (other than the Cla ss S Certificates, the Class X Certificates and the Residual Certificates) with later sequential designations.
On each Distribution Date, immediately following the distributions to be made to the Certificateholders on that date, the Trustee is required to calculate the amount, if any, by which (1) the aggregate Stated Principal Balance (for purposes of this calculation only, the aggregate Stated Principal Balance will not be reduced by the amount of principal payments received on the mortgage loans that were used to reimburse the Master Servicer, the Special Servicer or the Trustee from general collections of principal on the mortgage loans for Workout-Delayed Reimbursement Amounts, to the extent those amounts are not otherwise determined to be Nonrecoverable Advances) of the mortgage loans including any REO Loans expected to be outstanding immediately following that Distribution Date is less than (2) the aggregate Certificate Balance of the Certificates (other than the Class S and Class X Certificates and the Residual Certificates) after giving effec t to distributions of principal on that Distribution Date (any deficit, ‘‘Collateral Support Deficit’’). The Trustee will be required to allocate any Collateral Support Deficit among the respective Classes of Certificates (other than the Class S and Class X Certificates and the Residual Certificates) as follows: to the Class NR Certificates, Class T Certificates, Class Q Certificates, Class P Certificates, Class N Certificates, Class M Certificates, Class L Certificates, Class K Certificates, Class J Certificates, Class H Certificates, Class G Certificates, Class F Certificates, Class E Certificates, Class D Certificates, Class C Certificates, Class B Certificates, Class A-J Certificates and Class A-M Certificates, in that order, and in each case in respect of and until the remaining Certificate Balance of the Class or Classes of Certificates has been reduced to zero. Following the reduction of the Certificate Balances of all Classes of Subordinate Certificates to zero, the Trustee will be required to allocate the Collateral Support Deficit among the Classes of Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A Certificates pro rata (based upon their respective Certificate Balances) without regard to Loan Group or the Class A-SB Planned Principal Balance, until the remaining Certificate Balances of the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A Certificates have been reduced to zero. Any
S-189
Collateral Support Deficit allocated to a Class of Certificates will be allocated among the respective Certificates of such Class in proportion to the Percentage Interests evidenced by the respective Certificates.
Mortgage loan losses and Collateral Support Deficits will not be allocated to the Class S, Class R or Class LR Certificates and will not be directly allocated to the Class X Certificates. However, the Notional Amount of the Class X Certificates will be reduced if the Certificate Balances of the other Classes of Certificates (other than the Class S Certificates and the Residual Certificates) are reduced by such mortgage loan losses or such Collateral Support Deficits.
In general, Collateral Support Deficits 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 mortgage loans, Nonrecoverable Advances made in respect of the mortgage loans, the payment to the Special Servicer of any compensation as described in ‘‘Transaction Parties—Servicing and Other Compensation and Payment of Expenses’’ in this prospectus supplement, and the payment of interest on Advances and certain servicing expenses; and (2) certain unanticipated, non-mortgage loan specific expenses of the trust fund, including certain reimbursements to the Trustee as described under ‘‘Description of the Pooling Agreements—Certain Matters Regarding the Trustee’’ in the prospectus, and as described under ‘‘Transaction Parties—The Trustee, Certificate Registrar, Authenticating Agent and Custodian’’ in this prospectus supplement, certain reimbursements to the Master Servicer and the Depositor as described under ‘‘Description of the Pooling Agreements—Certain Matters Regarding the Master Servicer and the Depositor’’ in the prospectus, and certain federal, state and local taxes, and certain tax-related expenses, payable out of the trust fund as described unde r ‘‘Certain Federal Income Tax Consequences’’ and ‘‘Federal Income Tax Consequences for REMIC Certificates—Taxes That May Be Imposed on the REMIC Pool’’ in the prospectus. Accordingly, the allocation of Collateral Support Deficit as described above will constitute an allocation of losses and other shortfalls experienced by the trust fund.
A Class of Offered Certificates will be considered outstanding until its Certificate Balance (or Notional Amount, in the case of the Class X Certificates) is reduced to zero. However, notwithstanding a reduction of its Certificate Balance to zero, reimbursements of any previously allocated Collateral Support Deficits are required thereafter to be made to a Class of Offered Certificates (other than the Class X Certificates) in accordance with the payment priorities set forth in ‘‘—Distributions—Priority’’ above.
Advances
On the business day immediately preceding each Distribution Date (the ‘‘Master Servicer Remittance Date’’), the Master Servicer will be obligated, except to the extent 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 Pooling and Servicing Agreement, certain funds held in the Certificate Account that are not required to be part of the Available Distribution Amount 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 balloon payments, that were due on the mortgage loans (including the Non-Serviced Loans) and any REO Loan during the related Due Period and not received as of the Determination Date; and (2) in the case of each mortgage loan delinquent in respect of its balloon payment as of the related Master Servicer Remittance Date (including any REO Loan as to which the balloon payment would have been past due) and each REO Loan, 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 will continue, except if a determination as to non-recoverability is made, through and up to liquidation of the mortgage loan or disposition of the REO Property, as the case may be. 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 received prior to the
S-190
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 Pooling and Servicing Agreement, the Trustee will make the required P&I Advance in accordance with the terms of the Pooling and Servicing Agreement.
Neither the Master Servicer nor the Trustee will be required to make a P&I Advance for default interest, Yield Maintenance Charges, prepayment premiums or with respect to any Companion Loan.
If an Appraisal Reduction has been made with respect to any mortgage loan (or, in the case of each Non-Serviced Mortgage Loan, an appraisal reduction has been made in accordance with the JPMCC 2007-LDP11 Pooling and Servicing Agreement and notice has been provided to the Master Servicer) and such mortgage loan experiences subsequent delinquencies, 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 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, if an y, and the denominator of which is equal to the Stated Principal Balance of that mortgage loan immediately prior to the related Distribution Date. For purposes of the immediately preceding sentence, the Periodic Payment due on the maturity date for a balloon loan will be the Assumed Scheduled Payment for the related Distribution Date.
In addition to P&I Advances, the Master Servicer will also be obligated, and the Special Servicer may be permitted (in each case, subject to the limitations described in this prospectus supplement), 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 Loans) in respect of which a default, delinquency or other unanticipated event has occurred or is reasonably foreseeable, or, in connection with the servicing and administration of any Mortgaged Property or REO Property, in order to pay delinquent real estate taxes, assessments and hazar d 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 Pooling and Servicing Agreement and the Trustee has notice of this failure, the Trustee will be required to make the required Servicing Advance in accordance with the terms of the Pooling and Servicing Agreement.) The JPMCC 2007-LDP11 Master Servicer is obligated to make servicing advances with respect to the Carespring Portfolio Whole Loan and each Logan Portfolio Whole Loan pursuant to the terms of the JPMCC 2007-LDP11 Pooling and Servicing Agreement. If the JPMCC 2007-LDP11 Master Servicer makes a servicing advance with respect to the Carespring Portfolio Whole Loan or any Logan Portfolio Whole Loan, it will be entitled to be reimbursed from the related Mortgage Loan and the related Pari Passu Companion Loan(s), on a pro rata basis (based on each such loan’s outstanding principal balance), and if such servicing advance has been determined nonrecoverable, then from general collections on all mortgage loans included in the JPMCC 2007-LDP11 Trust Fund and general collections on all Mortgage Loans included in the Trust Fund, in each case, on a pro rata basis (based on each such loan’s outstanding principal balance).
The Master Servicer or the Trustee, as applicable, will be entitled to recover any Servicing Advance made out of its own funds from any amounts collected in respect of a mortgage loan (including, with respect to a Servicing Advance made for a Whole Loan in accordance with the related Intercreditor Agreement), as to which that Servicing Advance was made, and to recover any P&I Advance made out of its own funds from any amounts collected in respect of a mortgage loan, whether in the form of late payments, Insurance and Condemnation Proceeds, Liquidation Proceeds or otherwise from the related mortgage loan (‘‘Related Proceeds’’). Notwithstanding the foregoing, neither the Master Servicer nor the Trustee will be obligated to make any Advance
S-191
that it determines in its reasonable judgment would, if made, not be recoverable (including interest on the Advance) out of Related Proceeds (a ‘‘Nonrecoverable Advance’’). Each of the Master Servicer and the Trustee will be entitled to recover any Advance made by it that it subsequently determines to be a Nonrecoverable Advance out of general funds relating to the mortgage loans on deposit in the Certificate Account (first from principal collections and then from interest collections). The Trustee will be entitled to rely conclusively on any non-recoverability determination of the Master Servicer and will be bound by any non-recoverability determination of the Special Servicer. If the funds in the Certificate Account relating to the mortgage loans allocable to principal on the mortgage loans are insufficient to fully reimburse the party entitled to reimbursement, then su ch 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 and any election to so defer or not to defer shall be deemed to be in accordance with the Servicing Standards; provided that no such deferral shall occur at any time to the extent that amounts otherwise distributable as principal are available for such reimbursement. At any time after such a determination to obtain reimbursement over time, the Master Servicer, the Special Servicer or the Trustee, as applicable, may, in its sole discretion, decide to obtain reimbursement immedia tely. Each of the Master Servicer and the Trustee will be entitled to recover any Advance (together with interest on that Advance) that is outstanding at the time that a mortgage loan is modified but is not repaid in full by the borrower in connection with such modification but becomes an obligation of the borrower to pay such amounts in the future (such Advance, a ‘‘Workout-Delayed Reimbursement Amount’’) out of principal collections on the mortgage loans in the Certificate Account; provided that in the case of each Whole Loan (other than the Carespring Portfolio Whole Loan and the Logan Portfolio Whole Loan), each of the Master Servicer and the Trustee will be entitled to recover such Nonrecoverable Advance (i) first from co llections on, and proceeds of, the related Subordinate Companion Loan(s) (to the extent provided in the related Intercreditor Agreement) and (ii) then from collections on, and proceeds of, the related Mortgage Loan and any related Pari Passu Companion Loans, on a pro rata basis (based on each such loan’s outstanding principal balance). A Workout-Delayed Reimbursement Amount will constitute a Nonrecoverable Advance when the person making such determination, and taking into account factors such as all other outstanding Advances, either (a) determines in its reasonable judgment that such Workout-Delayed Reimbursement Amount would not be recoverable (including interest on the Advance) out of Related Proceeds, or (b) has determined in accordance with the Servicing Standards (in the case of the Master Servicer or the Special Servicer) or its good-faith business judgment (in the case of the Trustee) that such Workout-Delayed Reimbursement Amount, along with any other Workout-Delayed Reimbursement Am ounts and Nonrecoverable Advances, would not ultimately be recoverable out of principal collections in the Certificate Account. 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 shall be recoverable as any other Nonrecoverable Advance. To the extent a Nonrecoverable Advance or a Workout-Delayed Reimbursement Amount with respect to a mortgage loan is required to be reimbursed from the principal portion of the general collections on the mortgage loans as described in this paragraph, such reimbursement will be made first, from the principal collections available on the mortgage loans included in the same Loan Group as such mortgage loan and if the principal collections in such Loan Group are not sufficient to make such reimbursement in full, then from the principal collections available in the other Loan Group (after giving effect to any reimbursement of Nonrecoverable Advances and Workou t-Delayed Reimbursement Amounts that are related to such other Loan Group). To the extent a Nonrecoverable Advance with respect to a mortgage loan is required to be reimbursed from the interest portion of the general collections on the mortgage loans as described in this paragraph, such reimbursement will be made first, from the interest collections available on the mortgage loans included in the same Loan Group as such mortgage loan and if the interest collections in such Loan Group are not
S-192
sufficient to make such reimbursement in full, then from the interest collections available in the other Loan Group (after giving effect to any reimbursement of Nonrecoverable Advances that are related to such other Loan Group). In addition, the Special Servicer may, at its option, in consultation with the Directing Certificateholder, make a determination in accordance with the Servicing Standards that any P&I Advance or Servicing Advance, if made, would be a Nonrecoverable Advance and may deliver to the Master Servicer and the Trustee notice of such determination, which determination will be conclusive and binding on the Master Servicer and the Trustee; however, the Special Servicer will have no obligation to make such an affirmative determination that any P&I 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. Additionally, with respect to the Sawgrass Mills Mall Loan, if any servicer in connection with another securitization of the related Sawgrass Mills Mall Pari Passu Companion Loan determines that any P&I Advance with respect to the related Sawgrass Mills Mall Pari Passu Companion Loan, if made, would be non-recoverable, such determination will not be binding on the Master Servicer and the Trustee as it relates to any proposed P&I Advance with respect to those loans. Similarly, with respect to each Non-Serviced Mortgage Loan, if the JPMCC 2007-LDP11 Master Servicer or the JPMCC 2007-LDP11 Special Servicer determines that any proposed principal and/or interest advance with respect to the related Pari Passu Companion Loan, if made, would be non-recoverable, such determination will not be binding on the Master Servicer and the Trustee as it relates to any proposed P&I Advance with respect to such Non-Serviced Mortgage Loan. In making such non-recoverability determination, such person will be entitled to consider (among other thing s) the obligations of the borrower under the terms of the related mortgage loan as it may have been modified, to consider (among other things) 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, to estimate and consider (among other things) future expenses and to estimate and consider (among other things) the 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, 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 deter minations (but not reverse any other person’s determination that an Advance is non-recoverable) at any time and may obtain at the expense of the trust any analysis, appraisals or market value estimates or other information for such purposes. Absent bad faith, any determination that an Advance is or would be a Nonrecoverable Advance described in this paragraph will be conclusive and binding on the Certificateholders, the Master Servicer and the Trustee. The Trustee will be entitled to rely conclusively on any non-recoverability determination of the Master Servicer and shall be bound by any non-recoverability determination of the Special Servicer and the Master Servicer shall rely conclusively on any non-recoverability determination of the Special Servicer. If the Special Servicer determines that a portion of an Advance is or would be non-recoverable, neither the Master Servicer nor the Trustee will be precluded from determining that the remainder of such Advance is or would be nonrecoverable. Nonrecover able Advances will represent a portion of the losses to be borne by the Certificateholders. No P&I Advances will be made by the Master Servicer or the Trustee with respect to delinquent amounts in respect of monthly payments or the balloon payments due on any Companion Loan. No Servicing Advances will be made with respect to any Companion Loan if the related Mortgage Loan is no longer part of the trust. Any requirement of the Master Servicer, the Special Servicer or Trustee to make an Advance in the Pooling and Servicing Agreement is intended solely to provide liquidity for the benefit of the Certificateholders and not as credit support or otherwise to impose on any such person the risk of loss with respect to one or more mortgage loans. See ‘‘Description of the Certificates—Advances in Respect of Delinquencies’’ and ‘ ‘Description of the Pooling Agreements—Certificate Account’’ in the prospectus.
S-193
In connection with its recovery of any Advance, each of the Master Servicer, the Special Servicer and the Trustee will be entitled to be paid, out of any amounts relating to the mortgage loans then on deposit in the Certificate Account, interest compounded annually, 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. None of the Master Servicer or 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 in The Wall Street Journal, New York edition.
Each Statement to Certificateholders furnished or made available by the Trustee to the Certificateholders will contain information relating to the amounts of Advances made with respect to the related Distribution Date. See ‘‘Description of the Certificates—Reports to Certificateholders; Certain Available Information’’ in this prospectus supplement and ‘‘Description of the Certificates—Reports to Certificateholders’’ in the prospectus.
Appraisal Reductions
After an Appraisal Reduction Event has occurred with respect to a mortgage loan (except for the Non-Serviced Mortgage Loans), an Appraisal Reduction is required to be calculated. An ‘‘Appraisal Reduction Event’’ will occur on the earliest of:
(1) 120 days after an uncured delinquency (without regard to the application of any grace period) occurs in respect of a mortgage loan or a related Companion Loan;
(2) the date on which a reduction in the amount of Periodic Payments on a mortgage loan or a related Companion Loan, or a change in any other material economic term of the mortgage loan or a related Companion Loan (other than an extension of its maturity), becomes effective as a result of a modification of the related mortgage loan by the Special Servicer;
(3) the date on which a receiver has been appointed;
(4) 60 days after a borrower declares bankruptcy;
(5) 60 days after the date on which an involuntary petition of bankruptcy is filed with respect to the borrower if not dismissed within such time;
(6) 90 days after an uncured delinquency occurs in respect of a balloon payment for a mortgage loan or a related Companion Loan, except where a refinancing is anticipated within 120 days after the maturity date of the mortgage loan, in which case 120 days after such uncured delinquency; and
(7) immediately after a mortgage loan or a related Companion Loan becomes an REO Loan.
No Appraisal Reduction Event may occur at any time when the aggregate Certificate Balance of all Classes of Certificates (other than the Class A Certificates) has been reduced to zero.
The ‘‘Appraisal Reduction’’ for any Distribution Date and for any mortgage loan (except for the Non-Serviced Mortgage Loans) as to which any Appraisal Reduction Event has occurred will be an amount calculated by the Master Servicer, based on the appraised value determined by the Special Servicer, in consultation with the Directing Certificateholder, as of the first Determination Date that is at least ten Business Days following the date the Special Servicer receives and delivers to the Master Servicer such appraisal equal to the excess of (a) the Stated Principal Balance of that mortgage loan over (b) the excess of (1) the sum of (x) 90% of the appraised value of the related Mortgaged Property as determined (A) by one or more MAI appraisals with respect to that mortgage loan (together with any other m ortgage loan cross-collateralized with such 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 an Advance), or (B) by an internal valuation performed by the Special Servicer with respect to that mortgage loan (together with any other mortgage loan
S-194
cross-collateralized with that mortgage loan) with an outstanding principal balance less than $2,000,000, and (y) all escrows, letters of credit and reserves in respect of that mortgage loan as of the date of calculation over (2) the sum as of the due date occurring in the month of the date of determination of (x) to the extent not previously advanced by the Master Servicer or the Trustee, all unpaid interest on that mortgage loan at a per annum rate equal to the Mortgage Rate, (y) all Advances not reimbursed from the proceeds of such mortgage loan and interest on those Advances at the Reimbursement Rate in respect of that mortgage loan and (z) all currently due and unpaid real estate taxes and assessments, insurance premiums and ground rents, unpaid Special Servicing Fees and all other amounts due and unpaid under that mortgage loan (whi ch tax, premiums, ground rents and other amounts have not been the subject of an Advance by the Master Servicer, the Special Servicer or the Trustee, as applicable).
The Special Servicer will be required to order an appraisal or conduct a valuation promptly upon the occurrence of an Appraisal Reduction Event (except with respect to the Non-Serviced Mortgage Loans). On the first Determination Date occurring on or after the tenth Business Day following delivery to the Master Servicer of the MAI appraisal or the completion of the valuation, the Master Servicer will be required to calculate and report to the Directing Certificateholder and the Trustee (and, in the case of any Whole Loan, any related Companion Holders) the Appraisal Reduction, taking into account the results of such appraisal or valuation. In the event that the Master 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 clauses (1) and (6) of the third preceding paragraph, within 120 days (in the case of clause (1)) or 90 or 120 days (in the case of clause (6)), respectively, after the initial delinquency for the related Appraisal Reduction Event), the amount of the Appraisal Reduction will be deemed to be an amount equal to 25% of the current Stated Principal Balance of the related mortgage loan until the MAI appraisal is received.
As a result of calculating one or more Appraisal Reductions, the amount of any required P&I Advance will be reduced, which will have the effect of reducing the amount of interest available to the most subordinate Class of Certificates then outstanding (i.e., first to the Class NR Certificates, then to the Class T Certificates, then to the Class Q Certificates, then to the Class P Certificates, then to the Class N Certificates, then to the Class M Certificates, then to the Class L Certificates, then to the Class K Certificates, then to the Class J Certificates, then to the Class H Certificates, then to the Class G Certificates, then to the Class F Certificates, then to the Class E Certificates, then to the Class D Certificates, then to the Class C Certificates, then to the Class B Certificates, then to the Class A-J Certificates, then to the Class A-M Certificates, and then to the Class A Certificates and Class X Certificates, pro rata. See ‘‘—Advances’’ above.
With respect to each mortgage loan (other than the Non-Serviced Mortgage Loans) as to which an Appraisal Reduction has occurred (unless the mortgage loan has remained current for three consecutive Periodic Payments, and with respect to which no other Appraisal Reduction Event has occurred with respect to that mortgage loan during the preceding three months), the Special Servicer is required, within 30 days of each annual anniversary of the related Appraisal Reduction Event to order an appraisal (which may be an update of a prior appraisal), the cost of which will be a Servicing Advance, or to conduct an internal valuation, as applicable. Based upon the appraisal or valuation, the Master Servicer is required to redetermine and report to the Directing Certificateholder, each holder of a Companion Loan and the Trustee, the recalculated amount of the Appraisal Reduction with respect to the mortgage loan. The Directing Certificateholder will have 10 business&nbs p;days to review and approve each calculation of any recalculated Appraisal Reduction; provided, however, if the Directing Certificateholder fails to approve any calculation of the recalculated Appraisal Reduction within such 10 business days, such consent will be deemed to be given. Notwithstanding the foregoing, the Special Servicer will not be required to obtain an appraisal or valuation with respect to a mortgage 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 12-month period prior to the occurrence of the Appraisal Reduction Event. Instead, the Special Servicer may
S-195
use the prior appraisal or valuation in calculating any Appraisal Reduction with respect to the mortgage loan; provided that the Special Servicer is not aware of any material change to the Mortgaged Property, its earnings potential or risk characteristics, or marketability, or market conditions that has occurred that would affect the validity of the appraisal or valuation.
Pending Directing Certificateholder review of a calculation of an appraisal reduction amount, the appraisal reduction amount in effect prior to such calculation shall remain in effect (or, in the case of an initial calculation, the deemed appraisal reduction amount shall apply).
Each Whole Loan (other than the Non-Serviced Mortgage Loans) will be treated as a single mortgage loan for purposes of calculating an Appraisal Reduction with respect to the mortgage loans that comprise such Whole Loan. Any Appraisal Reduction in respect of a Whole Loan will generally be allocated first to the related Subordinate Companion Loan(s), on a pro rata basis, and then to any related Pari Passu Companion Loans and the related mortgage loan included in the trust fund, on a pro rata basis.
Any mortgage loan previously subject to an Appraisal Reduction that becomes current and remains current for three consecutive Periodic Payments, and with respect to which no other Appraisal Reduction Event has occurred and is continuing, will no longer be subject to an Appraisal Reduction.
Each Non-Serviced Mortgage Loan is subject to the provisions in the JPMCC 2007-LDP11 Pooling and Servicing Agreement relating to appraisal reductions that are substantially similar to the provisions described above. The existence of an appraisal reduction under the JPMCC 2007-LDP11 Pooling and Servicing Agreement in respect of such 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 such Non-Serviced Mortgage Loan and will generally have the effect of reducing the amount otherwise available for distributions to the Certificateholders. Pursuant to the JPMCC 200 7-LDP11 Pooling and Servicing Agreement, each Non-Serviced Whole Loan will be treated as a single mortgage loan for purposes of calculating an appraisal reduction amount with respect to the mortgage loans that comprise such whole loan. Any appraisal reduction calculated with respect to any Non-Serviced Whole Loan will be allocated to the related Non-Serviced Mortgage Loan and the related Pari Passu Companion Loans, pro rata, based on their outstanding principal balances.
Reports to Certificateholders; Certain Available Information
On each Distribution Date, the Trustee will be required to make available on its website to each holder of a Certificate, the Master Servicer, the underwriters, the Special Servicer, the Directing Certificateholder, each holder of a Companion Loan, each Rating Agency and certain assignees of the Depositor, including certain financial market publishers (which are anticipated to initially be Bloomberg, L.P., Trepp, LLC and Intex Solutions, Inc.), if any, a statement (a ‘‘Statement to Certificateholders’’) based in part upon information provided by the Master Servicer in accordance with the Commercial Mortgage Securities Association (or any successor organization reasonably acceptable to the Master Servicer and the Trustee) guidelines setting forth, among other things:
(1) the amount of the distribution on the Distribution Date to the holders of each Class of Certificates in reduction of the Certificate Balance of the Certificates;
(2) the amount of the distribution on the Distribution Date to the holders of each Class of Certificates allocable to Distributable Certificate Interest;
(3) (A) the aggregate amount of Servicing Advances and P&I Advances, on a loan by loan basis, made in respect of the Distribution Date, and (B) the aggregate amount of Nonrecoverable Advances on a loan by loan basis;
(4) the aggregate amount of compensation paid to the Trustee and servicing compensation paid to the Master Servicer and the Special Servicer with respect to the Due Period for the Distribution Date;
S-196
(5) the aggregate Stated Principal Balance of the mortgage loans and any REO Loans outstanding immediately before and immediately after the Distribution Date;
(6) the number, aggregate principal balance, weighted average remaining term to maturity and weighted average Mortgage Rate of the mortgage loans as of the end of the related Due Period for the Distribution Date;
(7) the number and aggregate principal balance of mortgage loans (A) delinquent 30-59 days, (B) delinquent 60-89 days, (C) delinquent 90 days or more, (D) current but specially serviced or in foreclosure but not an REO Property and (E) for which the related borrower is subject to oversight by a bankruptcy court;
(8) the value of any REO Property included in the trust fund as of the Determination Date for the Distribution Date, on a loan-by-loan basis, based on the most recent appraisal or valuation;
(9) the Available Distribution Amount for the Distribution Date;
(10) the amount of the distribution on the Distribution Date to the holders of each Class of Certificates allocable to Yield Maintenance Charges;
(11) the Pass-Through Rate for each Class of Certificates for the Distribution Date and the next succeeding Distribution Date;
(12) the Scheduled Principal Distribution Amount and the Unscheduled Principal Distribution Amount for the Distribution Date;
(13) the Certificate Balance or Notional Amount, as the case may be, of each Class of Certificates immediately before and immediately after the Distribution Date, separately identifying any reduction in these amounts as a result of the allocation of any Collateral Support Deficit on the Distribution Date;
(14) the fraction, expressed as a decimal carried to eight places, the numerator of which is the then related Certificate Balance or Notional Amount, as the case may be, and the denominator of which is the related initial aggregate Certificate Balance or Notional Amount, as the case may be, for each Class of Certificates (other than the Residual Certificates and the Class S Certificates) immediately following the Distribution Date;
(15) the amount of any Appraisal Reductions effected in connection with the Distribution Date on a loan-by-loan basis and the total Appraisal Reduction effected in connection with such Distribution Date;
(16) the number and Stated Principal Balances of any mortgage loans extended or modified since the previous Determination Date (or in the case of the first Distribution Date, as of the Cut-off Date) on a loan-by-loan basis;
(17) the amount of any remaining unpaid interest shortfalls for each Class of Certificates as of the Distribution Date;
(18) a loan-by-loan listing of each mortgage loan which was the subject of a principal prepayment since the previous Determination Date (or in the case of the first Distribution Date, as of the Cut-off Date) and the amount and the type of principal prepayment occurring;
(19) a loan-by-loan listing of any mortgage loan that was defeased since the previous Determination Date (or in the case of the first Distribution Date, as of the Cut-off Date);
(20) all deposits into, withdrawals from, and the balance of the Interest Reserve Account on the related Master Servicer Remittance Date;
(21) the amount of the distribution on the Distribution Date to the holders of each Class of Certificates in reimbursement of Collateral Support Deficit;
(22) the aggregate unpaid principal balance of the mortgage loans outstanding as of the close of business on the related Determination Date;
S-197
(23) with respect to any mortgage loan as to which a liquidation occurred since the previous Determination Date (or in the case of the first Distribution Date, as of the Cut-off Date) (other than a payment in full), (A) its loan number, (B) the aggregate of all Liquidation Proceeds which are included in the Available Distribution Amount and other amounts received in connection with the liquidation (separately identifying the portion allocable to distributions on the Certificates) and (C) the amount of any Collateral Support Deficit in connection with the liquidation;
(24) with respect to any REO Property included in the trust as to which the Special Servicer determined, in accordance with the Servicing Standards, that all payments or recoveries with respect to the Mortgaged Property have been ultimately recovered since the previous Determination Date, (A) the loan number of the related mortgage loan, (B) the aggregate of all Liquidation Proceeds and other amounts received in connection with that determination (separately identifying the portion allocable to distributions on the Certificates) and (C) the amount of any realized loss in respect of the related REO Loan in connection with that determination;
(25) the aggregate amount of interest on P&I Advances paid to the Master Servicer and the Trustee since the previous Determination Date (or in the case of the first Distribution Date, as of the Cut-off Date);
(26) the aggregate amount of interest on Servicing Advances (other than with respect to the Non-Serviced Mortgage Loans) paid to the Master Servicer, the Special Servicer and the Trustee since the previous Determination Date (or in the case of the first Distribution Date, as of the Cut-off Date);
(27) the original and then-current credit support levels for each Class of Certificates;
(28) the original and then-current ratings for each Class of Certificates;
(29) the amount of the distribution on the Distribution Date to the holders of the Residual Certificates;
(30) the aggregate amount of Yield Maintenance Charges collected since the previous Determination Date (or in the case of the first Distribution Date, as of the Cut-off Date);
(31) a loan-by-loan listing of any material modification, extension or waiver of a mortgage loan; and
(32) a loan-by-loan listing of any material breach of the representations and warranties given with respect to a mortgage loan by the applicable Mortgage Loan Seller.
Under the Pooling and Servicing Agreement, the Master Servicer is required to provide to the holder of the related Subordinate Companion Loan certain other reports, copies and information relating to the applicable Whole Loan.
The Trustee will make available each month the Statements to Certificateholders and the other parties to the Pooling and Servicing Agreement through its website which is initially located at www.etrustee.net. In addition, the Trustee may make certain other information and reports (including the collection of reports specified by The Commercial Mortgage Securities Association (or any successor organization reasonably acceptable to the Trustee and the Master Servicer) known as the ‘‘CMSA Investor Reporting Package’’) related to the mortgage loans available, to the extent that the Trustee receives such information and reports from the Master Servicer, and direction from the Depositor, or is otherwise directed to do so under the Pooling and Servicing Agreement. The Trustee will not make any representations or warranties as t o the accuracy or completeness of any information provided by it and may disclaim responsibility for any information for which it is not the original source. In connection with providing access to the Trustee’s website, the Trustee may require registration and acceptance of a disclaimer. The Trustee will not be liable for the dissemination of information made in accordance with the Pooling and Servicing Agreement.
S-198
In addition, copies of each Statement to Certificateholders will be filed with the Securities and Exchange Commission (the ‘‘SEC’’) through its EDGAR system located at ‘‘http://www.sec.gov’’ under the name of the Issuing Entity for so long as the Issuing Entity is subject to the reporting requirement of the Securities Exchange Act of 1934, as amended. The public also may read and copy any materials filed with the SEC at its Public Reference Room located at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
In the case of information furnished pursuant to clauses (1), (2), (10), (17) and (21) above, the amounts will be expressed as a dollar amount in the aggregate for all Certificates of each applicable Class and per any definitive certificate. In addition, within a reasonable period of time after the end of each calendar year, the Trustee 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 the information set forth in clauses (1), (2) and (10) above 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 Trustee 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. Th is obligation of the Trustee will be deemed to have been satisfied to the extent that substantially comparable information will be provided by the Trustee pursuant to any requirements of the Code as from time to time are in force.
The Trustee will be required to provide or make available to certain financial market publishers, which are anticipated initially to be Bloomberg, L.P., Trepp, LLC and Intex Solutions, Inc., certain current information with respect to the Mortgaged Properties on a monthly basis, including current and original net operating income, debt service coverage ratio based upon borrowers’ annual Operating Statements and occupancy rates, to the extent it has received the information from the Master Servicer pursuant to the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement requires that the Trustee make available at its offices, during normal business hours, for review by any holder of an Offered Certificate, the Mortgage Loan Sellers, the Depositor, the Special Servicer, the Master Servicer, the Directing Certificateholder, the holder of each Companion Loan, each Rating Agency, any designee of the Depositor or any other person to whom the Trustee believes the disclosure is appropriate, upon their prior written request, originals or copies of, among other things, the following items:
(1) the Pooling and Servicing Agreement and any amendments to that agreement;
(2) all Statements to Certificateholders made available to holders of the relevant Class of Offered Certificates since the Closing Date;
(3) all officer’s certificates delivered to the Trustee since the Closing Date as described under ‘‘Description of the Pooling Agreements—Evidence as to Compliance’’ in the prospectus;
(4) all accountants’ reports delivered to the Trustee since the Closing Date as described under ‘‘Description of the Pooling Agreements—Evidence as to Compliance’’ in the prospectus;
(5) the most recent property inspection report prepared by or on behalf of the Master Servicer or the Special Servicer and delivered to the Trustee in respect of each Mortgaged Property;
(6) copies of the mortgage loan documents;
(7) any and all modifications, waivers and amendments of the terms of a mortgage loan entered into by the Master Servicer or the Special Servicer and delivered to the Trustee; and
(8) any and all statements and reports delivered to, or collected by, the Master Servicer or the Special Servicer, from the borrowers, including the most recent annual property
S-199
Operating Statements, rent rolls and borrower financial statements, but only to the extent that the statements and reports have been delivered to the Trustee.
Copies of any and all of the foregoing items will be available to those named in the above paragraph, from the Trustee upon request; however, the Trustee will be permitted to require payment of a sum sufficient to cover the reasonable costs and expenses of providing the copies, except that the Directing Certificateholder will be entitled to receive such items free of charge. Pursuant to the Pooling and Servicing Agreement, the Master Servicer will be required to use reasonable efforts to collect certain financial and property information required under the mortgage loan documents, such as Operating Statements, rent rolls and financial statements.
The Trustee will make each Statement to Certificateholders available each month to Certificateholders and the other parties to the Pooling and Servicing Agreement via the Trustee’s internet website. The Trustee will also make the periodic reports described in the prospectus under ‘‘Description of the Certificates—Reports to Certificateholders; Certain Available Information’’ relating to the Issuing Entity available through its website promptly after they are filed with the SEC. The Trustee’s internet website will initially be located at ‘‘www.etrustee.net.’’ Assistance in using the website can be obtained by calling the Trustee’s customer service desk at (714) 259-6253. Parties that are unable to use the website are entitled to have a paper copy mailed to them at no charge via first class mail by calling the customer service desk.
The Pooling and Servicing Agreement will require the Master Servicer and the Trustee, subject to certain restrictions (including execution and delivery of a confidentiality agreement) set forth in the Pooling and Servicing Agreement, 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 or the Trustee, as the case may be, to any Certificateholder, the underwriters, the Mortgage Loan Sellers, any Certificate Owner or any prospective investor so identified by a Certificate Owner or an underwriter, that requests reports or information. However, the Trustee and 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, except that, other than for extraordinary or duplicate requests, the Directing Certificateholder will be entitled to reports and information free of charge. 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 Offered 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 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 Offered Certificates will be Cede & Co., as nominee for DTC.
Voting Rights
At all times during the term of the Pooling and Servicing Agreement, the voting rights for the Certificates (the ‘‘Voting Rights’’) will be allocated among the respective Classes of Certificateholders as follows: (1) 4% in the case of the Class X Certificates, and (2) in the case of any other Class of Certificates (other than the Class S Certificates and the Residual Certificates), a percentage equal to the product of 96% and a fraction, the numerator of which is equal to the aggregate Certificate Balance 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 of all Classes of Certificates (other than the Class S Certificates), each determined as of the prior Distribution Date. None of the Class S, Class R or Class LR Certificates will be entitled to any Voting Rights. For purposes of determining Voting Rights, the Certificate Balance of each Class (other than the Class S Certificates) will not be reduced by the amount allocated to that Class of any Appraisal
S-200
Reductions related to mortgage loans as to which Liquidation Proceeds or other final payment have not yet been received. Voting Rights allocated to a Class of Certificateholders will be allocated among the Certificateholders in proportion to the Percentage Interests evidenced by their respective Certificates. Solely for purposes of giving any consent, approval or waiver pursuant to the Pooling and Servicing Agreement, neither the Master Servicer, the Special Servicer nor the Depositor will be entitled to exercise any Voting Rights with respect to any Certificates registered in its name, if the consent, approval or waiver would in any way increase its compensation or limit its obligations in the named capacities or waive an Event of Default under the Pooling and Servicing Agreement; provided, however, the restrictions will not apply to the exercise of the Special Servicer’s rights, if any, as a member of the Controlling Class.
Termination; Retirement of Certificates
The obligations created by the Pooling and Servicing Agreement will terminate upon payment (or provision for payment) to all Certificateholders of all amounts held by the Trustee and required to be paid following the earlier of (1) the final payment (or related Advance) or other liquidation of the last mortgage loan or REO Property remaining in the trust fund, (2) the voluntary exchange of all the then outstanding certificates (other than the Class S and the Residual Certificates) for the mortgage loans remaining in the trust (provided, however, that (a) the Offered Certificates (other than the Class X Certificates) and the Class G, Class H, Class J and Class K Certificates are no longer outstanding and (b) there is only one holder of the then outstanding Certificates (other than the Class S and the Residual Certificates) or (3) the purchase or other liquidation of all of the assets of the trust fund by the holders of the Controlling Class, the Special Servicer, the Master Servicer or the holders of the Class LR Certificates, in that order of priority. Written notice of termination of the Pooling and Servicing Agreement will be given by the Trustee to each Certificateholder and each Rating Agency and the final distribution will be made only upon surrender and cancellation of the Certificates at the office of the Certificate Registrar or other location specified in the notice of termination.
The holders of the Controlling Class, the Special Servicer, the Master Servicer and the holders of the Class LR Certificates (in that order) will have the right to purchase all of the assets of the trust fund. This purchase of all the mortgage loans and other assets in the trust fund is required to be made at a price equal to the sum of (1) the aggregate Purchase Price of all the mortgage loans (exclusive of REO Loans) then included in the trust fund, (2) the aggregate fair market value of the trust fund’s portion of all REO Properties then included in the trust fund (which fair market value for any REO Property may be less than the Purchase Price for the corresponding REO Loan), as determined by an appraiser selected and mutually agreed upon by the Master Servicer and the Trustee, plus the reasonable out of pocket expenses of the Master Servicer related to such purchase, unless the Master Servicer is the purchaser, and (3) if the Mortgaged Property relating to any Non-Serviced Mortgage Loan is an REO Property under the terms of the JPMCC 2007-LDP11 Pooling and Servicing Agreement, the allocable portion of the fair market value of the related property, as determined by the JPMCC 2007-LDP11 Master Servicer in accordance with the terms of the JPMCC 2007-LDP11 Pooling and Servicing Agreement. This purchase will effect early retirement of the then outstanding Offered Certificates, but the rights of the holders of the Controlling Class, the Special Servicer, the Master Servicer or the holders of the Class LR Certificates to effect the termination is subject to the requirement that the then aggregate Stated Principal Balance of the pool of mortgage loans be less than 1% of the Initial Pool Balance. The voluntary exchange of Certificates, including the Class X Certificates, for the remaining mortgage loans is not subject to the 1% limit but is limited to each Class of outstanding Certificates being held by one Certificateholder who must voluntarily participate.
On the final 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 LR Certificates, as the case may be, for the mortgage loans and other assets in the trust fund (if the trust fund is to be terminated as a result of the purchase described in the preceding paragraph), together with all other amounts on deposit in the Certificate Account and not otherwise payable to a person other
S-201
than the Certificateholders (see ‘‘Description of the Pooling Agreements— Certificate Account’’ in the prospectus), will be applied generally as described above under ‘‘—Distributions—Priority’’ in this prospectus supplement.
Any optional termination by the holders of the Controlling Class, the Special Servicer, the Master Servicer or the holders of the Class LR Certificates would result in prepayment in full of the Certificates and would have an adverse effect on the yield of the Class X Certificates because a termination would have an effect similar to a principal prepayment in full of the mortgage loans and, as a result, investors in the Class X Certificates and any other Certificates purchased at premium might not fully recoup their initial investment. See ‘‘Yield and Maturity Considerations’’ in this prospectus supplement.
S-202
Servicing of the Mortgage Loans
General
The servicing of the mortgage loans (including each Whole Loan other than the Non-Serviced Whole Loans) and any related Companion Loan and any REO Properties will be governed by the Pooling and Servicing Agreement. The following summaries describe certain provisions of the Pooling and Servicing Agreement relating to the servicing and administration of the mortgage loans (excluding the Non-Serviced Mortgage Loans) and any REO Properties. Each Non-Serviced Mortgage Loan is being serviced in accordance with the JPMCC 2007-LDP11 Pooling and Servicing Agreement by the JPMCC 2007-LDP11 Master Servicer and the JPMCC 2007-LDP11 Special Servicer and according to the servicing standards provided for in the JPMCC 2007-LDP11 Pooling and Servicing Agreement, which require, among other things, that the JPMCC 2007-LDP11 Master Servicer and the JPMCC 2007-LDP11 Special Servicer attempt to maximize recovery on all portions of the related Whole Loan. All references to ‘‘mortgage loans’’ in this section, ‘‘Servicing of the Mortgage Loans,’’ do not include the Non-Serviced Mortgage Loans and any related Mortgaged Property or REO Property unless otherwise specifically stated. The summaries do not purport to be complete and are subject, and qualified in their entirety by reference, to the provisions of the Pooling and Servicing Agreement. Reference is made to the prospectus for additional information regarding the terms of the Pooling and Servicing Agreement relating to the servicing and administration of the mortgage loans and any REO Properties; provided that the information in this prospectus supplement supersedes any contrary information set forth in the prospectus. See ‘‘Description of the Pooling Agreements’’ in the prospectus.
Each of the Master Servicer (directly or through one or more sub-servicers) and the Special Servicer (directly or through one or more sub-servicers) will be required to service and administer the mortgage loans (including each Whole Loan) for which it is responsible. The Master Servicer may delegate and/or assign some or all of its servicing obligations and duties with respect to some or all of the mortgage loans to one or more third-party sub-servicers (although the Master Servicer will remain primarily responsible for the servicing of those mortgage loans).
The Master Servicer and the Special Servicer will be required to service and administer the mortgage loans (including each Whole Loan) for which it is responsible in accordance with applicable law, the terms of the Pooling and Servicing Agreement and the mortgage loan documents (and in the case of each Whole Loan, the terms of the related intercreditor agreement) 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 the Special Servicer, as the case may be, services and administers commercial, multifamily and manufactured housing community mortgage loans owned by the M aster Servicer or the Special Servicer, as the case may be, in either case, with a view to the maximization of recovery of principal and interest on a net present value basis on the mortgage loans, Whole Loans or Specially Serviced Mortgage Loans, as applicable, and the best interests of the trust and the Certificateholders (and in the case of each mortgage loan with one or more Companion Loans, the holder(s) of the related Companion Loan(s) taking into account the subordinate nature of any related subject Subordinate Companion Loan and the pari passu nature of any Pari Passu Companion Loan, subject to any rights contained in the related intercreditor agreement) as a collective whole, as determined by the Master Servicer or Special Servicer, as the case may be, in its reasonable judgment, in either case giving due consideration to the customary and usua l standards of practice of prudent institutional, multifamily and commercial loan servicers but without regard to:
(A) any relationship that the Master Servicer or the Special Servicer, or any of their respective affiliates, as the case may be, may have with the related borrower or any borrower affiliate, any Mortgage Loan Seller or any other party to the Pooling and Servicing Agreement;
S-203
(B) the ownership of any Certificate or, if applicable, a Companion Loan, by the Master Servicer or the Special Servicer or any of their respective affiliates, as the case may be;
(C) the Master Servicer’s obligation to make Advances;
(D) the Master Servicer or the Special Servicer’s, as the case may be, right to receive compensation (or the adequacy thereof) for its services under the Pooling and Servicing Agreement or with respect to any particular transaction;
(E) the ownership, servicing or management for others of any other mortgage loans or mortgaged properties by the Master Servicer or the Special Servicer, as the case may be;
(F) any option to purchase any mortgage loan or Companion Loan it may have; and
(G) any debt that the Master Servicer or the Special Servicer or any of their respective affiliates, as the case may be, has extended to any borrower or any of their respective affiliates (the foregoing collectively referred to as the ‘‘Servicing Standards’’).
Except as otherwise described under ‘‘—Inspections; Collection of Operating Information’’ below, the Master Servicer will be responsible initially for the servicing and administration of the mortgage loans it is the Master Servicer for (including, if applicable, each Whole Loan). 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):
(1) as to which a payment default has occurred at its original maturity date, or, if the original maturity date has been extended, at its extended maturity date; provided that in the case of a balloon payment, if the borrower continues to make the assumed payment and delivers to the Special Servicer, prior to the date the balloon payment was due, a bona fide written refinancing commitment that provides that such refinancing will occur within 60 days of the balloon payment due date and that is otherwise acceptable in form and substance to the Special Servicer, a servicing transfer event will not occur until the earlier of (x) 60 days f ollowing the due date of the balloon payment and (y) the date on which the refinancing commitment terminates;
(2) as to which any Periodic Payment (other than a balloon payment or other payment due at maturity) is more than 60 days delinquent;
(3) as to which the borrower has entered into or consented to bankruptcy, appointment of a receiver or conservator or a similar insolvency proceeding, or the borrower has become the subject of a decree or order for that proceeding (provided that if the appointment, decree or order is stayed or discharged, or the case dismissed within 60 days, that mortgage loan will not be considered a Specially Serviced Mortgage Loan during that period), or the related borrower has admitted in writing its inability to pay its debts generally as they become due;
(4) as to which the Master Servicer has received notice of the foreclosure or proposed foreclosure of any other lien on the Mortgaged Property;
(5) as to which, in the judgment of the Master Servicer or the Special Servicer, as applicable, a payment default is imminent and is not likely to be cured by the borrower within 60 days;
(6) as to which a default of which the Master Servicer or the Special Servicer (in the case of the Special Servicer with the consent of the Directing Certificateholder) has notice (other than a failure by the related borrower to pay principal or interest) and which the Master Servicer or Special Servicer determines, in its good faith reasonable judgment, may materially and adversely affect the interests of the Certificateholders (or, with respect to each Whole Loan, the interests of the holders of the related Companion Loans) has occurred and remains unremediated for the applicable grace period specified in the mortgage loan documents, other than, in certain circumstances, the failure to maintain terrorism insurance (or if no grace period is specified for events of default which are capable of cure, 60 days); or
S-204
(7) as to which the Master Servicer or the Special Servicer (in the case of the Special Servicer, with the consent of the Directing Certificateholder) determines that (i) a default (other than as described in clause (5) above) under the mortgage loan is imminent, (ii) such default will materially impair the value of the corresponding Mortgaged Property as security for the mortgage loan or otherwise materially adversely affect the interests of Certificateholders (or, with respect to each Whole Loan, the interests of the holders of the related Companion Loans), and (iii) the default will continue unremedied for the applicable cure period under the terms of the mortgage loan or, if no cure period is specified and the default is capable of being cured, for 30 days (provided that such 30-day grace period does not apply to a default that gives rise to immediate acceleration without application of a grace period under the terms of the mortgage loan); provided that any determination that a special servicing transfer event has occurred under this clause (7) with respect to any mortgage loan solely by reason of the failure (or imminent failure) of the related borrower to maintain or cause to be maintained insurance coverage against damages or losses arising from acts of terrorism may only be made by the Special Servicer (with the consent of the Directing Certificateholder) as described under ‘‘—Maintenance of Insurance’’ below.
However, the Master Servicer will be required to continue to (w) receive payments on the mortgage loan (including, to the extent permitted by the related Intercreditor Agreement, each Whole Loan) (including amounts collected by the Special Servicer), (x) make certain calculations with respect to the mortgage loan, (y) make remittances and prepare certain reports to the Certificateholders with respect to the mortgage loan and (z) receive the Servicing Fee in respect of the mortgage loan at the Servicing Fee Rate. If the related Mortgaged Property is acquired in respect of any mortgage loan (including any Whole 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 manageme nt. The mortgage loans (including each Whole Loan) serviced by the Special Servicer and any mortgage loans (including each Whole Loan) that have become REO Properties are referred to in this prospectus supplement as the ‘‘Specially Serviced Mortgage Loans.’’ With respect to each Whole Loan (other than the Non-Serviced Mortgage Loans), if any of the Companion Loans become specially serviced, then the related Mortgage Loan will become a Specially Serviced Mortgage Loan. With respect to each Whole Loan (other than the Non-Serviced Mortgage Loans), if the related Mortgage Loan becomes a Specially Serviced Mortgage Loan, then the related Companion Loans will become a Specially Serviced Mortgage Loan. With respect to any Non-Serviced Mortgage Loan, if the related Pari Passu Companion Loan becomes a specially serviced mortgage loan, then such Non-Serviced Mortgage Loan will become a specially serviced mortgage loan under the JPMCC 2007-LDP11 Pooling and Servicing Agreement. The Master Servicer will not have any responsibility for the performance by the Special Servicer of its duties under the Pooling and Servicing Agreement. Any mortgage loan that is cross-collateralized with a Specially Serviced Mortgage Loan will become a Specially Serviced Mortgage Loan.
If any Specially Serviced Mortgage Loan, in accordance with its original terms or as modified in accordance with the Pooling and Servicing Agreement, becomes performing for at least three consecutive Periodic Payments (provided no additional event of default is foreseeable in the reasonable judgment of the Special Servicer) or the circumstances which give rise to the transfer no longer exist, the Special Servicer will be required to return servicing of that mortgage loan (a ‘‘Corrected Mortgage Loan’’) to the Master Servicer.
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) that becomes a Specially Serviced Mortgage Loan not later than 60 days after the servicing of such mortgage loan is transferred to the Special Servicer. Each Asset Status Report will be required to be delivered to the Directing Certificateholder, each holder of a related Companion Loan, the Master Servicer, the Trustee and each Rating Agency. If the Directing Certificateholder does not disapprove an Asset Status Report within ten business days, the Special Servicer will be required to implement the recommended action as outlined in the Asset Status Report. The Directing Certificateholder may object to any
S-205
Asset Status Report within ten business days of receipt; provided, however, the Special Servicer will be required to implement the recommended action as outlined in the Asset Status Report if it makes a determination in accordance with the Servicing Standards that the objection is not in the best interest of all the Certificateholders. If the Directing Certificateholder disapproves the Asset Status Report 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 revise the Asset Status Report until the Directing Certificateholder fails to disapprove the revised Asset Status Report as described above or until the Special Serv icer makes a determination that the objection is not in the best interests of the Certificateholders; provided, however, in the event that the Directing Certificateholder and the Special Servicer have not agreed upon an Asset Status Report with respect to a Specially Serviced Mortgage Loan within 90 days of the Directing Certificateholder’s receipt of the initial Asset Status Report with respect to such Specially Serviced Mortgage Loan, the Special Servicer will implement the actions described in the most recent Asset Status Report submitted to the Directing Certificateholder by the Special Servicer.
The Directing Certificateholder
The Directing Certificateholder will be entitled to advise the Master Servicer or the Special Servicer, as applicable, with respect to the following actions and others more particularly described in the Pooling and Servicing Agreement. The Directing Certificateholder’s rights with respect to each Whole Loan are subject to the rights of the holder of the related Companion Loan to the extent described in ‘‘Description of the Mortgage Pool—The Whole Loans’’ in this prospectus supplement or in addition to the rights the Directing Certificateholder may have as described in such section. Except as otherwise described in the succeeding paragraphs below, the Master Servicer or the Special Servicer, as applicable, will not be permitted to take any of the following actions as to which the Di recting Certificateholder has objected in writing within ten business days of having been notified of the proposed action (provided, that if such written objection has not been received by the Master Servicer or the Special Servicer, as applicable, within the ten day period, the Directing Certificateholder will be deemed to have approved such action):
(i) 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 as come into and continue in default;
(ii) 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) of a mortgage loan or any extension of the maturity date of such mortgage loan;
(iii) any sale of a defaulted mortgage loan or REO Property (other than in connection with the termination of the trust as described under ‘‘Description of the Certificates— Termination; Retirement of Certificates’’ in this prospectus supplement) for less than the applicable Purchase Price (other than in connection with the exercise of the Purchase Option described under ’’—Realization Upon Defaulted Mortgage Loans’’ below);
(iv) any determination to bring an REO Property into compliance with applicable environmental laws or to otherwise address hazardous material located at an REO Property;
(v) any release of collateral or any acceptance of substitute or additional collateral for a mortgage loan or any consent to either of the foregoing, other than if required pursuant to the specific terms of the related mortgage loan;
(vi) any waiver of a ‘‘due-on-sale’’ or ‘‘due-on-encumbrance’’ clause with respect to a 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 (as described under
S-206
‘‘Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans —Due-on-Sale and Due-on-Encumbrances Provisions’’ above);
(vii) any property management company changes or franchise changes with respect to a mortgage loan for which the consent or approval of the lender is required under the related loan documents;
(viii) releases of 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 mortgage loan with no material lender discretion;
(ix) any acceptance of an assumption agreement releasing a borrower from liability under a mortgage loan other than pursuant to the specific terms of such mortgage loan; and
(x) any determination by the Special Servicer of an Acceptable Insurance Default.
provided, that in the event that the Master Servicer or the Special Servicer determines that immediate action is necessary to protect the interests of the Certificateholders (as a collective whole), the Master Servicer or the Special Servicer, as applicable, may take any such action without waiting for the Directing Certificateholder’s response.
In addition, the Directing Certificateholder may direct the Master Servicer and/or the Special Servicer to take, or to refrain from taking, other actions with respect to a mortgage loan, as the Directing Certificateholder may reasonably deem advisable; provided that the Master Servicer and/or the Special Servicer will not be required to take or refrain from taking any action pursuant to instructions or objections from the Directing Certificateholder that would cause it to violate applicable law, the related mortgage loan documents, the Pooling and Servicing Agreement, including the Servicing Standards, or the REMIC Provisions (and, with respect to any Whole Loan, subject to the rights of the holders of the related Companion Loans as described under ‘‘Description of the Mortgage Pool—Whole Loans’’ in this prospectus supplement).
With respect to the Carespring Portfolio Whole Loan and each Logan Portfolio Whole Loan, the Directing Certificateholder will not be entitled to exercise the above-described rights, but similar rights under the JPMCC 2007-LDP11 Pooling and Servicing Agreement will be exercisable by the JPMCC 2007-LDP11 Directing Certificateholder.
Furthermore, the Special Servicer will not be obligated to seek approval from the Directing Certificateholder, as contemplated above, for any actions to be taken by the Special Servicer with respect to a mortgage loan or REO Property if: (i) the Special Servicer has, as described above, notified the Directing Certificateholder in writing of various actions that the Special Servicer proposes to take with respect to the workout or liquidation of such mortgage loan or REO Property and (ii) for 60 days following the first such notice, the Directing Certificateholder has objected to all of those proposed actions but has failed to suggest any alternative actions that do not violate the Servicing Standards or the REMIC Provisions of the Code.
The ‘‘Directing Certificateholder’’ will be the Controlling Class Certificateholder or the representative of the Controlling Class Certificateholder selected by more than 50% of the Controlling Class Certificateholders, by Certificate Balance, as certified by the Certificate Registrar from time to time; provided, however, (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 owns the largest aggregate Certificate Bala nce of the Controlling Class will be the Directing Certificateholder. The initial Directing Certificateholder will be JER Investors Trust Inc.
A ‘‘Controlling Class Certificateholder’’ is each holder (or Certificate Owner, if applicable) of a Certificate of the Controlling Class as certified to the Certificate Registrar from time to time by the holder (or Certificate Owner).
The ‘‘Controlling Class’’ will be, as of any date of determination, the most subordinate Class of Certificates (other than the Class X Certificates) then outstanding that has a Certificate Balance
S-207
at least equal to 25% of the initial Certificate Balance of such Class. For purposes of determining the identity of the Controlling Class, the Certificate Balance of each Class will not be reduced by the amount allocated to that Class of any Appraisal Reductions relating to mortgage loans as to which Liquidation Proceeds or other final payment has not yet been received. As the Certificate Balance of the most subordinate Class of Certificates is reduced on account of, among other things, distributions of principal or the allocation of Collateral Support Deficits to such Class, the Controlling Class may change from the most subordinate Class of Certificates to a more senior Class of Certificates. The Controlling Class as of the Closing Date will be the Class NR Certificates.
Neither the Special Servicer nor either Master Servicer will be permitted to take or refrain from taking any action pursuant to instructions from the Directing Certificateholder or the holder of any Companion Loan that would cause either of the Master Servicer or the Special Servicer to violate applicable law, the related mortgage loan documents, the Pooling and Servicing Agreement, including the Servicing Standards, any intercreditor agreement, or the REMIC Provisions.
Either the Master Servicer and the Special Servicer may resign under the Pooling and Servicing Agreement at any time if continuing to perform their respective servicing duties would cause it to be in violation of any applicable law. The Master Servicer may generally resign at any time so long as it provides a replacement meeting the requirements in the Pooling and Servicing Agreement and that is otherwise acceptable to the Rating Agencies. The Special Servicer may generally be replaced at any time by Certificateholders representing a majority of the Voting Rights or by the Directing Certificateholder so long as, among other things, those Certificateholders provide or the Directing Certificateholder provides, as applicable, a replacement that is acceptable to the Rating Agencies. Additionally, either of the Master Servicer or the Special Servicer, as applicable, generally may be replaced by the Depositor, the Trustee, or Certificateholders representing at least 2 5% of Voting Rights in the event that an event of default under the Pooling and Servicing Agreement occurs with respect to such entity. In the event that either of the Master Servicer or the Special Servicer resigns or is replaced and no replacement is otherwise provided for, the Trustee is required to immediately take the place of such resigning or replaced Master Servicer or Special Servicer unless it is prohibited by any applicable law from serving in such capacity. The Certificateholders will receive notification from the Trustee in any case in which either of the Master Servicer or Special Servicer resigns or is replaced.
Limitation on Liability of Directing Certificateholder
The Directing Certificateholder will not be liable to the trust fund or the Certificateholders for any action taken, or for refraining from the taking of any action 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 misfeasance, bad faith or negligence in the performance of duties or by reason of reckless disregard of obligations or duties.
Each Certificateholder acknowledges and agrees, by its acceptance of its Certificates, that the 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,
(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 over the interests of the holders of one or more other Classes of Certificates,
(e) will have no liability whatsoever for having so acted and that 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.
S-208
The taking of, or refraining from the taking of, any action by the Master Servicer or the Special Servicer in accordance with the direction or approval of the Directing Certificateholder, which does not violate any law or the Servicing Standards or any other provisions of the Pooling and Servicing Agreement, will not result in any liability on the part of the Master Servicer or the Special Servicer.
Generally, the holders of the Companion Loans and their designees will have limitations on liability with respect to actions taken in connection with the related Whole Loan similar to the limitations of the Directing Certificateholder described above.
Maintenance of Insurance
Except with respect to the Non-Serviced Mortgage Loans, to the extent permitted by the related mortgage loan and required by the Servicing Standards, the Master Servicer or the Special Servicer (with respect to REO Properties) will be required to use efforts consistent with the Servicing Standards, to cause each borrower to maintain for the related Mortgaged Property all insurance coverage required by the terms of the mortgage loan documents, except to the extent that the failure of the related borrower to do so is an Acceptable Insurance Default (as defined below). This insurance coverage is required to be in the amounts, and from an insurer meeting the requirements, set forth in the related mortgage loan documents. If the borrower does not maintain such coverage, subject to its recovery determination as to any required Servicing Advance, the Master Servicer (with respect to the mortgage loans other than the Non-Serviced Mortgage Loans) or the Special Servicer (with respect to REO Properties other than the REO Properties relating to the Non-Serviced Mortgage Loans), as the case may be, will be required to maintain such coverage to the extent such coverage is available at commercially reasonable rates and the Trustee has an insurable interest, as determined by the Special Servicer in accordance with the Servicing Standards; provided that the Master Servicer will be obligated to cause to be maintained insurance against property damage resulting from terrorist or similar acts unless the borrower’s failure is an Acceptable Insurance Default. The coverage described in the immediately preceding sentence will be in an amount that is not less than the lesser of the full replacement cost of the improvements securing that mortgage loan or the outstanding principal balance owing on that mortgage loan, but in any event, in a n amount sufficient to avoid the application of any co-insurance clause unless otherwise noted in the related mortgage loan documents. After the Master Servicer determines that a Mortgaged Property is located in an area identified as a federally designated special flood hazard area (and flood insurance has been made available), the Master Servicer will be required to use efforts consistent with the Servicing Standards to (1) cause each borrower to maintain (to the extent required by the related mortgage loan documents), and if the borrower does not so maintain, will be required to (2) itself maintain to the extent the Trustee, as mortgagee, has an insurable interest in the Mortgaged Property and is available at commercially reasonable rates (as determined by the Master Servicer in accordance with the Servicing Standards) a flood insurance policy in an amount representing coverage not less than the lesser of (1) the outstanding principal balance of the related mortgage loan and (2) th e maximum amount of insurance which is available under the National Flood Insurance Act of 1968, as amended, but only to the extent that the related mortgage loan permits the lender to require the coverage and maintaining coverage is consistent with the Servicing Standards.
Notwithstanding the foregoing, with respect to the mortgage loans that either (x) require the borrower to maintain ‘‘all-risk’’ property insurance (and do not expressly permit an exclusion for terrorism) or (y) contain provisions generally requiring the applicable borrower to maintain insurance in types and against such risks as the holder of such mortgage loan reasonably requires from time to time in order to protect its interests, the Master Servicer will be required to, consistent with the Servicing Standards, (A) actively monitor whether the insurance policies for the related Mortgaged Property contain exclusions in addition to those customarily found in insurance policies prior to September 11, 2001 (‘‘Additional Exclusions’’), (B) request the borrower to either purchase i nsurance against the risks specified in the Additional Exclusions or provide an explanation as to its reasons for failing to purchase such insurance, and (C) notify the Special
S-209
Servicer if it has knowledge (such knowledge to be based on the Master Servicer’s compliance with the immediately preceding clauses (A) and (B)) that any insurance policy contains Additional Exclusions or if it has knowledge (such knowledge to be based on the Master Servicer’s compliance with the immediately preceding clauses (A) and (B)) that any borrower fails to purchase the insurance requested to be purchased by the Master Servicer pursuant to clause (B) above. If the Special Servicer determines in accordance with the Servicing Standards that such failure is not an Acceptable Insurance Default the Special Servicer will be required to notify the Master Servicer, and the Master Servicer will be required to cause such insurance to be maintained. If the Special Servicer determines that such failure is an Acceptable Insurance Default, it will be required to inform each Rating Agency as to such conclusions for those mortgage loans that (i) have one of the ten (10) high est outstanding principal balances of the mortgage loans then included in the trust or (ii) comprise more than 5% of the outstanding principal balance of the mortgage loans then included in the trust.
Notwithstanding the foregoing, the Master Servicer will not be required to maintain or cause to be maintained any earthquake or environmental insurance on a Mortgaged Property unless such insurance was in effect as of origination of the mortgage loan or the date of initial issuance of the certificates and such insurance is available at commercially reasonable rates.
‘‘Acceptable Insurance Default’’ means, with respect to any mortgage loan, other than a mortgage loan that expressly requires the borrower to maintain insurance coverage for acts of terrorism, a default under the related mortgage loan documents arising by reason of (i) any failure on the part of the related borrower to maintain with respect to the related mortgaged real property specific insurance coverage with respect to, or an all-risk casualty insurance policy that does not specifically exclude, terrorist or similar acts, and/or (ii) any failure on the part of the related borrower to maintain with respect to the related mortgaged real property, insurance coverage with respect to damages or casualties caused by terrorist or similar acts upon terms not materially less favorable than those in place as of the Closing Date, in each case, as to which default the Master Servicer and the Special Servicer may forbear taking any enforcement action; provided that the Special Servicer has determined in its reasonable judgment, based on inquiry consistent with the Servicing Standards and subject to the consent of the Directing Certificateholder or any holder of a related companion loan to the extent provided for under the related intercreditor agreement or Pooling and Servicing Agreement, as applicable, that either (a) such insurance is not available at commercially reasonable rates and that such hazards are not at the time commonly insured against for properties similar to the related mortgaged real property and located in or around the region in which such related mortgaged real property is located, or (b) such insurance is not available at any rate; provided, however, the Directing Certificateholder or any holder of a related companion loan to the extent provided for under the related intercreditor agreement or Pooling and Servicing Agreement, as applicable will not have more than 30 days to respond to the Special Servicer’s request for consent; provided, further, that upon the Special Servicer’s determination, consistent with the Servicing Standards, that exigent circumstances do not allow the Special Servicer to wait for the consent of the Directing Certificateholder or any holder of a related companion loan to the extent provided for under the related intercreditor agreement or Pooling and Servicing Agreement, as applicable, the Special Servicer will not be requir ed to do so. Each of the Master Servicer and the Special Servicer will be entitled to rely on insurance consultants in making the determinations described above (as well as determinations of whether particular exclusions constitute additional exclusions) and the cost of such expense shall be paid from the Certificate Account as a Servicing Advance.
With respect to the Sawgrass Mills Mall Whole Loan and each AB Whole Loan, the rights of the Directing Certificateholder described in the preceding paragraph shall be subject to the rights of certain holders of the related Subordinate Companion Loans under the circumstances described under ‘‘Description of the Mortgage Pool—The Whole Loans.’’ With respect to the Carespring Portfolio Whole Loan and each Logan Portfolio Whole Loan, the Directing Certificateholder will not be entitled to exercise the rights in the preceding paragraph, but
S-210
similar rights under the JPMCC 2007-LDP11 Pooling and Servicing Agreement will be exercisable by the JPMCC 2007-LDP11 Directing Certificateholder.
During the period that the Special Servicer is evaluating the availability of such insurance, the Master Servicer will not be liable for any loss related to its failure to require the borrower to maintain such insurance and will not be in default of its obligations as a result of such failure.
The Special Servicer will be required to maintain (or cause to be maintained), fire and hazard insurance on each REO Property (other than with respect to the Non-Serviced Mortgage Loans), to the extent obtainable at commercially reasonable rates, in an amount that is at least equal to the lesser of (1) the full replacement cost of the improvements on the REO Property, or (2) the outstanding principal balance owing on the related mortgage loan, and in any event, the amount necessary to avoid the operation of any co-insurance provisions. In addition, if the REO Property is located in an area identified as a federally designated special flood hazard area, the Special Servicer will be required to cause to be maintained, to the extent available at commercially reasonable rates (as determined by the Special Servicer in accordance with the Servicing Standards), a flood insurance policy meeting the requirements of the current guidelines of the Federal Insuranc e Administration in an amount representing coverage not less than the maximum amount of insurance that is available under the National Flood Insurance Act of 1968, as amended.
The Pooling and Servicing Agreement provides that the Master Servicer and the Special Servicer may satisfy their respective obligations to cause each borrower to maintain a hazard insurance policy by maintaining a blanket or master single interest or force-placed policy insuring against hazard losses on the mortgage loans and REO Properties. Any losses incurred with respect to mortgage loans or REO Properties due to uninsured risks (including earthquakes, mud flows and floods) or insufficient hazard insurance proceeds may adversely affect payments to Certificateholders. Any cost incurred by the Master Servicer or the Special Servicer in maintaining a hazard insurance policy, if the borrower defaults on its obligation to do so, will be advanced by the Master Servicer as a Servicing Advance and will be charged to the related borrower. Generally, no borrower is required by the mortgage loan documents to maintain earthquake insurance on any Mortgaged Property and th e Special Servicer will not be required to maintain earthquake insurance on any REO Properties. Any cost of maintaining that kind of required insurance or other earthquake insurance obtained by the Special Servicer will be paid out of a segregated custodial account created and maintained by the Special Servicer on behalf of the Trustee in trust for the Certificateholders (the ‘‘REO Account’’) or advanced by the Master Servicer as a Servicing Advance.
The costs of the insurance may be recovered by the Master Servicer or Trustee, as applicable, from reimbursements received from the borrower or, if the borrower does not pay those amounts, as a Servicing Advance as set forth in the Pooling and Servicing Agreement. All costs and expenses incurred by the Special Servicer in maintaining the insurance described above on REO Properties will be paid out of the related REO Account or, if the amount in such account is insufficient, such costs and expenses will be advanced by the Master Servicer to the Special Servicer as a Servicing Advance to the extent such Servicing Advance is not determined to be a Nonrecoverable Advance.
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, nor will any mortgage loan be subject to FHA insurance.
Modifications, Waiver and Amendments
Except as otherwise set forth in this paragraph, the Special Servicer (or, with respect to non-material modifications, waivers and amendments as set forth in the Pooling and Servicing Agreement, the Master Servicer) may not waive, modify or amend (or consent to waive, modify or amend) any provision of a mortgage loan that is not in default or as to which default is not reasonably foreseeable except for (1) the waiver of any due-on-sale clause or
S-211
due-on-encumbrance clause to the extent permitted in the Pooling and Servicing Agreement, and (2) any waiver, modification or amendment more than three months after the Closing Date that would not be a ‘‘significant modification’’ of the mortgage loan within the meaning of Treasury Regulations Section 1.860G-2(b). The Master Servicer will not be permitted under the Pooling and Servicing Agreement to agree to any modifications, waivers and amendments without the consent of the Special Servicer except certain non-material consents and waivers described in the Pooling and Servicing Agreement. The Special Servicer will have the sole authority (but may be required as described in this prospectus supplement and under the Pooling and Servicing Agreement to take direction from and obtain the written approval of the Directing Certificateholder or with respect to each AB Mortgage Loan and the Sawgrass Mills Mall Loan, in certain circumstances, certain holders of the related Subor dinate Companion Loans) to approve any assumptions, transfers of interest, material modifications, property management company changes, franchise affiliation changes, releases of performance escrows, additional indebtedness, due-on-sale or due-on-encumbrance provisions with respect to all mortgage loans (other than non-material modifications, waivers and amendments).
If, and only if, the Special Servicer determines that a modification, waiver or amendment (including the forgiveness or deferral of interest or principal or the substitution or release of collateral or the pledge of additional collateral) of the terms of a Specially Serviced Mortgage Loan with respect to which a payment default or other material default has occurred or a payment default or other material default is, in the Special Servicer’s judgment, reasonably foreseeable, is reasonably likely to produce a greater recovery on a net present value basis (the relevant discounting to be performed at the related Mortgage Rate) than liquidation of the Specially Serviced Mortgage Loan, then the Special Servicer may, but is not required to, agree to a modification, waiver or amendment of the Specially Serviced Mortgage Loan, subject to the restrictions and limitations described below (and with respect to each AB Mortgage Loan and the Sawgrass Mills Mall Loan, su bject to the rights of certain holders of the related Subordinate Companion Loans to consent to such modification, waiver or amendment).
The Special Servicer is required to use its reasonable efforts to the extent reasonably possible to fully amortize a modified mortgage loan prior to the Rated Final Distribution Date. The Special Servicer may not agree to a modification, waiver or amendment of any term of any Specially Serviced Mortgage Loan if that modification, waiver or amendment would extend the maturity date of the Specially Serviced Mortgage Loan to a date occurring later than the earlier of (A) two years prior to the Rated Final Distribution Date and (B) if the Specially Serviced Mortgage Loan is secured by a leasehold estate and not the related fee interest, the date twenty years or, to the extent consistent with the Servicing Standards, giving due consideration to the remaining term of the ground lease, ten years, prior to the end of the current term of the ground lease, plus any unilateral options to extend.
In the event of a modification that creates a deferral of interest on a mortgage loan and a capitalization of such interest deferral, the Pooling and Servicing Agreement will provide that the amount of deferred interest will be allocated to reduce the Distributable Certificate Interest of the Class or Classes of Certificates (other than the Class S and Class X Certificates and the Residual Certificates) with the latest sequential designation then outstanding, and to the extent so allocated, will be added to the Certificate Balance of the Class or Classes.
The Special Servicer or the Master Servicer, as the case may be, will be required to notify each other, the Directing Certificateholder (and in the case of each Whole Loan, one or more holders of the related Companion Loan), the applicable Mortgage Loan Seller, each Rating Agency and the Trustee of any modification, waiver or amendment of any term of any mortgage loan and will be required to deliver to the Trustee for deposit in the related mortgage file, an original counterpart of the agreement related to the modification, waiver or amendment, promptly following the execution of that agreement, with a copy to the Master Servicer, all as set forth in the Pooling and Servicing Agreement. Copies of each agreement whereby the modification, waiver or amendment of any term of any mortgage loan is effected are required to be available
S-212
for review during normal business hours at the offices of the Trustee. See ‘‘Description of the Certificates—Reports to Certificateholders; Certain Available Information’’ in this prospectus supplement.
The modification, waiver or amendment of each Whole Loan may be subject to certain other limitations set forth in the related Mortgage Loan documents and the related Intercreditor Agreement.
Any modification, extension, waiver or amendment of the payment terms of a Whole Loan will be required to be structured so as to be consistent with the allocation and payment priorities in the related loan documents and intercreditor agreement, such that neither the trust as holder of the related Mortgage Loan nor any holder of a related Companion Loan gains a priority over any other holder that is not reflected in the related loan documents and intercreditor agreement.
Realization Upon Defaulted Mortgage Loans
Within 30 days after a mortgage loan (other than with respect to the Non-Serviced Mortgage Loans) has become a Specially Serviced Mortgage Loan, the Special Servicer will be required to order an appraisal (which will not be required to be received within that 30-day period) and, not more than 30 days after receipt of such appraisal, determine the fair value of the mortgage loan in accordance with the Servicing Standards. The Special Servicer will be permitted to change, from time to time thereafter, its determination of the fair value of a mortgage loan in default based upon changed circumstances, new information or otherwise, in accordance with the Servicing Standards.
In the event a mortgage loan is in default, the Certificateholder holding the largest aggregate Certificate Balance of the Controlling Class and the Special Servicer will each have an assignable option (a ‘‘Purchase Option’’) to purchase the mortgage loan in default from the trust fund ((i) with respect to each AB Mortgage Loan and the Sawgrass Mills Mall Loan , subject to the purchase right of certain holders of the related Subordinate Companion Loan(s), and (ii) in the case of any mortgage loan with a mezzanine loan, subject to the purchase right of the holder of the mezzanine debt set forth under any related intercreditor agreement as described under ‘‘Description of the Mortgage Pool—General’’ in this prospectus supplement) at a price (the ‘‘Option Price’’) equal to, if the Special Servicer has not yet determined the fair value of the mortgage loan in default, (i) (a) the unpaid principal balance of the mortgage loan in default, plus (b) accrued and unpaid interest on such balance, plus (c) all Yield Maintenance Charges and/or prepayment penalties then due (except if the Purchase Option is exercised by the Controlling Class Certificateholder), plus (d) all related unreimbursed Servicing Advances, together with accrued and unpaid interest on all Advances, all accrued Special Servicing Fees allocable to such mortgage loan in default whether paid or unpaid, and any unreimbursed trust fund expenses in respect of such mortgage loan or (ii) the fair value of the mortgage loan in default as determined by the Special Servicer, if the Special Servicer has made such fair value determination. The Certificateholder holding the largest aggregate Certificate Balance of the Controlling Class will have an exclusive right to exercise the Purchase Option for a specified period of time.
Unless and until the Purchase Option with respect to a mortgage loan in default is exercised, the Special Servicer will be required to pursue such other resolution strategies available under the Pooling and Servicing Agreement, including workout and foreclosure, consistent with the Servicing Standards, but the Special Servicer will not be permitted to sell the mortgage loan in default other than pursuant to the exercise of the Purchase Option.
If not exercised sooner, the Purchase Option with respect to any mortgage loan in default will automatically terminate upon (i) the related borrower’s cure of all defaults on the mortgage loan in default, (ii) the acquisition on behalf of the trust fund of title to the related Mortgaged Property by foreclosure or deed in lieu of foreclosure, (iii) the modification or pay-off (full or discounted) of the mortgage loan in default in connection with a workout and (iv) in the case of each AB Whole Loan and the Sawgrass Mills Mall Whole Loan, the purchase of the related
S-213
Mortgage Loan by certain holders of the related Subordinate Companion Loan(s). In addition, the Purchase Option with respect to a mortgage loan in default held by any person will terminate upon the exercise of the Purchase Option by any other holder of a Purchase Option.
If (a) a Purchase Option is exercised with respect to a mortgage loan in default and the person expected to acquire the mortgage loan in default pursuant to such exercise is a Controlling Class Certificateholder, the Special Servicer, or any of their respective affiliates (in other words, the Purchase Option has not been assigned to another unaffiliated person) and (b) the Option Price is based on the Special Servicer’s determination of the fair value of the mortgage loan in default, then the Master Servicer (or, if the Master Servicer is an affiliate of the Special Servicer, an independent third party appointed by the Trustee) will be required to determine if the Option Price represents a fair value for the mortgage loan in default. The Master Servicer (or the independent third party, as applicable) will be entitled to receive, out of general collections on the mortgage loans and any REO Properties in the trust fund, a reasonable fee for each su ch determination not to exceed $2,500 per mortgage loan plus reasonable out-of-pocket costs and expenses; provided, however, with respect to any mortgage loan, the $2,500 fee shall be collectible once in any six month period.
The Purchase Option with respect to each AB Mortgage Loan and the Sawgrass Mills Mall Loan is subject to the right of certain holders of the related Subordinate Companion Loan(s) to exercise its option to purchase the related AB Mortgage Loan following a default as described under the related Intercreditor Agreement and ‘‘Description of the Mortgage Pool—AB Whole Loans’’ in this prospectus supplement. The Purchase Option with respect to each mortgage loan with a mezzanine loan is subject to the rights of the holder of the related mezzanine debt to exercise its option to purchase the related mortgage loan following a default as described under the related intercreditor agreement (and such purchase price is subject to the terms of the related intercreditor agreement). See ‘‘Description of the Mortgage Pool—Additional Debt’’ in this prospectus supplement.
If title to any Mortgaged Property is acquired by the trust fund, the Special Servicer, on behalf of the trust fund, will be required to sell the Mortgaged Property prior to the close of the third calendar year beginning after the year of acquisition, unless (1) the Internal Revenue Service (the ‘‘IRS’’) grants an extension of time to sell the property or (2) the Trustee receives an opinion of independent counsel to the effect that the holding of the property by the trust fund longer than the above-referenced three year period will not result in the imposition of a tax on any Loan REMIC, the Upper-Tier REMIC or the Lower-Tier REMIC or cause any Loan REMIC, the Upper-Tier REMIC or the Lower-Tier REMIC to fail to qualify as a REMIC under the Code at any time that any Certificate is outstanding. Subject to th e foregoing and any other tax-related limitations, pursuant to the Pooling and Servicing Agreement, the Special Servicer will generally be required to attempt to sell any Mortgaged Property so acquired on the same terms and conditions it would if it were the owner. The Special Servicer will also be required to ensure that any Mortgaged Property acquired by the trust fund is administered so that it constitutes ‘‘foreclosure property’’ within the meaning of Code Section 860G(a)(8) at all times and that the sale of the property does not result in the receipt by the trust fund of any income from nonpermitted assets as described in Code Section 860F(a)(2)(B). If the trust fund acquires title to any Mortgaged Property, the Special Servicer, on behalf of the trust fund, will retain, at the expense of the trust fund, an independent contractor to manage and operate the property. The independent contractor generally will be permitted to perform construction (including renovation) on a foreclosed property only if the construction was at least 10% completed at the time default on the related mortgage loan became imminent. The retention of an independent contractor, however, will not relieve the Special Servicer of its obligation to manage the Mortgaged Property as required under the Pooling and Servicing Agreement.
Generally, a Loan REMIC or the Lower-Tier REMIC will not be taxable on income received with respect to a Mortgaged Property acquired by the trust fund to the extent that it constitutes ‘‘rents from real property,’’ within the meaning of Code Section 856(c)(3)(A) and Treasury regulations under the Code. Rents from real property include fixed rents and rents based on the
S-214
receipts or sales of a tenant but do not include the portion of any rental based on the net income or profit of any tenant or sub-tenant. No determination has been made whether rent on any of the Mortgaged Properties meets this requirement. Rents from real property include charges for services customarily furnished or rendered in connection with the rental of real property, whether or not the charges are separately stated. Services furnished to the tenants of a particular building will be considered as customary if, in the geographic market in which the building is located, tenants in buildings that are of similar class are customarily provided with the service. No determination has been made whether the services furnished to the tenants of the Mortgaged Properties are ‘‘customary’’ within the meaning of applicable regulations. It is therefore possible that a portion of the rental income with respect to a Mortgaged Property owned by the trust fund would not constitute rents from real property, or that none of such income would qualify if a separate charge is not stated for such non-customary services or they are not performed by an independent contractor. Rents from real property also do not include income from the operation of a trade or business on the Mortgaged Property, such as a hotel. Any of the foregoing types of income may instead constitute ‘‘net income from foreclosure property,’’ which would be taxable to the related Loan REMIC or the Lower-Tier REMIC at the highest marginal federal corporate rate (currently 35%) and may also be subject to state or local taxes. The Pooling and Servicing Agreement provides that the Special Servicer will be permitted to cause the related Loan REMIC or 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. Becau se these sources of income, if they exist, are already in place with respect to the Mortgaged Properties, it is generally viewed as beneficial to Certificateholders to permit the trust fund to continue to earn them if it acquires a Mortgaged Property, even at the cost of this tax. These taxes would be chargeable against the related income for purposes of determining the proceeds available for distribution to holders of Certificates. See ‘‘Certain Federal Income Tax Consequences’’ and ‘‘Federal Income Tax Consequences for REMIC Certificates—Taxes That May Be Imposed on the REMIC Pool’’ in the prospectus.
To the extent that Liquidation Proceeds collected with respect to any mortgage loan are less than the sum of: (1) the outstanding principal balance of the mortgage loan, (2) interest accrued on the mortgage loan and (3) the aggregate amount of expenses reimbursable to the Master Servicer, the Special Servicer or the Trustee or paid out of the trust fund that were not reimbursed by the related borrower (including any unpaid servicing compensation, unreimbursed Servicing Advances and unpaid and accrued interest on all Advances and additional trust fund expenses) incurred with respect to the mortgage loan, the trust fund will realize a loss in the amount of the shortfall. The Trustee, the Master Servicer and/or the Special Servicer will be entitled to reimbursement out of the Liquidation Proceeds recovered on any mortgage loan, prior to the distribution of those Liquidation Proceeds to Certificateholders, of any and all amounts that represent unpaid servicing compensation in respect of the related mortgage loan, certain unreimbursed expenses incurred with respect to the mortgage loan and any unreimbursed Advances (including interest thereon) made with respect to the mortgage loan. In addition, amounts otherwise distributable on the Certificates will be further reduced by interest payable to the Master Servicer, the Special Servicer or the Trustee on these Advances.
If any Mortgaged Property suffers damage and the proceeds, if any, of the related hazard insurance policy are insufficient to restore fully the damaged property, the Master Servicer will not be required to advance the funds to effect the restoration unless (1) the Special Servicer determines that the restoration will increase the proceeds to Certificateholders on liquidation of the mortgage loan after reimbursement of the Special Servicer or the Master Servicer, as the case may be, for its expenses and (2) the Master Servicer has not determined that the advance would be a Nonrecoverable Advance.
Inspections; Collection of Operating Information
The Master Servicer will be required to perform or cause to be performed (at its own expense), physical inspections of each Mortgaged Property (other than the Mortgaged Property
S-215
securing each Non-Serviced Mortgage Loan, which is subject to inspection pursuant to the JPMCC 2007-LDP11 Pooling and Servicing Agreement) securing a Mortgage Note with a Stated Principal Balance of (A) $2,000,000 or more at least once every 12 months and (B) less than $2,000,000 at least once every 24 months, in each case commencing in the calendar year 2008 unless a physical inspection has been performed by the Special Servicer within the last calendar year 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 relate d mortgage loan, the Special Servicer is required to inspect the related Mortgaged Property as soon as practicable after the mortgage loan becomes a Specially Serviced Mortgage Loan and annually thereafter for so long as the mortgage loan remains a Specially Serviced Mortgage Loan (the cost of which inspection will be reimbursed first from default interest and late charges constituting additional compensation of the Special Servicer on the related mortgage and then from the Certificate Account as an expense of the trust fund, and, in the case of any Whole Loan, as an expense of the holder of the related Companion Loan to the extent provided by 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 and specifying the existence of any material vacancies in the Mortgaged Property of which it has knowledge, of any sale, transfer or abandonment of the Mortgaged Property, of any material change in the condition of the Mortgaged Property, or of any material waste committed on the Mortgaged Property.
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 of the related Mortgaged Property. Most of the mortgage loan documents obligate the related borrower to deliver 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.
Copies of the inspection reports and Operating Statements referred to above that are delivered to the Directing Certificateholder and the Trustee will be available for review by Certificateholders during normal business hours at the offices of the Trustee. See ‘‘Description of the Certificates—Reports to Certificateholders; Certain Available Information’’ in this prospectus supplement.
Certain Matters Regarding the Master Servicer, the Special Servicer and the Depositor
The Pooling and Servicing Agreement 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 Trustee of written confirmation from each Rating Agency that the resignation and appointment will not, in and of itself, cause a downgrade, withdrawal or qualification of the rating assigned by such Rating Agency to any Class of Certificates; and, in the case of the Special Servicer, the approval of such successor by the Directing Certificateholder, which approval shall 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. 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 Pooling and Servicing Agreement. 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.
The Pooling and Servicing Agreement will provide that none of the Master Servicer, the Special Servicer, the Depositor or any member, manager, director, officer, employee or agent of any of them will be under any liability to the trust fund or the Certificateholders for any action taken, or not taken, in good faith pursuant to the Pooling and Servicing Agreement or for errors
S-216
in judgment; provided, however, none of the Master Servicer, the Special Servicer, the Depositor or similar person will be protected against any liability that would otherwise be imposed by reason of willful misfeasance, bad faith or negligence in the performance of obligations or duties under the Pooling and Servicing Agreement or by reason of negligent disregard of the obligations and duties. The Pooling and Servicing Agreement will also provide that the Master Servicer, the Special Servicer, the Depositor and their respective affiliates and any director, officer, employee or agent of any of them will be entitled to indemnification by the trust fund against any loss, liability or expense incurred in connection with any legal action or claim that relates to the Pooling and Servicing Agreement or the Certificates; provided, however, the indemnification will not extend to any loss, liability or expense incurred by reason of willful misfeasance, bad faith or negligence in the performance of obligations or duties under the Pooling and Servicing Agreement, by reason of negligent disregard of such party’s obligations or duties, or in the case of the Depositor and any of its directors, officers, members, managers, employees and agents, any violation by any of them of any state or federal securities law. The Pooling and Servicing Agreement will also provide that the JPMCC 2007-LDP11 Master Servicer, the depositor under the JPMCC 2007-LDP11 Pooling and Servicing Agreement, the JPMCC 2007-LDP11 Special Servicer, the JPMCC 2007-LDP11 Trustee and any director, officer, employee or agent of any of them will be entitled to indemnification by the trust fund and held harmless against the trust’s pro rata share of any liability or expense incurred in connection with any legal action or claim that relates to the Non-Serviced Mortgage Loans under the JPMCC 2007-LDP11 Pooling and Servicing Agreement or the Pooling and Servicing Agreement; provided, however, such indemnification will not extend to any loss, liability or expense incurred by reason of willful misfeasance, bad faith or negligence on the part of the JPMCC 2007-LDP11 Master Servicer, the depositor under the JPMCC 2007-LDP11 Pooling and Servicing Agreement, the JPMCC 2007-LDP11 Special Servicer or the JPMCC 2007-LDP11 Trustee in the performance of obligations or duties or by reason of negligent disregard of obligations or duties under the JPMCC 2007-LDP11 Pooling and Servicing Agr eement.
In addition, the Pooling and Servicing Agreement will provide that none of the Master Servicer, the Special Servicer or the Depositor will be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its respective responsibilities under the Pooling and Servicing Agreement or that in its opinion may involve it in any expense or liability not reimbursed by the trust. However, each of the Master Servicer, the Special Servicer and the Depositor 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 Pooling and Servicing Agreement and the interests of the Certificateholders, and in the case of any Whole Loan, the rights of the Certificateholders and the holder of the related Companion Loan (as a collective whole); provided, however, if a Whole Loan and/or holder of the related Companion Loan are involved, such expenses, costs and liabilities will be payable out of funds related to the related Whole Loan and will also be payable out of the other funds in the Certificate Account if amounts on deposit with respect to such whole loan are insufficient therefor but, if the amount relates to the related Mortgage Loan, then any subsequent recovery on that mortgage loan will be used to reimburse the trust for the reimbursement that the trust made.
Pursuant to the Pooling and Servicing Agreement, the Master Servicer and 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 Pooling and Servicing Agreement. Notwithstanding the foregoing, each of 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 Pooling and Servicing Agreement are met.
Any person into which the Master Servicer, the Special Servicer or the Depositor may be merged or consolidated, or any person resulting from any merger or consolidation to which the
S-217
Master Servicer, the Special Servicer or the Depositor is a party, or any person succeeding to the business of the Master Servicer, the Special Servicer or the Depositor, will be the successor of the Master Servicer, the Special Servicer or the Depositor, as the case may be, under the Pooling and Servicing Agreement. The Master Servicer and the Special Servicer may have other normal business relationships with the Depositor or the Depositor’s affiliates.
Unless and until the Purchase Option with respect to a mortgage loan in default is exercised, the Special Servicer will be required to pursue such other resolution strategies available under the Pooling and Servicing Agreement, including workout and foreclosure, consistent with the Servicing Standards and the REMIC Provisions, but the Special Servicer will not be permitted to sell the mortgage loan in default other than pursuant to the exercise of the Purchase Option.
Events of Default
‘‘Events of Default’’ under the Pooling and Servicing Agreement with respect to the Master Servicer or the Special Servicer, as the case may be, will include, without limitation:
(a) (i) any failure by the Master Servicer to make a required deposit to the Certificate Account on the day such deposit was first required to be made, which failure is not remedied within one business day, or (ii) any failure by the Master Servicer to deposit into, or remit to the Trustee for deposit into, the Distribution Account (or Companion Distribution Account, as applicable) any amount required to be so deposited or remitted, which failure is not remedied by 11:00 a.m. New York City time on the relevant Distribution Date;
(b) any failure by the Special Servicer to deposit into the REO Account within two business days after the day such deposit is required to be made, or to remit to the Master Servicer for deposit in the Certificate Account any such remittance required to be made by the Special Servicer on the day such remittance is required to be made under the Pooling and Servicing Agreement;
(c) any failure by the Master Servicer or the Special Servicer duly to observe or perform in any material respect any of its other covenants or obligations under the Pooling and Servicing Agreement, which failure continues unremedied for thirty days (fifteen days in the case of the Master Servicer’s failure to make a Servicing Advance or fifteen days in the case of a failure to pay the premium for any insurance policy required to be maintained under the Pooling and Servicing Agreement or five days (or another specified number of days) (thirty days during any period in which the trust is not subject to the reporting requirements of the Securities Exchange Act of 1934) in the case of a failure by either of the Master Servicer or the Special Servicer to deliver certain reports required under the Pooling and Servicing Agreement) after written notice of the failure has been given to the Master Servicer or the Special Servicer, as the case may be, by any other party to the Pooling and Servicing Agreement, or to the Master Servicer or the Special Servicer, as the case may be, with a copy to each other party to the related Pooling and Servicing Agreement, by Certificateholders of any Class, evidencing as to that Class, Percentage Interests aggregating not less than 25% or with respect to each Pari Passu Whole Loan and the Sawgrass Mills Mall Whole Loan, by the holder of any related Pari Passu Companion Loan, as applicable; provided, however, if that failure is capable of being cured and the Master Servicer or Special Servicer, as applicable, is diligently pursuing that cure, that 30-day period will be extended an additional 30 days;
(d) any breach on the part of the Master Servicer or the Special Servicer of any representation or warranty in the Pooling and Servicing Agreement that materially and adversely affects the interests of any Class of Certificateholders and that continues unremedied for a period of 30 days after the date on which notice of that breach, requiring the same to be remedied, will have been given to the Master Servicer or the Special Servicer, as the case may be, by the Depositor or the Trustee, or to the Master Servicer, the Special Servicer, the Depositor and the Trustee by the Certificateholders of any Class, evidencing as to that Class, Percentage Interests aggregating not less than 25% or with respect to any Pari
S-218
Passu Whole Loan and the Sawgrass Mills Mall Whole Loan, by the holder of any related Pari Passu Companion Loan; provided, however, if that breach is capable of being cured and the Master Servicer or Special Servicer, as applicable, is diligently pursuing that cure, that 30-day period will be extended an additional 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, 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) Moody’s places its ratings with respect to any Class of Certificates on a ‘‘watch’’ status in contemplation of a ratings downgrade or withdrawal, citing servicing or special servicing concerns, as applicable, as the sole or material factor in such rating action and such ‘‘watch’’ status is not rescinded within 60 days (or such longer period as would not, as confirmed by Moody’s in writing, result in a qualification, downgrade or withdrawal of one or more ratings assigned by Moody’s to the Certificates);
(g) Moody’s downgrades the then-current ratings of any Class of Certificates, citing servicing or special servicing concerns, as applicable, as the sole or a material factor in such downgrade;
(h) the Master Servicer or the Special Servicer is no longer rated at least ‘‘CMS3’’ or ‘‘CSS3’’ by Fitch, respectively, and the Master Servicer or Special Servicer is not reinstated to that rating within 30 days of the delisting; or
(i) the Master Servicer or the Special Servicer is no longer listed on S&P’s Select Servicer List as a U.S. Commercial Mortgage Master Servicer or a U.S. Commercial Mortgage Special Servicer, as applicable, and is not reinstated to that rating within 60 days of the delisting.
Rights Upon Event of Default
If an Event of Default occurs with respect to the Master Servicer or the Special Servicer under the Pooling and Servicing Agreement, then, so long as the Event of Default remains unremedied, the Depositor or the Trustee will be authorized, and at the written direction of Certificateholders entitled to not less than 51% of the Voting Rights or the Directing Certificateholder, the Trustee will be required, to terminate all of the rights and obligations of the defaulting party as the Master Servicer or Special Servicer, as applicable (other than certain rights in respect of indemnification and certain items of servicing compensation), under the Pooling and Servicing Agreement. The Trustee will then succeed to all of the responsibilities, duties and liabilities of the defaulting party as the Master Servicer or Special Servicer, as applicable, under the Pooling and Servicing Agreement and will be entitled to similar compensation arrangements. If the Trustee is unwill ing or unable so to act, it may (or, at the written request of the Directing Certificateholder or Certificateholders entitled to not less than 51% of the Voting Rights, it will be required to) appoint, or petition a court of competent jurisdiction to appoint, a loan servicing institution or other entity that would not result in the downgrade, qualification or withdrawal of the ratings assigned to any Class of Certificates by either Rating Agency to act as successor to the Master Servicer or Special Servicer, as the case may be, under the Pooling and Servicing Agreement and that has been approved by the Directing Certificateholder, which approval shall not be unreasonably withheld.
Notwithstanding anything to the contrary contained in the section described above, with respect to the Sawgrass Mills Mall Whole Loan, if (i) an Event of Default on the part of the Master Servicer remains unremedied and materially and adversely affects only a related Pari Passu Companion Loan, (ii) the Master Servicer fails to make any payment on a Pari Passu Companion Loan when required under the terms of the Pooling and Servicing Agreement as further described in the terms of the Pooling and Servicing Agreement, which failure has not been remedied or (iii) any qualification, downgrade or withdrawal by any rating agency of certificates backed by any related Pari Passu Companion Loan occurs solely as a result of an action of the
S-219
Master Servicer, then the Master Servicer may not be terminated but the holder of such related Pari Passu Companion Loan, or if such Pari Passu Companion Loan is included in a securitization, the related trustee, acting at the direction of the related directing certificateholder of such securitization, will be entitled to require the Master Servicer to appoint a sub-servicer solely with respect to that Sawgrass Mills Mall Whole Loan (or if that Whole Loan is currently being sub-serviced, to replace the current sub-servicer, but only if such original sub-servicer is in default under the related sub-servicing agreement). The appointment (or replacement) of a sub-servicer with respect to a Sawgrass Mills Mall Whole Loan will in any event be subject to confirmation from each rating agency that such appointment would not result in the downgrade, withdrawal or qualification of the then-current ratings on any class of outstanding Certificates and certificates backed by any Pari Passu Companion Loan. A replacement s ub-servicer will be selected jointly by the Directing Certificateholder and the holders of the Pari Passu Companion Loans (or the related directing certificateholders, as applicable); provided that if the Directing Certificateholder and the holders of the Pari Passu Companion Loans (or the related directing certificateholders) are not able to agree on a sub-servicer within 45 days after the date on which the Trustee was directed to appoint a sub-servicer or replace the current sub-servicer, such sub-servicer will be selected by the Directing Certificateholder.
Notwithstanding anything to the contrary contained in the section described above, in the case of each Pari Passu Whole Loan, if (i) an event of default on the part of the JPMCC 2007-LDP11 Master Servicer remains unremedied and materially and adversely affects only the related Pari Passu Mortgage Loan included in the Trust Fund, (ii) the JPMCC 2007-LDP11 Master Servicer fails to make any payment on the related Pari Passu Mortgage Loan when required under the terms of the JPMCC 2007-LDP11 Pooling and Servicing Agreement as further described in the terms of the JPMCC 2007-LDP11 Pooling and Servicing Agreement, which failure has not been remedied or (iii) any qualification, downgrade or withdrawal by any rating agency of the Certificates occurs solely as a result of an action of the JPMCC 2007-LDP11 Master Servicer, then the JPMCC 2007-LDP11 Master Servicer may not be terminated but the Directing Certificateholder will be entitled to require the JPMC C 2007-LDP11 Master Servicer to appoint a sub-servicer solely with respect to that Pari Passu Whole Loan (or if that Whole Loan is currently being sub-serviced, to replace the current sub-servicer, but only if such original sub-servicer is in default under the related sub-servicing agreement). The appointment (or replacement) of a sub-servicer with respect to a Pari Passu Whole Loan will in any event be subject to confirmation from each rating agency that such appointment would not result in the downgrade, withdrawal or qualification of the then-current ratings on any class of outstanding Certificates and certificates backed by the related Pari Passu Companion Loan. A replacement sub-servicer will be selected jointly by the Directing Certificateholder and the holder of the Pari Passu Companion Loan (or the JPMCC 2007-LDP11 Directing Certificateholder, as applicable); provided that if the Directing Certificateholder and the JPMCC 2007-LDP11 Directing Certificateholder are not able to agree on a sub-servicer within 45 days after the date on which the JPMCC 2007-LDP11 Trustee was directed to appoint a sub-servicer or replace the current sub-servicer, such sub-servicer will be selected by the JPMCC 2007-LDP11 Directing Certificateholder.
However, if the Master Servicer receives notice of termination solely due to an Event of Default described in clauses (f) through (i) under ‘‘—Events of Default’’ above, and prior to being replaced as described in the second preceding paragraph, the Master Servicer provides the Trustee with the appropriate ‘‘request for proposal’’ material and the names of potential bidders within 5 business days after receipt of such notice of termination, the Trustee will solicit good faith bids for the Master Servicer’s rights to master service mortgage loans in accordance with the Pooling and Servicing Agreement. The Trustee will have 45 days after receipt of the notice of termination of the Master Servicer to sell those rights and obligations to a successor se rvicer that meets the requirements of a Master Servicer under the Pooling and Servicing Agreement; provided that the Rating Agencies have confirmed in writing that such servicing transfer will not result in a withdrawal, downgrade or qualification of the then-current ratings on the Certificates. The termination of the Master Servicer will be effective when such successor servicer has
S-220
succeeded the terminated Master Servicer, as successor Master Servicer and such successor Master Servicer has assumed the terminated Master Servicer’s master servicing obligations and responsibilities under the Pooling and Servicing Agreement. If a successor has not entered into the Pooling and Servicing Agreement as successor Master Servicer within 45 days after notice of the termination of the Master Servicer, the Master Servicer will be replaced by the Trustee as described in the previous paragraph.
No Certificateholder will have any right under the Pooling and Servicing Agreement to institute any proceeding with respect to the Certificates or the Pooling and Servicing Agreement unless the holder previously has given to the Trustee 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, 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 Pooling and Servicing Agreement 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.
Amendment
The Pooling and Servicing Agreement may be amended by the parties to the Pooling and Servicing Agreement, without the consent of any of the holders of Certificates or any Companion Loan:
(a) to cure any ambiguity to the extent the cure of the ambiguity does not materially and adversely affect the interests of any Certificateholder or the holder of a Companion Loan;
(b) to cause the provisions in the Pooling and Servicing Agreement to conform or be consistent with or in furtherance of the statements made in this prospectus supplement with respect to the Certificates, the trust or the Pooling and Servicing Agreement or to correct or supplement any of its provisions which may be inconsistent with any other provisions therein or to correct any error to the extent, in each case, it does not materially and adversely affect the interests of any Certificateholder or the holder of a Companion Loan;
(c) to change the timing and/or nature of deposits in the Certificate Account, the Distribution Account or the REO Account; provided, that (A) the Master Servicer Remittance Date shall in no event be later than the business day prior to the related Distribution Date, (B) the change would not adversely affect in any material respect the interests of any Certificateholder or the holder of a Companion Loan, as evidenced by an opinion of counsel (at the expense of the party requesting the amendment) and (C) the change would not result in the downgrade, qualification or withdrawal of the ratings assigned to any Class of Certificates by either Rating Agency, as evidenced by a letter from each Rating Agency;
(d) to modify, eliminate or add to any of its provisions (i) to the extent as will be necessary to maintain the qualification of the Upper-Tier REMIC, the Lower-Tier REMIC or any Loan REMIC as a REMIC, to maintain the grantor trust portion of the trust fund as a grantor trust or to avoid or minimize the risk of imposition of any tax on the trust fund; provided that the Trustee has received an opinion of counsel (at the expense of the party requesting the amendment) to the effect that (1) the action is necessary or desirable to maintain such qualification or to avoid or minimize such risk and (2) the action will not adversely affect in any material respect the interests of any holder of the Certificates or the holder of a Companion Loan or (ii) to restrict (or to remove any e xisting restrictions with respect to) the transfer of the Residual Certificates; provided that the Depositor has determined that the amendment will not give rise to any tax with respect to the transfer of the Residual
S-221
Certificates to a non-permitted transferee (see ‘‘Certain Federal Income Tax Consequences— Federal Income Tax Consequences for REMIC Certificates—Taxation of Residual Certificates —Tax-Related Restrictions on Transfer of Residual Certificates’’ in the prospectus);
(e) to make any other provisions with respect to matters or questions arising under the Pooling and Servicing Agreement or any other change; provided that the required action will not adversely affect in any material respect the interests of any Certificateholder or the holder of a Companion Loan, as evidenced by an opinion of counsel and written confirmation that the change would not result in the downgrade, qualification or withdrawal of the ratings assigned to any Class of Certificates by either Rating Agency; and
(f) to amend or supplement any provision of the Pooling and Servicing Agreement to the extent necessary to maintain the ratings assigned to each Class of Certificates by each Rating Agency, as evidenced by written confirmation that the change would not result in the downgrade, qualification or withdrawal of the ratings assigned to any Class of Certificates by such Rating Agency or any class of certificates backed by a Pari Passu Companion Loan by an applicable rating agency; provided that such amendment or supplement will not adversely affect in any material respect the interests of any holder of a Companion Loan.
Notwithstanding the foregoing, no amendment may be made that changes in any manner the obligations of any Mortgage Loan Seller under a Purchase Agreement without the consent of the applicable Mortgage Loan Seller or, if provided in the related Intercreditor Agreement, adversely affects any holder of a Companion Loan without the consent of the applicable holder of that Companion Loan.
The Pooling and Servicing Agreement may also be amended by the parties to the Pooling and Servicing Agreement with the consent of the holders of Certificates of each Class affected by such amendment evidencing, in each case, not less than 662/3% of the aggregate Percentage Interests constituting the Class for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Pooling and Servicing Agreement or of modifying in any manner the rights of the holders of the Certificates, except that the amendment may not (1) reduce in any manner the amount of, or delay the timing of, payments received on the mortgage loans that are required to be distributed on a Certificate of any Class without t he consent of the holder of that 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 the holder of the related Companion Loan, without the consent of the holders of all Certificates of that Class then outstanding or the holder of the related Companion Loan, as applicable, (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 the obligations of any Mortgage Loan Seller under a Purchase Agreement without the consent of the applicable Mortgage Loan Seller, or (5) amend the Servicing Standards without, in each case, the consent of 100% of the holders of Certificates and the holder of the related Companion Loan or wr itten confirmation that such amendment would not result in the downgrade, qualification or withdrawal of the ratings assigned to any Class of Certificates by either Rating Agency and, if required under the related intercreditor agreement, the consent of the holder of the related Companion Loan.
Notwithstanding the foregoing, no party will be required to consent to any amendment to the Pooling and Servicing Agreement without the Trustee and the Master Servicer having first received an opinion of counsel (at the trust fund’s expense) to the effect that the amendment is permitted under the Pooling and Servicing Agreement and that the amendment or the exercise of any power granted to the Master Servicer, the Special Servicer, the Depositor, the Trustee or any other specified person in accordance with the amendment, will not result in the imposition of a tax on any portion of the trust fund or cause any Loan REMIC, the Upper-Tier REMIC or the Lower-Tier REMIC to fail to qualify as a REMIC or cause the grantor trust portion of the trust fund to fail to qualify as a grantor trust.
S-222
Yield and Maturity Considerations
Yield Considerations
General. The yield on any Offered Certificate will depend on: (1) the Pass-Through Rate for the Certificate; (2) the price paid for the Certificate and, if the price was other than par, the rate and timing of payments of principal on the Certificate (or, in the case of the Class X Certificates, the Notional Amounts of the related components); (3) the aggregate amount of distributions on the Certificate (or in the case of the Class X Certificates, reduction of the notional amount of the related components, as a result of such distributions); and (4) the aggregate amount of Collateral Support Deficit amounts allocated to a Class of Offered Certificates (or, in the case of the Class X Certificates, in reduction of the Notional Amount of the related components).
Pass-Through Rate. The Pass-Through Rate applicable to each Class of Offered Certificates for any Distribution Date will equal the rate set forth on the cover of this prospectus supplement. See ‘‘Description of the Certificates’’ in this prospectus supplement.
Rate and Timing of Principal Payments. The yield to holders of Offered Certificates that are purchased at a discount or premium will be affected by the rate and timing of principal payments on the mortgage loans (including principal prepayments on the mortgage loans resulting from both voluntary prepayments by the borrowers and involuntary liquidations). As described in this prospectus supplement, the Group 1 Principal Distribution Amount (and, after the Class A-1A Certificates have been reduced to zero, any remaining Group 2 Principal Distribution Amount) for each Distribution Date will generally be distributable first, in respect of the Class A-SB Certificates until their Certificate Balance is reduced to the Class A-SB Planned Principal Balance, second, in respect of the Class A-1 Certificates until their Certificate Balance is reduced to zero, third, in respect of the Class A-2 Certificates until their Certificate Balance is reduced to zero, fourth, to the Class A-3 Certificates until their Certificate Balance is reduced to zero, fifth, in respect of the Class A-4 Certificates until their Certificate Balance is reduced to zero, and sixth, in respect of the Class A-SB Certificates until their Certificate Balance is reduced to zero; and the Group 2 Principal Distribution Amount (and, after the Class A-4 Certificates and Class A-SB Certificates have been reduced to zero, any remaining Group 1 Principal Distribution Amount) for each Distribution Date will generally be distributable to the Class A-1A Certificates until their Certificate Balance is reduced to zero. After those distributions, the remaining Principal Distribution Amount with respect to the pool of mortgage loans will generally be distributable entirely in respect of the Class A-M Certificates, Class A-J Certificates, Class& nbsp;B Certificates, Class C Certificates, Class D Certificates, Class E Certificates and Class F Certificates and then the Non-Offered Certificates, in that order, in each case until the Certificate Balance of such Class is reduced to zero. Consequently, the rate and timing of principal payments on the mortgage loans will in turn be affected by their amortization schedules, Lockout Periods, Yield Maintenance Charges, the dates on which balloon payments are due, any extensions of maturity dates by the Master Servicer or the Special Servicer and the rate and timing of principal prepayments and other unscheduled collections on the mortgage loans (including for this purpose, collections made in connection with liquidations of mortgage loans due to defaults, casualties or condemnations affecting the Mortgaged Properties, or purchases of mortgage loans out of the trust fund). Furthermore, because the amount of principal that will be distributed to the Class A-1, Class A-2, Class ;A-3, Class A-4, Class A-SB and Class A-1A Certificates will generally be based upon the particular Loan Group in which the related mortgage loan is deemed to be included, the yield on the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-SB Certificates will be particularly sensitive to prepayments on mortgage loans in Loan Group 1 and the yield on the Class A-1A Certificates will be particularly sensitive to prepayments on mortgage loans in Loan Group 2. 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 on the mortgage loans will depend in part on the period of time during which the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-1A Certificates remain outstanding. In particular, once such Classes of Certificates are no longer outstanding, any remaining portion on any Distribution Date of the Group 2 Principal
S-223
Distribution Amount and/or Group 1 Principal Distribution Amount, as applicable, will be distributed to the Class A-SB Certificates until the Certificate Balance of the Class A-SB Certificates is reduced to zero. 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, Class A-4 and Class A-1A Certificates were outstanding. Furthermore, because the Class X Certificates are not entitled to distributions of principal, the yield on such Certificates will be extremely sensitive to prepayments on the mortgage loans to the extent distributed to reduce the notional amounts of the related components. In addition, although the borrower under the ARD Loan may have certain incentives to prepay the ARD Loan on its Anticipated Repayment Dates, we cannot assure you that the borrower will be able to prepay the ARD Loan on its Anticipated Repayment Date. The failure of a borrower to prepay the ARD Loan on its Anticipated Repayment Date will not be an event of default under the terms of the ARD Loan, and pursuant to the terms of the Pooling and Servicing Agreement, neither the Master Servicer nor the Special Servicer will be permitted to take any enforcement action with respect to a borrower’s failure to pay Excess Interest, other than requests for collection, until the scheduled maturity of the ARD Loan; provided that the Master Servicer or the Special Servicer, as the case may be, may take action to enforce the trust fund’s right to apply excess cash flow to principal in accordance with the terms of the ARD Loan documents.
Prepayments and, assuming the respective stated maturity dates for the mortgage loans have not occurred, liquidations and purchases of the mortgage loans, will result in distributions on the Offered Certificates of amounts that would otherwise be distributed over the remaining terms of the mortgage loans. Defaults on the mortgage loans, particularly at or near their stated maturity dates, may result in significant delays in payments of principal on the mortgage loans (and, accordingly, on the Offered Certificates) while workouts are negotiated or foreclosures are completed. See ‘‘Servicing of the Mortgage Loans—Modifications, Waiver and Amendments’’ and ‘‘—Realization Upon Defa ulted Mortgage Loans’’ in this prospectus supplement and ‘‘Certain Legal Aspects of Mortgage Loans—Foreclosure’’ in the prospectus. Because the rate of principal payments on the mortgage loans will depend on future events and a variety of factors (as described below), we cannot assure you as to the rate of principal payments or the rate of principal prepayments in particular. We are not aware of any relevant publicly available or authoritative statistics with respect to the historical prepayment experience of a large group of mortgage loans comparable to the mortgage loans.
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 (with respect to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB and Class A-1A Certificates, the Loan Group in which such mortgage loan is deemed to be included) are in turn distributed on the Certificates, or, in the case of the Class X Certificates, applied to reduce the notional amounts of the related components. An investor should consider, in the case of any Offered Certificate (other than the Class X Certificates) purchased at a discount, the risk that a slower than anticipated rate of principal payments on the mortgage loans will result in an actual yield to the investor that is lower than the anticipated yield and, in the case of any Offered Certificate purchased at a premium, the risk that a faster than anticipated rate of principal payments on the mortgage loans will result in an actual yield to the investor that is lower than the anticipated yield. In general, the earlier a payment of principal is distributed on an Offered Certificate purchased at a discount or premium, the greater will be the effect on an investor’s yield to maturity. As a result, the effect on an investor’s yield of principal payments distributed on an investor’s Offered Certificates occurring at a rate higher (or lower) than the rate anticipated by the investor during any particular period would not be fully offset by a subsequent like reduction (or increase) in the rate of principal payments.
S-224
Because the Notional Amount of the Class X Certificates is based upon the outstanding principal balance of the other Classes of Certificates, the yield to maturity on the Class X Certificates will be extremely sensitive to the rate and timing of prepayments of principal on the mortgage loans.
Principal prepayments on the mortgage loans may (or in the case of the Class X Certificates or a Class of Certificates with a Pass-Through Rate equal to the WAC Rate, will) also affect the yield on each Class of Certificates that has a Pass-Through Rate based on, or limited by, the WAC Rate to the extent that mortgage loans with higher mortgage rates prepay faster than mortgage loans with lower mortgage rates. The Pass-Through Rates on those 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 yield to holders of the Offered Certificates will also depend on the extent to which the holders are required to bear the effects of any losses or shortfalls on the mortgage loans. Losses and other shortfalls on the mortgage loans will generally be borne by the holders of the Class NR, Class T, Class Q, Class P, Class N, Class M, Class L, Class K, Class J, Class H, Class G, Class F, Class E, Class D, Class C, Class B Certificates, in that order, in each case to the extent of amounts otherwise distributable in respect of the Class of Certificates. Following reduction of the Class B Certificates to zero resulting from losses or shortfalls, the losses or shortfalls will be borne by the Class A-J Certificates first and then the Class&nb sp;A-M Certificates, in each case to the extent of amounts otherwise distributable in respect of the Class of Certificates. In the event of the reduction of the Certificate Balances of all those Classes of Certificates to zero, the resulting losses and shortfalls will then be borne, pro rata, by the Class A Certificates without regard to Loan Group or the Class A-SB Planned Principal Balance. Although losses will not be allocated to the Class X Certificates directly, they will reduce the notional balances of the related components to the extent such losses are allocated to the Classes of Principal Balance Certificates and therefore the Class X Notional Amount, which will reduce the yield on such Certificates.
Certain Relevant Factors. The rate and timing of principal payments and defaults and the severity of losses on the mortgage loans may be affected by a number of factors, including, without limitation, prevailing interest rates, the terms of the mortgage loans (for example, due-on-sale clauses, Lockout Periods or Yield Maintenance Charges and amortization terms that require balloon payments), the demographics and relative economic vitality of the areas in which the Mortgaged Properties are located and the general supply and demand for rental 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’’ in this prospectus supplement and ‘‘Risk Factors’’ and ‘‘Yield and Maturity Considerations—Yield and Prepayment Considerations’’ in the prospectus.
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 coupon, a borrower may have an increased incentive to refinance its mortgage loan. However, under all of the mortgage loans, voluntary prepayments are subject to Lockout Periods and/or Yield Maintenance Charges. See ‘‘Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans—Prepayment Provisions’’ in this prospectus supplement. In any case, we cannot assure you that the related borrowers will refrain from prepaying their mortgage loans due to the existence of Yield Maintenance Charges or prepayment pr emiums, or that involuntary prepayments will not occur.
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 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.
S-225
The Depositor makes no representation as to the particular factors that will affect the rate and timing of prepayments and defaults on the mortgage loans, as to the relative importance of 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 12 days after the end of the related Interest Accrual Period for the Offered Certificates, the effective yield to the holders of such Offered 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).
Unpaid Distributable Certificate Interest. As described under ‘‘Description of the Certificates —Distributions—Priority’’ in this prospectus supplement, if the portion of the Available Distribution Amount distributable in respect of interest on any Class of Offered Certificates on any Distribution Date is less than the Distributable Certificate Interest then payable for that Class of Certificates, the shortfall will be distributable to holders of that Class of Certificates on subsequent Distribution Dates, to the extent of available funds. Any shortfall will not bear interest, however, so it will negatively affect the yield to maturity of the related Class of Certifi cates for so long as it is outstanding.
Weighted Average Life
The weighted average life of an Offered Certificate 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 an Offered Certificate will be influenced by, among other things, the rate at which principal on the mortgage loans is paid or otherwise collected, which may be in the form of scheduled amortization, voluntary prepayments, Insurance and Condemnation Proceeds and Liquidation Proceeds. As described in this prospectus supplement, the Group 1 Principal Distribution Amount (and, after the Class A-1A Certificates have been reduced to zero, any remaining Group 2 Principal Distribution Amount) for each Distribution Date will generally be distributable first, in respect of the Class A-SB Certificates until their Certificate Balance is reduced to the Class A-SB Planned Principal Balance, second, i n respect of the Class A-1 Certificates until their Certificate Balance is reduced to zero, third, in respect of the Class A-2 Certificates until their Certificate Balance is reduced to zero, fourth, to the Class A-3 Certificates, until their Certificate Balance is reduced to zero, fifth, in respect of the Class A-4 Certificates until their Certificate Balance is reduced to zero, and sixth, in respect of the Class A-SB Certificates until their Certificate Balance is reduced to zero; and the Group 2 Principal Distribution Amount (and, after the Class A-4 and the Class A-SB Certificates have been reduced to zero, any remaining Group 1 Principal Distribution Amount) for each Distribution Date will generally be distributable to the Class A-1A Certificates until their Certificate Balance is reduced to zero. After those distributions, the remaining Principal Distribution Amount with respect to all the mortgage loans will generally be distributable entirely in respect of the Class A-M Certificates, Class A-J Certificates, Class B Certificates, Class C Certificates, Class D Certificates, Class E Certificates and Class F Certificates and then the Non-Offered Certificates, in that order, in each case until the Certificate Balance of each such Class of Certificates is reduced to zero.
Prepayments on mortgage loans may be measured by a prepayment standard or model. The model used in this prospectus supplement is the ‘‘Constant Prepayment Rate’’ or ‘‘CPR’’ model. The CPR model represents an assumed constant annual rate of prepayment each month, expressed as a per annum percentage of the then-scheduled principal balance of the pool of mortgage loans. As used in each of the tables attached hereto as Annex A-4 to this prospectus supplement, 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 prepayments on the mortgage loans are made at those levels of CPR following the expiration of any Lockout Period and any
S-226
applicable period in which Defeasance is permitted and any yield maintenance or prepayment premium period. We cannot assure you, however, that prepayments of the mortgage loans will conform to any level of CPR, and no representation is made that the mortgage loans will prepay at the levels of CPR shown or at any other prepayment rate.
The tables attached as Annex A-4 to this prospectus supplement 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 Certificates. The tables have been prepared on the basis of the following assumptions, among others:
(a) scheduled periodic payments including payments due at maturity of principal and/or interest on the mortgage loans will be received on a timely basis and will be distributed on the 15th day of the related month, beginning in September 2007;
(b) the Mortgage Rate in effect for each mortgage loan as of the Cut-off Date will remain in effect to the maturity date or Anticipated Repayment Date, as the case may be, and will be adjusted as required pursuant to the definition of Mortgage Rate;
(c) no Mortgage Loan Seller will 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 LR Certificates will exercise its option to purchase all the mortgage loans and thereby cause an early termination of the trust fund and the holder of a Subordinate Companion Loan will not exercise its option to purchase the related Mortgage Loan and no holder of any mezzanine indebtedness will exercise its option to purchase the related mortgage loan;
(d) any principal prepayments on the mortgage loans will be received on their respective due dates after the expiration of any applicable Lockout Period and/or Defeasance Lockout Period and any yield maintenance or prepayment premium period at the respective levels of CPR set forth in the tables;
(e) no Yield Maintenance Charges or prepayment premiums are included in any allocations or calculations;
(f) the Closing Date is August 30, 2007;
(g) the ARD Loan prepays in full on its Anticipated Repayment Date;
(h) the Pass-Through Rates, initial Certificate Balances and initial Notional Amount of the respective Classes of Certificates are as described in this prospectus supplement;
(i) 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; and
(j) the optional termination of the trust will not be exercised.
To the extent that the mortgage loans have characteristics that differ from those assumed in preparing the tables set forth in Annex A-4 to this prospectus supplement, a Class of Offered Certificates may mature earlier or later than indicated by the tables. It is highly unlikely that the mortgage loans will prepay at any constant rate until maturity or that all the mortgage 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 tables attached as Annex A-4 to this prospectus supplement. These variations may occur even if the average prepayment experience of the mortgage loans were to equal any of the specified CPR percentages. Investors are urged to conduct their own analyses of the rates at which the mortgage loans may be expected to prepay. Based o n the foregoing assumptions, the tables attached hereto as Annex A-4 to this prospectus supplement 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 Offered Certificate that would be outstanding after each of the dates shown at the indicated CPRs.
S-227
Yield Sensitivity of the Class X Certificates
The yield to maturity of the Class X Certificates will be highly sensitive to the rate and timing of principal payments including by reason of prepayments, principal losses and other factors described above. Investors in the Class X 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.
Any optional termination by the holders of the Controlling Class, the Special Servicer, the Master Servicer or the holders of the Class LR Certificates would result in prepayment in full of the Certificates and would have an adverse effect on the yield of the Class X Certificates because a termination would have an effect similar to a principal prepayment in full of the mortgage loans and, as a result, investors in the Class X Certificates and any other Certificates purchased at premium might not fully recoup their initial investment. See ‘‘Description of the Certificates—Termination; Retirement of Certificates’’ in this prospectus supplement.
The following table indicates the approximate pre-tax yield to maturity on a corporate bond equivalent (‘‘CBE’’) basis on the Class X 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 Class X Certificates is as specified in the table below, expressed as a percentage of the initial Notional Amount of such Certificates, plus accrued interest from August 1, 2007 to the Closing Date.
The yields set forth in the following table were calculated by determining the monthly discount rates that, when applied to the assumed streams of cash flows to be paid on the Class X 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 calculation does 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 investors may be able to reinvest funds received by them as distributions on the Class X Certificates (and, accordingly, does not purport to reflect the return on any investment in the Class X Certificates when such reinvestment rates are considered).
The characteristics of the mortgage loans may differ from those assumed in preparing the table below. In addition, there can be no assurance that the mortgage loans will prepay in accordance with the above assumptions at any of the rates shown in the table or at any other particular rate, that the cash flows on the Class X Certificates will correspond to the cash flows shown herein or that the aggregate purchase price of the Class X 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 prepayme nt assumption to be used in deciding whether to purchase the Class X Certificates.
For purposes of this prospectus supplement, prepayment assumptions with respect to the mortgage loans are presented in terms of the ‘‘Constant Prepayment Rate’’ or ‘‘CPR’’ model described under ’’—Weighted Average Life’’ above.
S-228
Sensitivity to Principal Prepayments of the Pre-Tax
Yields to Maturity of the Class X Certificates
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Assumed Purchase Price (of Initial Notional Amount of Class X Certificates) | | | Prepayment Assumption (CPR) | |||||||||||||||||||||||||||
| 0% | | | 25% | | | 50% | | | 75% | | | 100% | |||||||||||||||||
| 1.14061% | | | | | 8.2002 | | | | | | 8.0989 | | | | | | 7.9869 | | | | | | 7.8486 | | | | | | 7.3049 | |
Effect of Loan Groups
Generally, the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-SB Certificates will only be entitled to receive distributions of principal collected or advanced with respect to the mortgage loans in Loan Group 1 until the Certificate Balance of the Class A-1A Certificates has been reduced to zero, and the Class A-1A Certificates will only be entitled to receive distributions of principal collected or advanced in respect of mortgage loans in Loan Group 2 until the Certificate Balances of the Class A-4 and Class A-SB Certificates have been reduced to zero. Accordingly, holders of the Class A-1A Certificates will be greatly affected by the rate and timing of payments and other collections of principal on the mortgage loans in Loan Group 2 and, in the absence of losses, should be largely unaffected by the rate and timing of payments and other collections of principal on the mortgage loans in Loan Group 1. Inve stors should take this into account when reviewing this ‘‘Yield and Maturity Considerations’’ section.
S-229
Certain Federal Income Tax Consequences
Upon the issuance of the Certificates, Cadwalader, Wickersham & Taft LLP, special counsel to the Depositor, will deliver its opinion that, assuming (1) the making of appropriate elections, (2) compliance with the provisions of the Pooling and Servicing Agreement and the Loan REMIC declarations, (3) compliance with all provisions of the JPMCC 2007-LDP11 Pooling and Servicing Agreement and other related documents and any amendments thereto and the continued qualification of the REMICs formed under the JPMCC 2007-LDP11 Pooling and Servicing Agreement and (4) compliance with applicable changes in the Internal Revenue Code of 1986, as amended (the ‘‘Code’’), including the REMIC Provisions, for federal income tax purposes, designated portions of the trust fund will qualify as two separate real estate mo rtgage investment conduits (the ‘‘Upper-Tier REMIC’’ and the ‘‘Lower-Tier REMIC,’’ respectively, and each, a ‘‘REMIC’’) within the meaning of Sections 860A through 860G (the ‘‘REMIC Provisions’’) of the Code, and (1) the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB, Class A-1 A, Class X, Class A-M, Class A-J, Class B, Class C, Class D, Class E, Class F, Class G, Class&n bsp;H, Class J, Class K, Class L, Class M, Class N, Class P, Class Q, Class T and Class NR Certificates will evidence the ‘‘regular interests’’ in the Upper-Tier REMIC and (2) the Class R Certificates will represent the sole class of ‘‘residual interest’’ in the Upper-Tier REMIC and the Class LR Certificates will represent the sole class of ‘‘residual interests’’ in the Lower-Tier REMIC, within the meaning of the REMIC Provisions. In addition, a separate REMIC election will be made with respect to each Logan Portfolio Loan pursuant to a separate REMIC declaration made July 5, 2007 to treat each such mortgage loan as a loan REMIC (each, a ‘‘Loan REMIC’’). In the opinion of Cadwalader, Wickersham & Taft LLP, each Loan REMIC will q ualify as a REMIC, the regular interest issued by the related Loan REMIC (each, a ‘‘Loan REMIC Regular Interest’’) will constitute a ‘‘regular interest’’ in the related Loan REMIC and the Class LR Certificates will represent beneficial interests in the residual interest issued by each Loan REMIC. The Certificates (other than the Class S, Class R and Class LR Certificates), are ‘‘Regular Certificates’’ as defined in the prospectus. In addition, in the opinion of Cadwalader, Wickersham & Taft LLP, (i) the portion of the trust fund consisting of the Excess Interest and the Excess Interest Distribution Account will be treated as a portion of a grantor trust for federal income tax purpose s under subpart E, Part I of subchapter J of the Code, and the Class S Certificates will represent undivided beneficial interest in such portion of the grantor trust, and (ii) the portion of the Trust Fund consisting of the residual interests issued by the Loan REMICs will be treated as a portion of a grantor trust under subpart E, Part I of subchapter J of the Code, and the Class LR Certificates will represent undivided beneficial interests in such portion of the grantor trust.
Each Loan REMIC will hold the related Logan Portfolio Loan and its proceeds, and the Trust’s beneficial interest in an allocable share of any property that secured such mortgage loan that was acquired by foreclosure or deed in lieu of foreclosure, and will issue an uncertificated Loan REMIC Regular Interest to the Lower-Tier REMIC and will issue a single class of residual interests. The Lower-Tier REMIC will hold the mortgage loans (other than the mortgage loans held by the Loan REMICs) and their proceeds, and the trust’s allocable share of any property that secured a mortgage loan that was acquired by foreclosure or deed in lieu of foreclosure (and in the case of each Non-Serviced Mortgage Loan, a beneficial interest in an allocable portion of the property securing such Non-Serviced Mortgage Loan, as applicable) and the Loan REMIC Regular Interests, and will issue certain uncertificated classes of regular interests (the ‘‘Lower-Tier REMIC Regular Interests’’) and the sole class of residual interest in the Lower-Tier REMIC, which will be represented by the Class LR Certificates. The Upper-Tier REMIC will hold the Lower-Tier REMIC Regular Interests and their proceeds and will issue the Regular Certificates as regular interests in the Upper-Tier REMIC, and the Class R Certificates, which will represent the sole Class of residual interest in the Upper-Tier REMIC.
Because they represent regular interests, each Class of Offered Certificates generally will be treated as newly originated debt instruments for federal income tax purposes. Holders of the Classes of Offered Certificates will be required to include in income all interest on the regular interests represented by their Certificates in accordance with the accrual method of accounting,
S-230
regardless of a Certificateholder’s usual method of accounting. It is anticipated that the Class A-1, Class A-2, Class A-3, Class A-4, Class A-SB, Class A-1A and Class A-M Certificates will be issued at a premium, that the Class X, Class B, Class C, Class D, Class E and Class F Certificates will be issued with original issue discount and that the Class A-J Certificates will be issued with a de minimis amount of original issue discount for federal income tax purposes. The prepayment assumption that will be used in determining the rate of accrual of original issue discount, if any, and market discount or whether any such discount is de minimis, and that may be used to amortize premium, if any, for federal income t ax purposes will be based on the assumption that subsequent to the date of any determination the mortgage loans will prepay at a rate equal to a CPR of 0%; provided that it is assumed that the ARD Loan prepays on its Anticipated Repayment Date (the ‘‘Prepayment Assumption’’). No representation is made that the mortgage loans will prepay at that rate or at any other rate. See ‘‘Certain Federal Income Tax Consequences—Federal Income Tax Consequences for REMIC Certificates—Taxation of Regular Certificates’’ in the prospectus.
Although unclear for federal income tax purposes, it is anticipated that the Class X Certificates 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 that Class (assuming the WAC Rate changes in accordance with the initial prepayment assumption in the manner set forth in the prospectus), over its issue price (including accrued interest from August 1, 2007). Any ‘‘negative’’ amounts of original issue discount on the Class X Certificates attributable to rapid prepayments with respect to the mortgage loans will not be deductible currently, but may be offset against future positive accruals of original issue discount, if any. Finally, a holder of any Class X Certificate may be entitled to a loss deduction to the extent it becomes certain that such holder will not recover a portion of its basis in such Certificate , assuming no further prepayments. In the alternative, it is possible that rules similar to the ‘‘noncontingent bond method’’ of the OID Regulations, as defined in the prospectus, may be promulgated with respect to these Certificates.
Yield Maintenance Charges actually collected will be distributed among the holders of the respective Classes of Offered Certificates as described under ‘‘Description of the Certificates—Allocation of Yield Maintenance Charges and Prepayment Premiums’’ in this prospectus supplement. It is not entirely clear under the Code when the amount of Yield Maintenance Charges so allocated should be taxed to the holder of an Offered Certificate, but it is not expected, for federal income tax reporting purposes, that Yield Maintenance Charges will be treated as giving rise to any income to the holder of an Offered Certificate prior to the Master Servicer’s actual receipt of a Yield Maintenance Charge. Yield Maintenance Charges, if any, may be treated as ordinary income, although authority exist s for treating such amounts as capital gain if they are treated as paid upon the retirement or partial retirement of a Certificate. Certificateholders should consult their own tax advisers concerning the treatment of Yield Maintenance Charges.
Except as provided below, the Offered Certificates will be treated as ‘‘real estate assets’’ within the meaning of Section 856(c)(5)(B) of the Code in the hands of a real estate investment trust or ‘‘REIT’’ and interest (including original issue discount, if any) on the Offered Certificates will be interest described in Section 856(c)(3)(B) of the Code, and the Offered Certificates will be treated as ‘‘loans ... secured by an interest in real property which is ... residential real property’’ under Section 7701(a)(19)(C)(v) of the Code for a domestic building and loan association to the extent the mortgage loans are secured by multifamily and manufactured housing community properties. As of the Cut-off Date, mortgage loans representing approximately 12.3% of the Initial Pool Balance are secured by multifamily properties and manufactured housing community properti es. Holders of the Offered Certificates should consult their own tax advisors whether the foregoing percentage or some other percentage applies to their certificates. In addition, mortgage loans that have been defeased with U.S. Treasury obligations will not qualify for the foregoing tax treatment. Moreover, the Offered Certificates will be ‘‘qualified mortgages’’ for another REMIC within the meaning of Section 860G(a)(3) of the Code. See ‘‘Certain Federal Income Tax Consequences —Federal Income Tax Consequences for REMIC Certificates’’ in the prospectus.
S-231
For further information regarding the federal income tax consequences of investing in the Offered Certificates see ‘‘Certain Federal Income Tax Consequences—Federal Income Tax Consequences for REMIC Certificates—Taxation of Regular Certificates’’ in the prospectus.
Certain ERISA Considerations
A fiduciary of any retirement plan or other employee benefit plan or arrangement, including individual retirement accounts and annuities, Keogh plans and collective investment funds and separate accounts in which those plans, annuities, accounts or arrangements are invested, including insurance company general accounts, that is subject to the fiduciary responsibility rules of the Employee Retirement Income Security Act of 1974, as amended (‘‘ERISA’’), or Section 4975 of the Code (an ‘‘ERISA Plan’’) or which is a governmental plan, as defined in Section 3(32) of ERISA, or a church plan, as defined in Section 3(33) of ERISA and for which no election has been made under Section 410(d) of the Code, subject to any federal, state or local law (‘‘Similar Law’’) which is, to a material extent, similar to the foregoing provisions of ERISA or the Code (collectively, with an ERISA Plan, a ‘‘Plan’’) should review with its legal advisors whether the purchase or holding of Offered Certificates could give rise to a transaction that is prohibited or is not otherwise permitted under ERISA, the Code or Similar Law or whether there exists any statutory, regulatory or administrative exemption applicable thereto. Moreover, each Plan fiduciary should determine whether an investment in the Offered Certificates is appropriate for the Plan, taking into account the overall investment policy of the Plan and the compositio n of the Plan’s investment portfolio.
The U.S. Department of Labor has issued to J.P. Morgan Securities Inc. an individual prohibited transaction exemption, PTE 2002-19, 67 Fed. Reg. 14,979 (March 28, 2002) (the ‘‘Exemption’’). The Exemption generally exempts from the application of the prohibited transaction provisions of Sections 406 and 407 of ERISA, and the excise taxes imposed on the prohibited transactions pursuant to Sections 4975(a) and (b) of the Code, certain transactions, among others, relating to the servicing and operation of pools of mortgage loans, such as the pool of mortgage loans held by the trust, and the purchase, sale and holding of mortgage pass-through certificates, such as the Offered Certificates, underwritten by J.P. Morgan Securities Inc.; provided that certain conditions set forth in the Exemption are satisfied.
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 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 S&P, Moody’s Investors Service, Inc., Fitch, DBRS Limited or DBRS, Inc. Third, the Trustee can not be an affiliate of any other member of the Restricted Group other than an underwriter. The ‘‘Restricted Group’’ consists of any underwriter, t he Depositor, the Trustee, Master Servicer, the Special Servicer, any sub-servicer, any entity that provides insurance or other credit support to the trust fund and any borrower with respect to mortgage loans constituting more than 5% of the aggregate unamortized principal balance of the mortgage loans as of the date of initial issuance of the Offered Certificates, and any affiliate of any of the foregoing entities. Fourth, the sum of all payments made to and retained by the underwriters must represent not more than reasonable compensation for underwriting the Offered Certificates, the sum of all payments made to and retained by the Depositor pursuant to the assignment of the mortgage loans to the trust fund must represent not more than the fair market value of the mortgage loans and the sum of all payments made to and retained by Master Servicer, the Special Servicer and any sub-servicer must represent not more than reasonable compensation for that person’s services under the Pooling and Servicing Agr eement 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 of the Securities and Exchange Commission under the Securities Act of 1933, as amended.
S-232
It is a condition of the issuance of the Offered Certificates that they have the ratings specified on the cover page. As of the Closing Date, the third general condition set forth above will be satisfied with respect to the Offered Certificates. A fiduciary of a Plan contemplating purchasing an Offered Certificate in the secondary market must make its own determination that, at the time of purchase, the Offered Certificates continue to satisfy the second and third general conditions set forth above. A fiduciary of a Plan contemplating purchasing an Offered Certificate, whether in the initial issuance of the related Certificates or in the secondary market, must make its own determination that the first, fourth and fifth general conditions set forth above will be satisfied with respect to the related Offered Certificate.
The Exemption also requires that the trust fund meet the following requirements: (1) the trust fund must consist solely of assets of the type that have been included in other investment pools; (2) certificates in those other investment pools must have been rated in one of the four highest categories of S&P, Moody’s Investors Service, Inc., Fitch, DBRS Limited or DBRS, Inc. for at least one year prior to the Plan’s acquisition of Offered Certificates; and (3) certificates in those other investment pools must have been purchased by investors other than Plans for at least one year prior to any Plan’s acquisition of Offered Certificates.
If the general conditions of the Exemption are satisfied, the Exemption may provide an exemption from the restrictions imposed by Sections 406(a) and 407(a) of ERISA (as well as the excise taxes imposed by Sections 4975(a) and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code) in connection with (1) the direct or indirect sale, exchange or transfer of Offered Certificates in the initial issuance of Certificates between the Depositor or the underwriters and a Plan when the Depositor, any of the underwriters, the Trustee, the Master Servicer, the Special Servicer, a sub-servicer or a borrower is a party in interest with respect to the investing Plan, (2) the direct or indirect acquisition or disposition in the secondary market of the Offered Certificates by a Plan and (3) the holding of Offered Certificates by a Plan. However, no exemption is provided from the restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding of an Offered Certificate on behalf of an ‘‘Excluded Plan’’ by any person who has discretionary authority or renders investment advice with respect to the assets of the Excluded Plan. For purposes of this prospectus supplement, an ‘‘Excluded Plan’’ is a Plan sponsored by any member of the Restricted Group.
If certain specific conditions of the Exemption are also satisfied, the Exemption may provide an exemption from the restrictions imposed by Sections 406(b)(1) and (b)(2) of ERISA and the taxes imposed by Section 4975(c)(1)(E) of the Code in connection with (1) the direct or indirect sale, exchange or transfer of Offered Certificates in the initial issuance of Certificates between the Depositor or the underwriters and a Plan when the person who has discretionary authority or renders investment advice with respect to the investment of Plan assets in those Certificates is (a) a borrower with respect to 5% or less of the fair market value of the mortgage loans or (b) an affiliate of that person, (2) the direct or indirect acquisition or disposition in the secondary market of Offered Certificates by a Plan and (3) the holding of Offered Certificates by a Plan.
Further, if certain specific conditions of the Exemption are satisfied, the Exemption may provide an exemption from the restrictions imposed by Sections 406(a), 406(b) and 407(a) of ERISA, and the taxes imposed by Sections 4975(a) and (b) of the Code by reason of Section 4975(c) of the Code for transactions in connection with the servicing, management and operation of the pool of mortgage loans.
Before purchasing an Offered Certificate, a fiduciary of a Plan should itself confirm that the specific and general conditions and the other requirements set forth in the Exemption would be satisfied at the time of purchase. In addition to making its own determination as to the availability of the exemptive relief provided in the Exemption, the Plan fiduciary should consider the availability of any other prohibited transaction exemptions, including with respect to governmental plans, any exemptive relief afforded under Similar Law. See ‘‘Certain ERISA Considerations’’ in the prospectus. A purchaser of an Offered Certificate should be aware,
S-233
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.
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.
The Pension Protection Act of 2006 makes significant changes to ERISA rules relating to prohibited transactions and plan assets, among other areas. Potential investors should consult with their advisors regarding the consequences of these changes.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting agreement (the ‘‘Underwriting Agreement’’), among the Underwriters and the Depositor, 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 Balances or Notional Amounts, as applicable, of each Class of Offered Certificates set forth below subject in each case to a variance of 5%.
| | | | | | | | | | | | | | | | | | |
| Class | | | J.P. Morgan Securities Inc. | | | UBS Securities LLC | | | Natixis Securities North America Inc. | |||||||||
| Class A-1 | | | | $ | 14,389,000 | | | | | $ | 4,619,000 | | | | | $ | 0 | |
| Class A-2 | | | | $ | 336,789,000 | | | | | $ | 108,110,000 | | | | | $ | 0 | |
| Class A-3 | | | | $ | 262,064,000 | | | | | $ | 84,123,000 | | | | | $ | 0 | |
| Class A-4 | | | | $ | 455,482,000 | | | | | $ | 146,211,000 | | | | | $ | 0 | |
| Class A-SB | | | | $ | 41,015,000 | | | | | $ | 13,166,000 | | | | | $ | 0 | |
| Class A-1A | | | | $ | 217,485,000 | | | | | $ | 69,814,000 | | | | | $ | 0 | |
| Class X | | | | $ | 1,895,055,095 | | | | | $ | 609,612,842 | | | | | $ | 0 | |
| Class A-M | | | | $ | 189,604,000 | | | | | $ | 60,863,000 | | | | | $ | 0 | |
| Class A-J | | | | $ | 149,312,000 | | | | | $ | 47,930,000 | | | | | $ | 0 | |
| Class B | | | | $ | 16,590,000 | | | | | $ | 5,326,000 | | | | | $ | 0 | |
| Class C | | | | $ | 21,331,000 | | | | | $ | 6,847,000 | | | | | $ | 0 | |
| Class D | | | | $ | 16,590,000 | | | | | $ | 5,326,000 | | | | | $ | 0 | |
| Class E | | | | $ | 9,480,000 | | | | | $ | 3,043,000 | | | | | $ | 0 | |
| Class F | | | | $ | 18,961,000 | | | | | $ | 6,086,000 | | | | | $ | 0 | |
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. Additionally, the Depositor and the Mortgage Loan Sellers have severally agreed to indemnify the Underwriters, and the Underwriters have severally agreed to indemnify the Depositor, against certain liabilities, including liabilities under the Securities Act of 1933, as amended.
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 101.752% of the initial aggregate Certificate Balance of the Offered Certificates, plus accrued interest on the Offered Certificates from August 1, 2007, before deducting expenses payable by the Depositor estimated to be approximately $6,000,000. 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 offered hereby, the Underwriters may be deemed to have received compensation from the Depositor in the form of underwriting discounts.
S-234
We cannot assure you that a secondary market for the Offered Certificates will develop or, if it does develop, that it will continue. The Underwriters expect to make, but are not obligated to make, a secondary market in the Offered Certificates. The primary source of ongoing information available to investors concerning the Offered Certificates will be the monthly statements discussed in the prospectus under ‘‘Description of the Certificates—Reports to Certificateholders,’’ which will include info rmation as to the outstanding principal balance of the Offered Certificates and the status of the applicable form of credit enhancement. Except as described in this prospectus supplement 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 a vailable 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.
J.P. Morgan Securities Inc., one of the Underwriters, is an affiliate of each of the Depositor and of JPMorgan Chase Bank, N.A., one of the Mortgage Loan Sellers and sponsors. UBS Securities LLC, one of the Underwriters, is an affiliate of UBS Real Estate Securities Inc., one of the Mortgage Loan Sellers and sponsors. Natixis Securities North America Inc., one of the Underwriters, is an affiliate of Natixis Real Estate Capital Inc., one of the Mortgage Loan Sellers and sponsors.
Legal Matters
The validity of the Certificates will be passed upon for the Depositor by Cadwalader, Wickersham & Taft LLP, and for the underwriters by Thacher Proffitt & Wood LLP. In addition, certain federal income tax matters will be passed upon for the Depositor by Cadwalader, Wickersham & Taft LLP.
Certain Legal Aspects of the Mortgage Loans
The following discussion summarizes certain legal aspects of mortgage loans secured by real property in California, Florida and Texas which is general in nature. This summary does not purport to be complete and is qualified in its entirety by reference to the applicable federal and state laws governing the mortgage loans.
19 of the Mortgaged Properties, securing mortgage loans representing approximately 17.5% of the Initial Pool Balance (17.9%, 14.2%), are located in the State of California. Mortgage loans in California are generally secured by deeds of trust on the related real estate. Foreclosure of a deed of trust in California may be accomplished by a non-judicial trustee’s sale in accordance with the California Civil Code (so long as it is permitted under a specific provision in the deed of trust) or by judicial foreclosure in accordance with the California Code of Civil Procedure. Public notice of either the trustee’s sale or the judgment of foreclosure is given for a statutory period of time after which the mortgaged real estate may be sold by the trustee, if foreclosed pursuant to the trustee’s power of sale, or by court appointed sheriff under a judicial foreclosure. Following a judicial foreclosure sale, the borrower or its successor in interest may, f or a period of up to one year, redeem the property; however, there is no redemption following a trustee’s power of sale. California’s ‘‘one action rule’’ requires the lender to complete foreclosure of all real estate provided as security under the deed of trust in an attempt to satisfy the full debt before bringing a personal action (if otherwise permitted) against the borrower for recovery of the debt, except in certain cases involving environmentally impaired real property where foreclosure of the real property is not required before making a claim under the indemnity. California case law has held that acts such as an offset of an unpledged account constitute violations of such statutes. Violations of such statutes may result in the loss of some or all of the security under the mortgage loan and a loss of the ability to sue for the debt. Other statutory provisions in California limit any deficiency judgment (if otherwise permitted) against the borrower following
S-235
a judicial foreclosure to the amount by which the indebtedness exceeds the fair value at the time of the public sale and in no event greater than the difference between the foreclosure sale price and the amount of the indebtedness. Further, under California law, once a property has been sold pursuant to a power of sale clause contained in a deed of trust (and in the case of certain types of purchase money acquisition financings, under all circumstances), the lender is precluded from seeking a deficiency judgment from the borrower or, under certain circumstances, guarantors. On the other hand, under certain circumstances, California law permits separate and even contemporaneous actions against both the borrower and any guarantors. California statutory provisions regarding assignments of rents and leases require that a lender whose loan is secured by such an assignment must exercise a remedy with respect to rents as authorized by statute in order to establish its right to receive the rents after an event of default. Among the remedies authorized by statute is the lender’s right to have a receiver appointed under certain circumstances.
15 of the Mortgaged Properties, securing mortgage loans representing approximately 12.6% of the Initial Pool Balance (12.8%, 10.9%), are located in Florida. Mortgage loans involving real property in Florida are secured by mortgages and foreclosures are accomplished by judicial foreclosure. There is no power of sale in Florida. After an action for foreclosure is commenced and the lender secures a judgment, the final judgment will provide that the property be sold at a public sale at the courthouse if the full amount of the judgment is not paid prior to the scheduled sale. Generally, the foreclosure sale must occur no earlier than 20 (but not more than 35) days after the judgment is entered. During this period, a notice of sale must be published twice in the county in which the property is located. There is no right of redemption after the foreclosure sale. Florida does not have a ‘‘one action rule’’ or ‘‘anti deficiency le gislation.’’ Subsequent to a foreclosure sale, however, a lender may be required to prove the value of the property sold as of the date of foreclosure in order to recover a deficiency. Further, other statutory provisions in Florida limit any deficiency judgment (if otherwise permitted) against a borrower following a judicial sale to the excess of the outstanding debt over the value of the property at the time of the judicial sale. In certain circumstances, the lender may have a receiver appointed.
28 of the Mortgaged Properties, securing mortgage loans representing approximately 11.3% of the Initial Pool Balance (9.5%, 24.8%), are located in the State of Texas. 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 a non-judicial trustee’s sale under a specific provision in the deed of trust or by judicial foreclosure. Any such action must be brought within 4 years after the accrual of the cause of action. With respect to a judicial foreclosure, notwithstanding anything in the deed of trust to the contrary, the mortgagee must give the borrower written notice delivered by certified mail that it is in default and provide 20 days for the borrower to cure such default before any judicial foreclosure is permitted. With respect to a trustee’s sale, the lender must give the borrower written notice delivered by certified mail that it is in def ault and provide 21 days for the borrower to cure such default before any judicial foreclosure is permitted. Public notice of the trustee’s sale is continued for at least 21 days in statutory form after which the mortgaged real estate may be sold by the trustee. Any trustee sale must be made pursuant to the terms of the deed of trust at a public venue at the county courthouse of the county in which any portion of the real estate is located, between the hours of 10 A.M. and 4 P.M. on the first Tuesday of the month after the month in which the statutory notice period has been satisfied in an area designated by the commissioners’ court. Under Texas law, the borrower does not have the right to redeem the real estate after a judicial foreclosure or trustee’s sale. Under Texas law, if the sale price at a judicial foreclosure or trustee’s sale is less than the fair market value of the real estate, any obligor (including any guarantor) may be required to offset the deficiency betwee n the fair market value and the sale price.
Other Aspects. Please see the discussion under ‘‘Certain Legal Aspects of the Mortgage Loans’’ in the accompanying prospectus regarding other legal aspects of the mortgage loans that you should consider prior to making any investment in the Certificates.
S-236
Ratings
It is a condition to issuance that the Offered Certificates be rated not lower than the following ratings by Moody’s Investors Service, Inc. (‘‘Moody’s’’), Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (‘‘S&P’’), and Fitch, Inc. (‘‘Fitch’’, and together with S&P and Moody’s, the ‘‘Rating Agencies’’):
| | | | | | | | | |
| Class | | | Moody’s | | | S&P | | | Fitch |
| Class A-1 | | | Aaa | | | AAA | | | AAA |
| Class A-2 | | | Aaa | | | AAA | | | AAA |
| Class A-3 | | | Aaa | | | AAA | | | AAA |
| Class A-4 | | | Aaa | | | AAA | | | AAA |
| Class A-SB | | | Aaa | | | AAA | | | AAA |
| Class A-1 A | | | Aaa | | | AAA | | | AAA |
| Class X | | | Aaa | | | AAA | | | AAA |
| Class A-M | | | Aaa | | | AAA | | | AAA |
| Class A-J | | | NR | | | AAA | | | AAA |
| Class B | | | NR | | | AA+ | | | AA+ |
| Class C | | | NR | | | AA | | | AA |
| Class D | | | NR | | | AA− | | | AA− |
| Class E | | | NR | | | A+ | | | A+ |
| Class F | | | NR | | | A | | | A |
A securities rating on mortgage pass-through certificates addresses the likelihood of the timely receipt by their holders of interest and the ultimate repayment of principal to which they are entitled by February 15, 2051 (the ‘‘Rated Final Distribution Date’’). The rating takes into consideration the credit quality of the pool of mortgage loans, structural and legal aspects associated with the certificates, and the extent to which the payment stream from the pool of mortgage loans is adequate to make payments required under the certificates. The ratings on the Offered Certificates do not, however, constitute a statement regarding the likelihood, timing or frequency of prepayments (whether voluntary or involuntary) on the mortgage loans or the degree to which the payments might differ from those originally contemplated. In ad dition, a rating does not address the likelihood or frequency of voluntary or mandatory prepayments of mortgage loans, payment of prepayment premiums, Yield Maintenance Charges or net default interest. In addition, S&P’s ratings on the Certificates do not address the application of Net Aggregate Prepayment Interest Shortfalls to the Certificates.
Also, the rating does not represent any assessment of the yield to maturity that investors may experience or the possibility that the Class X Certificateholders might not fully recover their investments in the event of rapid prepayments of the mortgage loans (including both voluntary and involuntary prepayments). As described in this prospectus supplement, the amounts payable with respect to the Class X Certificates consist only of interest. If the entire pool were to prepay in the initial month, with the result that the Class X Certificateholders receive only a single month’s interest and thus suffer a nearly complete loss of their investment, all amounts ‘‘due’’ to such Certificateholders will nevertheless have been paid, and such result is consistent with the ratings received on the Class X Certificates. The Notional Amount upon which interest is calculated with respect to the Class X Certificates is subject to reduction in connection with each reduction of a corresponding component, whether as a result of principal payments or the allocation of Collateral Support Deficits. The ratings on the Class X Certificates do not address the timing or magnitude of reduction of the Notional Amount, but only the obligation to pay interest timely on the Notional Amount as so reduced from time to time. Accordingly, the ratings on the Class X Certificates should be evaluated independently from similar ratings on other types of securities.
We cannot assure you as to whether any rating agency not requested to rate the Offered Certificates will nonetheless issue a rating to any Class of Offered Certificates and, if so, what the
S-237
rating would be. A rating assigned to any Class of Offered Certificates by a rating agency that has not been requested by the Depositor to do so may be lower than the rating assigned to such Class by the Rating Agencies.
The ratings on the Offered Certificates should be evaluated independently from similar ratings on other types of securities. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency.
Pursuant to an agreement between the Depositor and each of the Rating Agencies, the Rating Agencies will provide ongoing ratings feedback with respect to the Offered Certificates for as long as they remain issued and outstanding.
Legal Investment
The Offered Certificates will not constitute ‘‘mortgage related securities’’ for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended. The appropriate characterization of the Offered Certificates under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase Offered Certificates, is subject to significant interpretive uncertainties.
No representations are made as to the proper characterization of the Offered Certificates for legal investment, financial institution regulatory, or other purposes, or as to the ability of particular investors to purchase the Offered Certificates under applicable legal investment restrictions. 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 of the Offered 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 advisors in determining whether and to what extent the Offered Certificates will constitute legal investments for them or are subject to investment, capital, or other restrictions.
See ‘‘Legal Investment’’ in the prospectus.
S-238
INDEX OF DEFINED TERMS
| | | |
| | Page | |
| 0% CPR | | | S-226 |
| 30/360 Basis | | | S-119 |
| AB Intercreditor Agreement | | | S-103 |
| AB Mortgage Loan | | | S-91 |
| AB Subordinate Companion Loan | | | S-91 |
| AB Whole Loan | | | S-91 |
| Acceptable Insurance Default | | | S-210 |
| Accrued Interest from Recoveries | | | S-181 |
| Actual/360 Basis | | | S-119 |
| Additional Exclusions | | | S-209 |
| Administrative Cost Rate | | | S-180 |
| Advances | | | S-191 |
| Anticipated Repayment Date | | | S-118 |
| Appraisal Reduction | | | S-194 |
| Appraisal Reduction Event | | | S-194 |
| ARD Loan | | | S-118 |
| Asset Status Report | | | S-205 |
| Assumed Final Distribution Date | | | S-186 |
| Assumed Scheduled Payment | | | S-183 |
| Authenticating Agent | | | S-154 |
| Available Distribution Amount | | | S-171 |
| Base Interest Fraction | | | S-185 |
| Carespring Portfolio A-1 Pari Passu Companion Loan | | | S-97 |
| Carespring Portfolio Intercreditor Agreement | | | S-97 |
| Carespring Portfolio Loan | | | S-97 |
| Carespring Portfolio Mortgaged Property | | | S-97 |
| Carespring Portfolio Noteholders | | | S-97 |
| Carespring Portfolio Notes | | | S-97 |
| Carespring Portfolio Whole Loan | | | S-97 |
| Cassford Corporate Park Intercreditor Agreement | | | S-115 |
| Cassford Corporate Park Loan | | | S-114 |
| Cassford Corporate Park Mortgaged Property | | | S-115 |
| Cassford Corporate Park Note A Holder | | | S-115 |
| Cassford Corporate Park Note B Holder | | | S-115 |
| Cassford Corporate Park Subordinate Companion Loan | | | S-115 |
| Cassford Corporate Park Whole Loan | | | S-115 |
| CBE | | | S-228 |
| Certificate Account | | | S-170 |
| Certificate Balance | | | S-166 |
| Certificate Owner | | | S-167 |
| Certificate Registrar | | | S-154 |
| Certificateholders | | | S-87 |
| Certificates | | | S-166 |
| Class | | | S-166 |
| Class A Certificates | | | S-166 |
| Class A-SB Planned Principal Balance | | | S-184 |
| Class LR Distribution Account | | | S-171 |
| Clearstream | | | S-167 |
| Closing Date | | | S-87 |
| CMBS | | | S-147 |
| CMSA Investor Reporting Package | | | S-198 |
| Code | | | S-230 |
| Collateral Support Deficit | | | S-189 |
| Companion Loan | | | S-92 |
| Compensating Interest Payment | | | S-164 |
| Constant Prepayment Rate | | | S-226 |
| Controlling Class | | | S-207 |
| Controlling Class Certificateholder | | | S-207 |
| Corrected Mortgage Loan | | | S-205 |
| CPR | | | S-226 |
| Crossed Loan | | | S-137 |
| Cross-Over Date | | | S-179 |
| Custodian | | | S-131, S-154 |
| Cut-off Date | | | S-86 |
| Cut-off Date Balance | | | S-86 |
| Cut-off Date LTV Ratios | | | S-130 |
| Defeasance | | | S-122 |
| Defeasance Lockout Period | | | S-122 |
| Depositor | | | S-87 |
| Depositories | | | S-167 |
| Determination Date | | | S-169 |
| Direct Participants | | | S-168 |
| Directing Certificateholder | | | S-207 |
| Discount Rate | | | S-120 |
| Distributable Certificate Interest | | | S-181 |
| Distribution Account | | | S-170 |
| Distribution Date | | | S-169 |
| DSCR | | | S-86, S-143 |
| DTC | | | S-167 |
| Due Period | | | S-172 |
| Effective Gross Income | | | S-129 |
| ERISA | | | S-232 |
| ERISA Plan | | | S-232 |
S-239
| | | |
| | Page | |
| ESA | | | S-140 |
| Euroclear | | | S-167 |
| Events of Default | | | S-218 |
| Excess Interest | | | S-180 |
| Excess Interest Distribution Account | | | S-171 |
| Excluded Plan | | | S-233 |
| Exemption | | | S-232 |
| FIRREA | | | S-140 |
| Fitch | | | S-237 |
| Form 8-K | | | S-128 |
| FSMA | | | S-7 |
| Gain on Sale Reserve Account | | | S-171 |
| Group 1 Principal Distribution Amount | | | S-182 |
| Group 1 Principal Shortfall | | | S-184 |
| Group 2 Principal Distribution Amount | | | S-182 |
| Group 2 Principal Shortfall | | | S-184 |
| Hotel Pacific Control Appraisal Period | | | S-114 |
| Hotel Pacific Intercreditor Agreement | | | S-112 |
| Hotel Pacific Loan | | | S-112 |
| Hotel Pacific Mortgaged Property | | | S-112 |
| Hotel Pacific Note A Holder | | | S-112 |
| Hotel Pacific Note B Holder | | | S-112 |
| Hotel Pacific Subordinate Companion Loan | | | S-112 |
| Hotel Pacific Whole Loan | | | S-112 |
| Indirect Participants | | | S-168 |
| Initial Loan Group 1 Balance | | | S-86 |
| Initial Loan Group 2 Balance | | | S-86 |
| Initial Pool Balance | | | S-86 |
| Initial Rate | | | S-118 |
| Initial Resolution Period | | | S-134 |
| Insurance and Condemnation Proceeds | | | S-170 |
| Interest Accrual Period | | | S-181 |
| Interest Distribution Amount | | | S-181 |
| Interest Reserve Account | | | S-170 |
| IRS | | | S-214 |
| Issuing Entity | | | S-154 |
| JPMCB | | | S-11, S-139 |
| JPMCC 2007-LDP11 Directing Certificateholder | | | S-98 |
| JPMCC 2007-LDP11 Master Servicer | | | S-97 |
| JPMCC 2007-LDP11 Pooling and Servicing Agreement | | | S-97 |
| JPMCC 2007-LDP11 Securitization | | | S-97 |
| JPMCC 2007-LDP11 Special Servicer | | | S-97 |
| JPMCC 2007-LDP11 Trust Fund | | | S-97 |
| JPMCC 2007-LDP11 Trustee | | | S-97 |
| LaSalle | | | S-154 |
| LDP | | | S-139 |
| Liquidation Fee | | | S-163 |
| Liquidation Fee Rate | | | S-163 |
| Liquidation Proceeds | | | S-170 |
| Loan Group 1 | | | S-86 |
| Loan Group 2 | | | S-86 |
| Loan Groups | | | S-86 |
| Loan REMIC | | | S-40, S-230 |
| Loan REMIC Regular Interest | | | S-230 |
| Lockbox Accounts | | | S-137 |
| Lockbox Loans | | | S-137 |
| Lockout Period | | | S-120 |
| Logan Crossed Whole Loans | | | S-124 |
| Logan Portfolio Intercreditor Agreement | | | S-100 |
| Logan Portfolio Loans | | | S-99 |
| Logan Portfolio Mortgaged Properties | | | S-100 |
| Logan Portfolio Mortgaged Property | | | S-99 |
| Logan Portfolio Notes | | | S-100 |
| Logan Portfolio Pari Passu Companion Loan | | | S-100 |
| Logan Portfolio Pari Passu Companion Loans | | | S-100 |
| Logan Portfolio Whole Loan | | | S-100 |
| Logan Release Amount | | | S-125 |
| Logan Released Mortgaged Property | | | S-124 |
| Logan Released Whole Loan | | | S-124 |
| Logan Special Transfer | | | S-124 |
| Lower-Tier Distribution Account | | | S-170 |
| Lower-Tier REMIC | | | S-230 |
| Lower-Tier REMIC Regular Interests | | | S-230 |
| LTV | | | S-143 |
| LTV Ratio | | | S-130 |
| LTV Ratios | | | S-86 |
| MAI | | | S-135 |
| Master Servicer | | | S-155 |
| Master Servicer Remittance Date | | | S-190 |
S-240
| | | |
| | Page | |
| Maturity Date LTV Ratios | | | S-130 |
| Moody’s | | | S-237 |
| Mortgage | | | S-86 |
| Mortgage File | | | S-131 |
| Mortgage Loan Sellers | | | S-87 |
| Mortgage Note | | | S-86 |
| Mortgage Rate | | | S-180 |
| Mortgaged Property | | | S-87 |
| Natixis CIB | | | S-145 |
| Natixis RE | | | S-145 |
| NCMF | | | S-145 |
| Net Aggregate Prepayment Interest Shortfall | | | S-181 |
| Net Mortgage Rate | | | S-180 |
| Net Operating Income | | | S-129 |
| Nomura | | | S-147 |
| Non-Offered Certificates | | | S-166 |
| Nonrecoverable Advance | | | S-192 |
| Non-Serviced Mortgage Loans | | | S-99 |
| Non-Serviced Whole Loans | | | S-100 |
| Notional Amount | | | S-167 |
| Offered Certificates | | | S-166 |
| Operating Statements | | | S-129 |
| Option Price | | | S-213 |
| PAR | | | S-141 |
| Pari Passu Companion Loan | | | S-91 |
| Pari Passu Mortgage Loans | | | S-91 |
| Pari Passu Whole Loan | | | S-91 |
| Participants | | | S-167 |
| Pass-Through Rate | | | S-179 |
| PDEP | | | S-78 |
| Percentage Interest | | | S-167 |
| Periodic Payments | | | S-171 |
| Permitted Investments | | | S-171 |
| Plan | | | S-232 |
| Plaza El Segundo Control Appraisal Period | | | S-106 |
| Plaza El Segundo Intercreditor Agreement | | | S-104 |
| Plaza El Segundo Loan | | | S-104 |
| Plaza El Segundo Mortgaged Property | | | S-104 |
| Plaza El Segundo Note A Holder | | | S-104 |
| Plaza El Segundo Note B Holder | | | S-104 |
| Plaza El Segundo Subordinate Companion Loan | | | S-104 |
| Plaza El Segundo Whole Loan | | | S-104 |
| PML | | | S-127 |
| Pooling and Servicing Agreement | | | S-166 |
| Prepayment Assumption | | | S-231 |
| Prepayment Interest Excess | | | S-164 |
| Prepayment Interest Shortfall | | | S-164 |
| Primary Collateral | | | S-137 |
| Prime Rate | | | S-194 |
| Principal Balance Certificates | | | S-167 |
| Principal Distribution Amount | | | S-181 |
| Principal Shortfall | | | S-184 |
| Purchase Agreements | | | S-87 |
| Purchase Option | | | S-213 |
| Purchase Price | | | S-134 |
| P&I Advance | | | S-190 |
| Qualified Substitute Mortgage Loan | | | S-135 |
| Rated Final Distribution Date | | | S-237 |
| Rating Agencies | | | S-237 |
| Record Date | | | S-169 |
| Regular Certificates | | | S-230 |
| Reimbursement Rate | | | S-194 |
| Related Proceeds | | | S-191 |
| Release Date | | | S-122 |
| REMIC | | | S-230 |
| REMIC Provisions | | | S-230 |
| REO Account | | | S-211 |
| REO Loan | | | S-185 |
| REO Property | | | S-205 |
| Residual Certificates | | | S-166 |
| Restricted Group | | | S-232 |
| Revised Rate | | | S-118 |
| Rules | | | S-168 |
| Sawgrass Mills Mall Control Appraisal Event | | | S-93 |
| Sawgrass Mills Mall Intercreditor Agreement | | | S-93 |
| Sawgrass Mills Mall Loan | | | S-91 |
| Sawgrass Mills Mall Mortgaged Property | | | S-93 |
| Sawgrass Mills Mall Pari Passu Companion Loans | | | S-91 |
| Sawgrass Mills Mall Purchase Option | | | S-96 |
| Sawgrass Mills Mall Senior Noteholders | | | S-93 |
| Sawgrass Mills Mall Subordinate Companion Loans | | | S-91 |
| Sawgrass Mills Mall Subordinate Noteholders | | | S-93 |
| Sawgrass Mills Mall Whole Loan | | | S-91, S-93 |
| Scheduled Principal Distribution Amount | | | S-183 |
S-241